Applying the Nash Bargaining Solution for a Reasonable Royalty II

TL;DR

This paper refines the Nash Bargaining Solution for determining reasonable royalties by incorporating statistical methods to account for risk and uncertainty, making the estimates more reliable and aligned with legal criteria.

Contribution

It introduces a Bayesian cost approach to improve the NBS method for royalty estimation under uncertainty, expanding previous work.

Findings

NBS becomes more reliable with Bayesian analysis.

Addresses risk and uncertainty in royalty calculations.

Aligns NBS with legal criteria for reasonable royalties.

Abstract

This paper expands on the concepts presented in Applying the Nash Bargaining Solution for a Reasonable Royalty ( arXiv:2005.10158 ). The goal is to refine the process for determining a reasonable royalty using statistical methods in cases where there is risk and uncertainty regarding each party's disagreement payoffs (opportunity costs) in the Nash Bargaining Solution (NBS). This paper uses a Bayes Cost approach to analyze Case 1, Case 2, and the Original Nash model from the authors' previous work. By addressing risk and uncertainty in the NBS, the NBS emerges as a more reliable method for estimating a reasonable royalty, aligning with the criteria outlined in Georgia Pacific factor fifteen.