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Sleeping Patents and Computsory Licensing: An Options Analysis

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  • Weeds, H.

Abstract

Why should a firm wish to create a new technology that it will leave unexploited for some time? Sleeping patents have long been perceived as anticompetitive devices, used by dominant firms to block entry into their market. In a real options framework with both economic and technological uncertainty, we show that a sleeping patent may arise as the result of optimal forward-looking behavior, in the absence of any anticompetitive motive. We also consider the effect of possible measures to enforce the development of sleeping patents and find that these are likely to harm incentives for firms to engage in research.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp577.pdf
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Bibliographic Info

Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 577.

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Length: 32 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:wrk:warwec:577

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Keywords: RESEARCH AND DEVELOPMENT ; TECHNOLOGY ; MARKET;

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References

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  1. Robert S. Pindyck, 1992. "Investments of Uncertain Cost," NBER Working Papers 4175, National Bureau of Economic Research, Inc.
  2. Bar-Ilan, Avner & Strange, William C., 1998. "A model of sequential investment," Journal of Economic Dynamics and Control, Elsevier, vol. 22(3), pages 437-463, March.
  3. McDonald, Robert & Siegel, Daniel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 707-27, November.
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Cited by:
  1. Flavia Cortelezzi & Giovanni Villani, 2007. "Strategic Technology Adoption and Market Dynamics as Option Games," Quaderni DSEMS 14-2007, Dipartimento di Scienze Economiche, Matematiche e Statistiche, Universita' di Foggia.
  2. Chi Leung & Yue Kwok, 2011. "Real options game analysis of sleeping patents," Decisions in Economics and Finance, Springer, vol. 34(1), pages 41-65, May.
  3. Giovanni Villani, 2008. "An R&D Investment Game under Uncertainty in Real Option Analysis," Computational Economics, Society for Computational Economics, vol. 32(1), pages 199-219, September.
  4. Flavia Cortelezzi & Pierpaolo Giannoccolo, 2006. "Strategic Urban Development under Uncertainty," Working Papers 20060601, Università degli Studi di Milano-Bicocca, Dipartimento di Statistica, revised Jun 2006.

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