Fragmented property rights and royalty bargaining

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Date: Oct. 2009
Publisher: Elsevier B.V.
Document Type: Report
Length: 272 words

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Abstract :

To link to full-text access for this article, visit this link: Byline: Derek J. Clark (a), Jean Christophe Pereau (b) Keywords: Patents; Property rights; Bargaining; Sequential negotiation; Simultaneous negotiation Abstract: We consider production by a firm that relies on the patent rights that are held by other actors. Before production can take place, bargains have to be struck with each patent holder over the royalty per unit produced. In the negotiations, a patent holder must be mindful of the fact that a large royalty will increase the product price and lower demand for the final product. Hence each patent holder would prefer to gain a large royalty at the expense of rivals. When the producer makes the first offer in an alternating offer framework, we analyze whether it should conduct negotiations sequentially with some grouping of patent holders or simultaneously. We demonstrate that the producer will prefer simultaneous negotiation. An individual patent holder would prefer to negotiate early with the producer, and then to see remaining rights holders negotiate simultaneously. A firm that holds several patents would want to negotiate royalties on each one sequentially and then have simultaneous negotiation of payments to other rights holders. Author Affiliation: (a) Department of Economics and Management, NFH, University of TromsA[cedilla], N-9037 TromsA[cedilla], Norway (b) Universite Paris Est, OEP and TEPP (FR n[degrees] 3126, CNRS), Cite Descartes, 5 bd Descartes, 77454 Champs sur Marne Cedex 2, France Article History: Received 14 December 2007; Revised 23 May 2009; Accepted 26 May 2009 Article Note: (footnote) [star] This paper is part of the project "The knowledge-based society" sponsored by the Research Council of Norway (project 172603/V10).

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Source Citation   

Gale Document Number: GALE|A208958020