Asymptotic Properties of the Shapley Value of Patent Licensing Games

We study the asymptotic properties of the Shapley value of patent licensing games with the Cournot competition, shedding light on its relations to the nucleolus, core and bargaining set. The Shapley value of the outside patentee of a non-drastic cost-reducing innovation converges to 2(a − c), which coincides with the patentee’s profit through non-cooperative licensing by means of upfront fee (or royalty) in Kamien and Tauman (1986). The distance between the asymptotic Shapley value and asymptotic nucleolus becomes larger as the magnitude 2 of the cost reduction increases. The limit core is empty, and the asymptotic Shapley value is excluded from the limit bargaining set. All the results are based on a new way of deriving a v-function from n-person games in strategic form.