This paper is an attempt to provide a strategic rationale behind patent infringement agreements (PIA). We interpret such agreements as yet another form of cooperation in a non-cooperative environment. If the infringement probability is not 'too' low, firms would have incentive to sign a PIA sacrificing the right to punish the offender. In a simple Cournot-Nash model with linear demand, we show that the infringement probability as low as near 1/5 could induce PIA.
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Paper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number
419.
Length: 16 pages Date of creation: Mar 1993 Date of revision:
Sep 1993 Handle: RePEc:bon:bonsfa:419
Contact details of provider: Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany Fax: +49 228 73 9221 Web page: http://www.bgse.uni-bonn.de/index.php?id=517
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Find related papers by JEL classification: D45 - Microeconomics - - Market Structure and Pricing - - - Rationing; Licensing L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets