This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Simultaneous signaling and output royalties in licensing contracts

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Manel Antelo () (Universidade de Santiago de Compostela)
Abstract

This paper analyzes a two-period licensing model where an upstream patent holder licenses an innovation, by per-unit output royalty contracts, to several downstream licensees. Such firms compete in Cournot fashion at the product market and each firm's cost is directly unobservable for third parties. In such a context, the optimal royalties when licensees' outputs signal their costs through the output produced on the first period are examined and compared with those they would be if licensees' outputs were not a signal of such costs. It is shown that low-cost licensees have an incentive to misrepresent themselves as high-cost firms. This leads, when the efficiency gap between licensees is low enough, the first-period per-unit output royalties to be higher (resp. lower) than they would be if firms' output were not a signal of their costs provided that the probability of licensees being low-cost producers is very high (resp. low or moderate). Results are extended to the case of a large efficiency gap between licensees, and that of downstream Bertrand licensees who produce differentiated goods using the innovation and may signal their marginal costs through price choices of the first period.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://public.centrodeestudiosandaluces.es/pdfs/E200453.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Centro de Estudios Andaluces in its series Economic Working Papers at Centro de Estudios Andaluces with number E2004/53.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 41 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:cea:doctra:e2004_53

Contact details of provider:
Postal: c/ Bailén 50. 41001 Sevilla
Phone: (34) 955 055 210
Fax: (34) 955 055 211
Email:
Web page: http://www.centrodeestudiosandaluces.es
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Teresa Rodríguez).

Related research
Keywords: Patent licensing; per-unit output royalties; unobservable costs; signaling and no-signaling equilibrium;

Find related papers by JEL classification:
D45 - Microeconomics - - Market Structure and Pricing - - - Rationing; Licensing
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Kamien, Morton I & Tauman, Yair, 1986. "Fees versus Royalties and the Private Value of a Patent," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 471-91, August. [Downloadable!] (restricted)
  2. Gertner, Robert H. & Gibbons, Robert. & Scharfstein, David., 1987. "Simultaneous signaling to the capital and product markets," Working papers 1917-87., Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
    Other versions:
  3. Aghion, Philippe & Tirole, Jean, 1994. "The Management of Innovation," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 1185-1209, November. [Downloadable!] (restricted)
  4. Erutku, C. & Richelle, Y., 2000. "Optimal Licensing Contracts and the Value of a Patent," Cahiers de recherche 2000-07, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  5. Laffont, Jean-Jacques & Tirole, Jean, 1986. "Using Cost Observation to Regulate Firms," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 614-41, June. [Downloadable!] (restricted)
    Other versions:
  6. Katz, Michael L & Shapiro, Carl, 1986. "How to License Intangible Property," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 567-89, August. [Downloadable!] (restricted)
  7. Mailath, George J, 1989. "Simultaneous Signaling in an Oligopoly Model," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 417-27, May. [Downloadable!] (restricted)
  8. Ramon Fauli-Oller & Joel Sandonis, 2000. "To Merge or to License: Implications for Competition Policy," Discussion Papers 1284, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  9. Ines Macho-stadler & David Perez-castrillo, 1991. "Contrats de licences et asymétrie d'information," Annales d'Economie et de Statistique, ADRES, issue 24, pages 08, Octobre-D. [Downloadable!]
  10. Anand, Bharat N & Khanna, Tarun, 2000. "The Structure of Licensing Contracts," Journal of Industrial Economics, Blackwell Publishing, vol. 48(1), pages 103-35, March. [Downloadable!] (restricted)
  11. Nancy T. Gallini & Brian D. Wright, 1990. "Technology Transfer under Asymmetric Information," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 147-160, Spring. [Downloadable!] (restricted)
  12. Beggs, A. W., 1992. "The licensing of patents under asymmetric information," International Journal of Industrial Organization, Elsevier, vol. 10(2), pages 171-191, June. [Downloadable!] (restricted)
  13. Muto Shigeo, 1993. "On Licensing Policies in Bertrand Competition," Games and Economic Behavior, Elsevier, vol. 5(2), pages 257-267, April. [Downloadable!] (restricted)
  14. Kamien, Morton I. & Oren, Shmuel S. & Tauman, Yair, 1992. "Optimal licensing of cost-reducing innovation," Journal of Mathematical Economics, Elsevier, vol. 21(5), pages 483-508. [Downloadable!] (restricted)
  15. Aghion, Philippe & Tirole, Jean, 1994. "On the Management of Innovation," IDEI Working Papers 36, Institut d'Économie Industrielle (IDEI), Toulouse.
    Other versions:
  16. ERUTKU, C. & RICHELLE, Yves, 2000. "Optimal Licensing Contracts and the Value of a Patent," Cahiers de recherche 2000-07, Universite de Montreal, Departement de sciences economiques.
  17. Macho-Stadler, Ines & Martinez-Giralt, Xavier & David Perez-Castrillo, J., 1996. "The role of information in licensing contract design," Research Policy, Elsevier, vol. 25(1), pages 43-57, January. [Downloadable!] (restricted)
    Other versions:
  18. Bousquet, Alain & Cremer, Helmuth & Ivaldi, Marc & Wolkowicz, Michel, 1998. "Risk sharing in licensing," International Journal of Industrial Organization, Elsevier, vol. 16(5), pages 535-554, September. [Downloadable!] (restricted)
  19. Kreps, David M & Wilson, Robert, 1982. "Sequential Equilibria," Econometrica, Econometric Society, vol. 50(4), pages 863-94, July. [Downloadable!] (restricted)
    Other versions:
Full references

Statistics
Access and download statistics

Did you know? All RePEc services are meant to be be free forever, as they are all run by volunteers.

This page was last updated on 2009-11-16.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.