Coordinating Inventive and Innovative Decisions Through Markets with Prices: An Experimental Study of Patent Markets with Transparent Prices
AbstractThe patent system makes organized markets in patents with transparent prices possible. Such prices are here investigated as "signals" for inventors and innovators alike of valuable "technology areas," in an experimental study. They inform decisions of specialized "firms" on allocation of resources for invention given a search space of induced technology values. The traditional hierarchical model of coordinating invention and innovation in a vertically integrated firm is replaced by coordination of these activities among specialized firms through a "market" with prices. The experimental study builds on a study focusing on price mechanisms with exogenous technology values to a study of an economic environment with "endogenous" technology values. The results suggest that coordination clearly takes place but differs considerably between the institutions and patent validity tested (a 3 x 2 design). As with the price study, demand-side bidding in both dimensions of the linear contract appears to yield the broadest search scope, and thus the best chances for the allocation of resources for invention. Multiple end-states are observed, especially for institutions with less demand-side bidding, indicating imprecise price signals for institutions similar to today's personal exchange. Coordination with prices appears to increase the dynamic gains of the patent system through price information to reduce or better inform about the risk in investments in new technology.
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Bibliographic InfoPaper provided by George Mason University, Interdisciplinary Center for Economic Science in its series Working Papers with number 1018.
Date of creation: Nov 2010
Date of revision:
patents; trade; licensing; intellectual property; experiments;
Other versions of this item:
- Ullberg, Eskil, 2011. "Coordinating Inventive and Innovative Decisions through Markets with Prices: A Experimental Study of Patent Markets with Transparent Prices," JIBS Working Papers 2010-14, Jönköping International Business School.
- Ullberg, Eskil, 2010. "COORDINATING INVENTIVE AND INNOVATIVE DECISIONS THROUGH MARKETS WITH PRICES: A Experimental Study of Patent Markets with Transparent Prices," Working Paper Series in Economics and Institutions of Innovation 231, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
- D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
- O34 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-16 (All new papers)
- NEP-EXP-2011-04-16 (Experimental Economics)
- NEP-INO-2011-04-16 (Innovation)
- NEP-IPR-2011-04-16 (Intellectual Property Rights)
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- Christoph Engel & Marco Kleine, 2013. "Who is Afraid of Pirates? An Experiment on the Deterrence of Innovation by Imitation," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2013_07, Max Planck Institute for Research on Collective Goods, revised Nov 2013.
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