Per-unit versus ad-valorem royalty licensing in a Stackelberg market

We consider licensing of a non-drastic innovation by a licensor that interacts with a potential licensee in a Stackelberg duopoly, comparing per-unit and ad-valorem royalty two-part contracts and showing why and when each licensing deal should be used. We contribute three findings to the literature. First, ad-valorem royalty is preferred when the licensor plays as leader in the marketplace, but per-unit royalty is preferred when the licensor plays as follower. Second, only innovations that do not hurt consumers are socially beneficial. Third, our model also suggests that both the licensor’s status as a leader or follower in the marketplace and the innovation size determine the incentive to engage in innovative activities.

Dynamic Stackelberg duopoly with sticky prices and a myopic follower

In this paper, we study a model of a market with asymmetric information and sticky prices—the dynamic Stackelberg model with a myopic follower and infinite time horizon of Fujiwara ("Economics Bulletin" 12(12), 1–9 (2006)). We perform a comprehensive analysis of the equilibria instead of concentrating on the steady state only. We study both the equilibria for open loop and feedback information structure, which turn out to coincide, and we compare the results with the results for Cournot-Nash equilibria.