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Ex-ante Agreements and FRAND Commitments in a Repeated Game of Standard-Setting Organizations

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  • Gastón Llanes

    (Pontificia Universidad Católica de Chile)

Abstract

I study licensing and technology choice in standard setting. I find that there may be inefficient adoption of technologies, even when firms commit to a maximum royalty or price cap for the use of their patents. When firms interact repeatedly to develop standards, a commitment to set fair, reasonable and non-discriminatory (FRAND) royalty fees may lead to more efficient technologies and higher surplus for all parties. This result can explain why standard-setting organizations favor FRAND commitments over more structured licensing commitments—such as price caps—and why there are been relatively few cases of hold-up in practice, even though such opportunistic behavior has been a primary cause of concern for innovation economists.

Suggested Citation

  • Gastón Llanes, 2019. "Ex-ante Agreements and FRAND Commitments in a Repeated Game of Standard-Setting Organizations," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 54(1), pages 159-174, February.
    • Handle: RePEc:kap:revind:v:54:y:2019:i:1:d:10.1007_s11151-018-9647-7
    DOI: 10.1007/s11151-018-9647-7
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    References listed on IDEAS

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    1. G. M.P. Swann, 2009. "The Economics of Innovation," Books, Edward Elgar Publishing, number 13211.
    2. Gastón Llanes & Joaquín Poblete, 2014. "Ex Ante Agreements in Standard Setting and Patent‐Pool Formation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(1), pages 50-67, March.
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    Cited by:

    1. Fiedler, Clemens & Larrain, Maria & Prüfer, Jens, 2023. "Membership, governance, and lobbying in standard-setting organizations," Research Policy, Elsevier, vol. 52(6).

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