Licensor selection: an economico-mathematical model
The present paper contains a mathematical model of licensor selection for the situation when the licensee is authorized to produce and sell the product under licensor’s brand. The goal of the research is to build up a mathematical model of licensor selection based on economic principles rather than on empirical results in order to analyze licensee’s optimal behavior. The model is based on the hypothesis that the licensee selects the licensor who can ensure maximal revenue. The model takes into account the risk of licensee’s inability to organize production and distribution of the licensed product as well as licensee’s investments in licensor’s technology. It is supposed that this risk and these investments depend of the difference between licensee’s product and the licensed one. It is demonstrated that contrarily to the traditional approach the licensee should not be interested in maximization of difference between the price of his own product and the price of the licensed product.