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Patent Auctions and Bidding Coalitions: Structuring the Sale of Club Goods

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  • John Asker
  • Mariagiovanna Baccara
  • SangMok Lee

Abstract

Auctioneers of patents are observed to allow joint bidding by coalitions of buyers. These auctions are distinguished by the good for sale being non-rivalrous, but still excludable, in consumption{that is, they auctions of club goods. This affects how coalitional bidding impacts auction performance. We study the implications of coalitions of bidders on second-price (or equivalently, ascending-price) auctions. Although the formation of coalitions can benefit the seller, we show that stable coalition profiles tend to consist of excessively large coalitions, to the detriment of both auction revenue and social welfare. Limiting the permitted coalition size increases efficiency and confers benefits on the seller. Lastly, we compare the revenues generated by patent auctions and multi-license auctions, and we find that the latter are superior in a large class of environments.

Suggested Citation

  • John Asker & Mariagiovanna Baccara & SangMok Lee, 2021. "Patent Auctions and Bidding Coalitions: Structuring the Sale of Club Goods," NBER Working Papers 28602, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28602
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    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • 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
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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