The sequential coalition formation in the patent pool game with externality

The sequential coalition formation in the patent pool game with externality

In this paper, we consider a situation in which several …rms form a patent pool to reduce their marginal costs in the Cournot market. The game consists of two stages. In the …rst stage, patent holders form patent pools under the alternating-o¤ers bargaining game, while in the second stage, all …rms compete in the market. In the symmetric case, patent holders form either one grand coalition or two asymmetric coalitions according to the ratio of patent holders to the total competitors. The total pro…t of patent holders is maximized when the grand coalition is formed in the equilibrium. Finally, we show that the patent pool can mitigate the patent thicket problem under certain conditions.