Competition

This paper develops a two-country duopolistic model and takes into account trade barriers in exploring the insider patentee’s optimal licensing contract, as firms produce a homogeneous product and engage in Cournot competition in each market. The focus of the paper is on the impact of cost advantage generated by the innovation size and the rent created by trade barriers. The paper shows that mixed licensing contract is optimal as the innovation size relative to the innovation size is large under non-drastic innovation, while royalty licensing is optimal, otherwise. Moreover, it also shows that the optimal licensing contract is mixed licensing under drastic innovation