Licensing a new product: Fee vs. royalty licensing with unionized labor market |
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| Authors: | Arijit Mukherjee |
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| Institution: | 1. Department of Industrial Engineering, Fatih University, Istanbul 34500, Turkey;2. Department of Industrial Engineering, Sakarya University, Sakarya, Turkey;3. Department of Industrial Engineering, Istanbul Technical University, Istanbul, Turkey;1. Department of Mathematics and Industrial Engineering, École Polytechnique – Gerad, Montréal, Canada;2. Department of Electrical Engineering, École de Technologie Supérieure, Montréal, Canada;1. Shanghai University of Finance and Economics, School of Economics, Guoding Road 777, 200433 Shanghai, China;2. Korea University, Department of Economics, Sung-Buk Ku An-am Dong 5-1, Seoul 02841, Republic of Korea;3. Humboldt University at Berlin, Department of Economics, Spandauer Str. 1, 10178 Berlin, Germany;1. Economics and Trade Department, Dalian Maritime University, Dalian, China;2. Graduate School of Economics, Chonnam National University, Gwangju, Republic of Korea;3. Institute of Social Science, The University of Tokyo, Tokyo, Japan;1. Jadavpur University, Department of Economics, Kolkata, 700032, India;2. Chapman University, Argyros School of Business and Economics, Orange, CA 92866, USA |
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| Abstract: | In an economy with unionized labor market, we show that the payoff of an outside innovator may be higher under royalty licensing than under fixed-fee licensing and auction, if bargaining power of the labor union is sufficiently high. This result holds for both decentralized and centralized bargaining. It follows from our analysis that a combination of fixed-fee and output royalty can be preferable to the innovator compared to both royalty only licensing and auction (or fixed-fee licensing). We discuss the implications of positive opportunity costs of the licensees. |
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