Question: Firm 1 has an idea (x, c) for the first-generation product. Firm 2 has an idea (y, C2) for the second-generation product. Firm 2's idea

Firm 1 has an idea (x, c) for the first-generation product. Firm 2 has an idea (y, C2) for the second-generation product. Firm 2's idea is patentable but infringing firm 1's patent. To commercialize its idea, firm 2 needs to acquire a license from firm 1 by paying a certain amount of license fee. Suppose it is the fraction of profit, T is the discounted time. Assume the firms split the bargaining surplus evenly. Under what condition will firm 2 invest and obtain a license from firm 1 ex ante? Explain

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