Fees Versus Royalties and the Private Value of a Patent

  • Kamien M
  • Tauman Y
  • 37


    Mendeley users who have this article in their library.
  • 300


    Citations of this article.


We compare how much profit an owner of a patented cost-reducing invention can realize by licensing it to an oligopolistic industry producing a homogeneous product, by means of a fixed fee or a per unit royalty. Our analysis is conducted in terms of a noncooperative game involving n + 1 players: the inventor and the n firms. In this game the inventor acts as a Stackelberg leader, and it has a unique subgame perfect equilibrium in pure strategies. It is shown that licensing by means of a fixed fee is superior to licensing by means of a royalty for both the inventor and consumers. Only a ‘drastic’ innovation is licensed to a single producer. [ABSTRACT FROM AUTHOR]

Author-supplied keywords

  • COST control
  • EQUILIBRIUM (Economics)

Get free article suggestions today

Mendeley saves you time finding and organizing research

Sign up here
Already have an account ?Sign in

Find this document


  • Morton I Kamien

  • Yair Tauman

Cite this document

Choose a citation style from the tabs below

Save time finding and organizing research with Mendeley

Sign up for free