In what follows we propose a solution to a hypothetical bargaining problem that is likely to arise when the owner of an invention, which is assumed to lower the marginal cost of production, negotiates a patent license with producers. We show that, under various assumptions about the downstream...

Experimental studies show that the Nash equilibrium and its refinements are poor predictors of behavior in non-cooperative strategic games. Cooperation models, such as ERC and inequality aversion, yield superior predictions compared to the standard game theory predictions. However, those models...