The patent holder's bargaining power and the licensing of an innovation

Abstract

A bargaining licensing game is developed to study how the patent holder's bargaining power affects his licensing policy as well as the social welfare. Indeed, a modification in the patent's holder bargaining power is not innocuous for the economy. Therefore, a social agency that is concerned with a social welfare measure may raise the question of who should hold the bargaining power in order to increase the welfare of the economy. Consumers and the world economy are better off with the complete diffusion of the technology. This is only possible if the patent holder is attributed greater bargaining power than the one attributed to the potential licensees and the size of the innovation is small enough.