Ad-valorem and Royalty Licensing Under Decreasing Returns to Scale


  • Athanasia Mavrommati Department of Economics University of Ioannina
  • Athanasia Karakitsiou Department of Business Administration Technological Educational Institute of Serres


Patent Licensing, Royalty, Ad-valorem, Cournot Duopoly, Game Theory


In this paper we study the licensing of a cost reducing innovation by an internal patentee.
The analysis considers  a Cournot duopoly characterized by non-constant returns to scale.
The patentee chooses strategically whether to charge a per-unit or
an ad-valorem royalty to the other firm in the industry.
Our results indicate that an internal innovator may generate different incentives
for his licensing contract depending on the cost reduction imposed by the use of the new technology.


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How to Cite

Mavrommati, A., & Karakitsiou, A. (2013). Ad-valorem and Royalty Licensing Under Decreasing Returns to Scale. Asian Journal of Business and Management, 1(1). Retrieved from