In this paper we compare and contrast the most profitable modes of licensing a cost-reducing invention by an inventor who is an industry incumbent with one who is not. We find that an industry incumbent favors licensing by means of a royalty per unit of output to which the new technology is...

This chapter focuses on the patent licensing. Game-theoretic methods have made it possible to address questions with regard to patent licensing. The common modes of patent licensing are a royalty, possibly nonuniform, per unit of output produced with the patented technology, a fixed fee that is...