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The dominance of fee licensing contracts under asymmetric information signaling

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Abstract

This paper compares different licensing contracts defined by the type of payment (fees or royalties) and contract duration (short- or long-term) in a setting in which an outside patent holder that owns a patented innovation lasting for two periods licenses it to downstream Cournot firms; further, there is asymmetric information about firms' costs emerged from the use of innovation, but they are signaled through the output produced in period 1. In this context, if we concentrate on fee contracts, the patent holder prefers short-term (revealing) contracts rather than long-term contracts.

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File URL: http://www.centrodeestudiosandaluces.info/PDFS/E200908.pdf
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Paper provided by Centro de Estudios Andaluces in its series Economic Working Papers at Centro de Estudios Andaluces with number E2009/08.

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Length: 37 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:cea:doctra:e2009_08

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Keywords: Licensing; signaling; fees; royalties; short- and long-term contracts; welfare;

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  1. 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.
  2. Arora, Ashish & Fosfuri, Andrea, 1999. "Licensing the Market for Technology," CEPR Discussion Papers 2284, C.E.P.R. Discussion Papers.
  3. Manel Antelo, 2009. "On contract duration of royalty licensing contracts," Spanish Economic Review, Springer, vol. 11(4), pages 277-299, December.
  4. Anand, Bharat N & Khanna, Tarun, 2000. "The Structure of Licensing Contracts," Journal of Industrial Economics, Wiley Blackwell, vol. 48(1), pages 103-35, March.
  5. Burguet, Roberto, 1996. "Optimal Repeated Purchases When Sellers Are Learning about Costs," Journal of Economic Theory, Elsevier, vol. 68(2), pages 440-455, February.
  6. Beggs, A. W., 1992. "The licensing of patents under asymmetric information," International Journal of Industrial Organization, Elsevier, vol. 10(2), pages 171-191, June.
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Cited by:
  1. Rupayan Pal & Bibhas Saha, 2010. "Does Partial Privatization Improve the Environment?," Working Papers id:3122, eSocialSciences.
  2. Rupayan Pal, 2009. "Delegation and Emission Tax in a Differentiated Oligopoly," Working Papers id:2263, eSocialSciences.

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