What royalty rate should the patent holder set

Reference no: EM13751254

Question 1. Suppose the demand curve for widgets is given by p = 100 - 2q. One firm owns the patent on the widget, but licenses its patent to two manufacturers (and does not produce any widgets itself). Assume each manufacturer has a total cost curve given by TC(q) = q², and there are no fixed costs. If the two licensees compete by choosing quantities (a la Cournot), what royalty rate should the patent holder set? What fixed fee should it charge each licensee?

Question 2. Assume the demand curve for widgets is given by p=100 - 2q. Assume that there are two firms that each owns a patent on perfectly substitutable widgets. Each has a constant marginal cost per widget of $20, and no fixed costs.

(a) If the two firms compete by choosing quantities, what will their profits be?

(b) If the two firms enter an illegal cross-licensing agreement to share their patents, what common royalty rate should they charge each other to maximize their profits?

Question 3. Suppose the demand curve for widgets is given by p=100 - q where p is the price, and q is the quantity.

(a) If the market is served by a single monopolist with constant marginal cost of mc₁=$80, what is its incentive (or additional profit) from developing a cost-saving process innovation that reduces marginal cost to mc₂=$20? Be sure to include a diagram to illustrate your answer.

(b) If the market is competitive, and firms sell widgets at a price equal to constant marginal cost mc₁=$80, what is an individual firm's incentive to develop the same cost- saving process innovation (for which it obtains a patent to exclude other firms) that reduces marginal cost to mc₂=$20? Be sure to include a separate diagram to illustrate your answer.

Question 4. Suppose the number of potential adopters of a new technology is N=21, and β=0.07.

(a) Assuming a Central Source Model, calculate the number of adopters of the new technology for t=0, 1, 2,..., 30. Assume that the "central source" is one of the 21 adopters such that D(0)=1.

(b) Now assume an Epidemic Model with N=21, and β=0.07. Calculate the number of adopters of the new technology for t=0, 1, 2,..., 30. Assume that D(0)=1.

Question 5. Suppose the demand curve for a new technology is given by p=100 - q. The patent holder's total cost function is TC(q) = 500 + 40q.

(a) What are profits if the firm chooses the profit-maximizing price?

(b) What are profits if the firm chooses a penetration price equal to marginal cost?

Reference no: EM13751254

Questions Cloud

Challenges you faced with creating your tutorial : In a professional capacity, technical communicators often have to justify their design and development decisions. Challenges you faced with creating your tutorial and how you overcame those challenges

What is the relationship between quality and patient safety : Why do you believe measuring quality has become so important in the health care industry. Provide examples. What is the relationship between quality and patient safety. What is one example you believe shows this relationship effectively. Explain.

Why income inequality has been rising : Discuss some of the factors Autor identifies as having contributed to an increase in the demand for highly-educated workers and a decrease in the demand for less-educated workers.

Which groups supported the newly formed republic : Which groups supported the newly formed republic.

What royalty rate should the patent holder set : What royalty rate should the patent holder set - What fixed fee should it charge each licensee and what will their profits be?

Calculate the arithmetic average return : Calculate the arithmetic average return on these stocks over the sample period. Which stock has greater dispersion around the mean?

How did reagan contribute to corporate restructuring : How did Reagan contribute to corporate restructuring? What was the impact of the merger movement on the American economy generally? What new industries emerged in the late 1980s and 1990s?

What is your organization''s procurement cycle : Who are the internal and external customers for private, public, not-for-profit, global, and government organizations. How are they different. How does an organization tie its internal and external customer's expectations to its procurement strate..

Describe the current relationship between the us and india : Identify and describe the current relationship between the U.S. and India. Summarize events between the U.S. and at least one of the countries since the end of the Cold War.

User Account

All Pages