a dynamic analysis of licensing the boomerang effect and grant back clauses this article develops an incomplete contract model of the licensing relationship to analyze the dynamic effects of licensing on r d competition in the innovation market and to examine the rationale for often observed grant back clauses of particular concern are how the consideration of future competition distorts the licensing relationship and how the grant back clause can mitigate this distortion i also evaluate the validity of the casual antitrust argument that grant back clauses may adversely affect competition because they reduce the licensee s incentive to engage in r d and thereby limit rivalry in innovation markets

efficient methods of measuring welfare change and compensated income in terms of ordinary demand functions a utility maximizing consumer with a completely known system of ordinary demand functions q h p c is considered let p qo and p q be two arbitrary equilibrium situations the problem is to evaluate in which of the situations the utility is higher without knowing the utility function revealed preference theory tells that the ordinary demand functions which are in principle observable contain enough information to solve the problem remaining difficulties are therefore mainly computational we present how the compensated income c i c p qo and the compensated demand h p cl1 are calculated with arbitrary accuracy using only the ordinary demand system our two efficient algorithms also have interesting interpretations in terms of index numbers and consumer surplus measures

tax collection with agency costs private contracting or government bureaucrats historically governments contracted with private agents known as tax farmers to collect taxes this paper develops a theoretical framework for determining when a welfare maximizing government should choose tax farmers over bureaucratic tax collectors while bureaucratic collectors have an incentive to shirk and raise collection costs above least costs profit maximizing private collectors tend to reduce tax evasion below the optimal level generally the choice of collection methods depends on a comparison of the welfare loss associated with monitoring in the bureaucratic setting and the welfare loss associated with overdetection of evasion in the private setting copyright 1992 by the london school of economics and political science

the structure of licensing contracts industrial organization theory has explored several issues related to licensing but empirical analyses are extremely rare we amass a new and detailed dataset on licensing contracts and use it to present some simple facts concerning licensing behavior our analysis reveals robust cross industries differences in several contractual features such as exclusivity cross licensing ex ante versus ex post technology transfers and licensing to related versus unrelated parties we offer an interpretation of these facts based on cross industry variation in the strength of intellectual property rights

a bayesian approach to aggregation in demand systems smoothing with perfect substitution priors demand analysis requires aggregation of commodities some are imposed at the data collection level leaving some for the estimation level when data are collected the implicit assumption underlying the aggregation is perfect substitutability one gallon of gasoline is viewed by consumers as equivalent to another gallon hence the two are added together while such aggregation can be carried out further by the data analyst it is difficult to incorporate perfect substitutability into the estimation of direct demand systems perfect substitution in that context implies discontinuous demand functions which are not nested within standard empirical demand systems perfect substitution is much more easily handled in a system of inverse demands though an empirical method to impose perfect substitutability in an inverse demand system has not previously appeared in the literature in this article we develop such a method which allows perfect substitutability to be imposed as a prior restriction we use leame

royalties vs fees how do firms pay for foreign technology abstract the theoretical determinants of technology licensing contracts have been extensively studied but empirical evidence is scarce we assemble a data set of all the foreign technology licensing agreements entered into by manufacturing firms in india between 1989 and 1993 industry firm and contract characteristics are used to explain differences between the forms of payment in licensing contracts our findings support theoretical arguments licensing contracts are more likely to use royalties when sales are relatively high while increased volatility of sales and greater profitability favor fixed fee contracts we also find that firms are more likely to use output based payments to control the sale and diffusion of r d or brand intensive know how to unaffiliated firms

imperfect patent protection and innovation the paper studies the effect of strengthening protection on r d incentives in the context of process innovation it shows that for non drastic innovations that do not render the pre existing technology obsolete the innovator might favor imitation if the expected royalty rate determined by the court is sufficiently high since imitation is discouraged for very high levels of patent protection r d investment is maximized for an intermediate level of patent strength this finding provides a theoretical explanation for emerging empirical evidence questioning the effectiveness of strengthening protection on innovation incentives it also serves as a justification for the imperfections of the existing patent system that allows for some infringement

cost functions and nonlinear prices estimating a technology with quality differentiated inputs the paper is concerned with developing a production theory for the case when some inputs have nonlinear prices because the price depends on endogenous quality this involves extending the notion of a cost function to the case where nonlinear prices are parameters of costs after developing the appropriate theory we apply our results to the case of coal fired electric power generation where fuel quality depends on sulfur and ash impurities environmental regulations induce a negative value on sulfur whereas ash impurities degrade performance and thus reduce production possibilities a number of empirical results emerge including significant rates of technological change that are sulfur and ash saving though capital using this change may explain in part the recent drop in the price of sulfur allowances in the united states

field of use restrictions in licensing agreements a widely used clause in license contracts the field of use restriction four precludes licensees from operating outside of the technical field specified when a technology has several distinct applications four allow the licensor to divide up his rights and attribute them to the lowest cost producer in each field of use this can improve production efficiency with complex technologies however the boundaries of fields of use may be difficult to codify entailing a risk of licensees rights overlapping we explore how this affects the optimal license contract in a moral hazard framework where the licensor s effort determines the probability of overlap we show that depending on the contracting environment the license agreement may include output restrictions and non linear royalty schemes

patent damages and spatial competition this paper analyzes price competition between a spatially difierentiated product patentee and an imitator anticipating the possibility of future patent damages we compare the performance of three damage regimes the reasonable royalty regime the only one that yields symmetric equilibrium pricing maximizes static welfare and yields the highest incentives to innovate when patent enforcement is nearly certain the lost proflts regime the only one that may deter infringement yields the highest incentives to innovate when patent enforcement is less than certain and product value is su ciently high the unjust enrichment regime is weakest our results ofier an e ciency argument for abandoning it we also describe new insights into the hypothetical negotiation that the courts use to construct

valuation of landmass degradation using fuzzy hedonic method a case study of national capital region a hedonic model to determine the revealed willingness to pay for landmass of different suitability classes based on landmass functional characteristics obtained through subjective assessments is developed for the national capital region in india the inherent non specificity involved in subjective evaluation is minimized using fuzzy logic based regression technique the proposed fuzzy regression involves regression using central values of triangular fuzzy number and minimization of non specificity using linear programming the revealed willingness to pay for landmass of different suitability classes is used for valuation of disbenefits due to urban expansion on landmass of different agricultural suitability classes in national capital territory of delhi appropriate pricing policies to prevent the future inappropriate landuse practices are developed using the landmass valuation

welfare measurement for environmental improvements using the hedonic model the case of nonparametric marginal prices abstract research in environmental and natural resource economics frequently requires the use of hedonic models because of the differentiated products involved this is true for studies of the relationship between environmental quality and property values or wages or between the characteristics of a recreation site and the demand for its services an obvious use of such studies is in estimating willingness to pay for improvements with differentiated products there are usually nonlinear hedonic price schedules and thus nonlinear budget constraints this makes welfare analysis difficult because standard duality results no longer hold this paper develops a technique for estimating a psuedo demand system that can be used to derive exact measures of consumer welfare change similar techniques are developed for producers with a psuedo profit function that can be converted to an exact measure of the change in quasi rents or rents the paper also shows that the distance function can be used to develop an ex ante measure of welfare change

how not to sell nuclear weapons we consider situations where a sale affects the ensuing interaction between potential buyers these situations are modeled by assuming that an agent who does not acquire the object for sale incurs an identity dependent externality we construct a revenue maximizing auction for the seller we observe that 1 outside options and participation constraints are endogenous 2 the seller extracts surplus also from agents who do not obtain the auctioned object 3 the seller is better off by not selling at all while obtaining some payments if externalities are much larger than valuations

the shapley value of resale proof trades abstract this paper studies the shapley value of transferable utility games associated with resale proof trades of information is in the core iff there is exactly one minimal resale proof set a simple expression for is obtained for symmetric games and some bounds are given for in non symmetric cases

beyond implicit prices recovering theoretically consistent and transferable values for noise avoidance from a hedonic property price model using a two stage hedonic pricing methodology we estimate a system of structural demand equations for different sources of transport related noise in the first stage we identify market segments using model based clustering techniques and estimate separate hedonic price functions hpfs for each segment in so doing we show how a semiparametric spatial smoothing estimator outperforms other standard specifications of the hpf in the second stage we control for non linearity of the budget constraint and identify demand relationships using techniques that account for problems of endogeneity and censoring of the dependent variable our estimated demand functions provide welfare estimates for peace and quiet that we believe to be the first derived from property market data in a theoretically consistent manner

international technology licensing monopoly rents transaction costs and exclusive rights as firms increasingly use licensing to exploit knowledge based assets in global technology markets appropriate structuring of these agreements has become an important line of research inquiry one area that has received less attention is the nature of rights granted in inter firm licensing relationships although it is an important clause that has implications for profit generation from licensing of proprietary assets conceptualizing licensing rights in terms of number of licenses granted and exclusivity rights given to a licensee in a foreign market this paper examines the determinants of these rights based on monopoly rents and transaction costs associated with different types of licensing contracts hypotheses are empirically tested through two studies one based on large us manufacturing firms and the other on a cross national sample of medium sized firms actively involved in international technology licensing results from both studies show a greater propensity to use non exclusive multiple licensing when the licensed technology has greater potential to produce differentiated products or when there is greater threat of substitutive technologies entering the market on the other hand innovative technologies and a higher degree of asset specific investments required of the licensee for the technology are related to the use of single exclusive licensing agreements

on the licensing of a technology with unknown use abstract we consider the problem facing the patentee of a technology that may be used to reduce the costs of firms in an industry the technology s ability to cut costs depends on a use for it being discovered and the patentee has the option of trying to discover the use before licensing the technology to the firms should the patentee try to answer this question we model the interaction between the patentee and the firms as a game in extensive form the first move in the game belongs to the patentee deciding whether to carry a trial next there is a licensing stage followed by cournot competition involving licensees and nonlicensees we show that if a failure leads to the belief that the technology is most likely useless to the firms then not trying to discover the use is optimal even if a trial is free of pecuniary costs

the diffusion of a durable embodied capital innovation abstract this paper shows that some important results of the literature on the diffusion of innovations may change in a significant way when it is simultaneously considered that i there are costs of producing the innovation and ii the potential adopters demands are interdependent

estimating the general equilibrium benefits of large changes in spatially delineated public goods the purpose of this article is to report a new approach for measuring the general equilibrium willingness to pay for large changes in spatially delineated public goods such as air quality we estimate the parameters of a locational equilibrium model and compute equilibria for alternative scenarios characterizing the availability of public goods within a system of communities welfare measures take into consideration the adjustments of households in equilibrium to nonmarginal changes in public goods the framework is used to analyze willingness to pay for reductions in ozone concentrations in southern california between 1990 and 1995

farsighted stability in patent licensing an abstract game approach abstract this paper analyzes the negotiations made by an external patent holder and potential licensee firms in a new model of patent licensing assuming that they are all farsighted and characterizes the symmetric farsighted stable sets given a net profit of each licensee firm a set of outcomes is a symmetric farsighted stable set if and only if at any outcome in the set each licensee firm receives the net profit and the number of licensee firms maximizes the patent holder s profit provided that licensee firms obtain the net profits we also show the close relationship between the symmetric farsighted stable sets and the relative interior of the core further we confirm that the symmetric farsighted stable sets are the absolutely maximal farsighted stable sets ray and vohra forthcoming as well as the history dependent strongly rational expectation farsighted stable sets dutta and vartiainen forthcoming

network externalities and royalty licensing we compare the licensing mechanism of per unit and ad valorem royalties in network industries it is shown that the standard finding that an internal patentee always prefers an ad valorem royalty to a per unit royalty may reverse by considering the network effect when the network effect is sufficiently intense a per unit royalty may be superior to an ad valorem royalty this finding is meaningful for the firms in network industries to reconsider how to use royalty licensing

socially excessive dissemination of patent licences compared with the social optimum a monopolist usually sells too little this result seemingly includes the case of a lab that licences its patented cost innovation katz and shapiro 1986 find conditions under which the lab will issue fewer than the socially optimal number of licences however i find instead that its incentives can be socially too high the monopoly seller may sell too much for example it can be profit maximizing to sell several licences while it is socially optimal that none is sold en comparaison avec l optimum social un monopoleur habituellement vend trop peu voila qui semble tenir pour le cas d un laboratoire qui vend des licences pour une innovation brevetee qui reduit les couts katz shapiro 1986 ont montre dans quelles conditions le laboratoire va emettre moins que le nombre optimal de licences cependant l auteur decouvre que les incitations peuvent plutot l amener a en emettre trop plus que l optimum social par exemple il se peut que la maximisation du profit amene a vendre plusieurs licences alors qu il serait socialement optimal de n en vendre aucune

estimating the demand for protecting freshwater lakes from eutrophication in any discussion of the valuation of public goods particularly environmental amenities contingent valuation travel cost and hedonics are commonly cited as methods for estimating hicksian or marshallian welfare freeman while contingent valuation and travel cost are widely employed we know of very few applications where hedonic demand functions have been estimated palmquist 1984 and parsons estimated second stage hedonic demands for characteristics of housing units both used the approach of estimating separate hedonic price functions for different real estate markets to identify demand parameters for housing characteristics the research reported here is the first to use separate real estate markets to identify demand parameters for an environmental amenity the specific application is water clarity in selected lakes in maine reduced water

competition and the efficiency of markets for technology the sale of r d projects through licensing facilitates the division of labor between research and development activities this vertical specialization can improve the overall eciency of the innovative process however these gains depend on the timing of the sale the buyer of an r d project should assume development at the stage at which he has an eciency advantage we show that in an environment where the seller is overcondent about the value of the project she may delay the sale to the more ecient rm in order to provide veriable information about its quality though this delay implies higher total development costs for the project we obtain a condition for the equilibrium timing of licensing and examine how factors such as the intensity of competition between potential buyers inuence it we show that a wide array of dierent explanations based on dierences in information beliefs or risk proles lead to the same qualitative results we present empirical evidence from pharmaceutical licensing contracts that is consistent with our theoretical predictions

do subsidies to cooperative r d actually stimulate r d investment and cooperation abstract a popular view in the industrial policy debate is that cooperation among firms r d departments should be encouraged the european community japan and the us all subsidize research cooperatives this study presents the first empirical test of the effectiveness of such subsidies using a database of competitors in 45 technological races the results indicate that subsidies that require cooperation in the form of result sharing agreements significantly increase the likelihood of cooperation but they decrease incentives to conduct r d subsidy programmes such as eureka that require cooperation but do not require result sharing agreements do not increase the likelihood of cooperation they do however increase incentives to conduct r d somewhat about to the same extent as subsidies that do not require cooperation

estimating compensating and equivalent income variations from hedonic price models abstract estimates of welfare changes obtained from hedonic price models usually consist of changes in marshallian consumer s surplus this note shows how compensating and equivalent income variations can be computed from the information available in hedonicprice models

tv wars exclusive content and platform competition in pay tv the article examines incentives for exclusive distribution of premium television programming static analysis shows that a vertically integrated operator with premium programming always supplies this content to the rival distributor using per subscriber fees to soften competition in a dynamic setting with switching costs exclusivity confers a market share advantage benefiting the operator in the future under certain conditions this future benefit outweighs the opportunity cost of forgone wholesale fees making exclusivity the preferred choice alternative dynamic mechanisms are explored identifying essential features the analysis explains the observed incidence of content exclusivity in pay tv and provides guidance for policy makers

do capitalization effects for public goods reveal the public s willingness to pay this article develops a welfare theoretic framework for interpreting evidence on the impacts of public programs on housing markets we extend rosen s hedonic model to explain how housing prices capitalize exogenous shocks to public goods and externalities the model predicts that trading between heterogeneous buyers and sellers will drive a wedge between these capitalization effects and welfare changes we test this hypothesis in the context of changes in measures of school quality in five metropolitan areas results from boundary discontinuity designs suggest that capitalization effects understate parents willingness to pay for public school improvements by as much as 75

selling patent rights and the incentive to innovate abstract we show that an outside innovator has a higher incentive to innovate than an incumbent innovator by auctioning off his patent rights exclusively to an incumbent firm for significant innovations this is also superior to selling licenses directly

possibility of relicensing and patent protection abstract we examine the effects of patent protection paying attention to its role of prohibiting relicensing we focus on two questions first whether does the innovator have an incentive of licensing the concealable easily kept secret if not licensed innovation in the case where patent protection is absent second what effects does patent protection have upon the innovator s payoff and the consumers welfare principal findings include the following in the case of nondrastic innovations in the sense of arrow the innovator has an incentive of licensing even without patent protection patent protection generally benefits the innovator but may cause damage to the consumers for large innovations for drastic innovations patent protection has no influence on licensing licensing never takes place regardless of whether it is provided or not

bootstrapping your fish or fishing for bootstraps precision of welfare loss estimates from a globally concave inverse demand model of commercial fish landings in the u s great lakes we extend holt and bishop s 2002 normalized quadratic inverse demand function by obtaining measures of precision of elasticities and consumer welfare loss estimates due to reductions in commercial landings in the u s great lakes even with curvature constraints imposed confidence intervals are obtained by using the bootstrap subsample bootstrap and subsample jackknife

international technology transfer under potential threat of entry a cournot nash framework abstract this paper analyses the possibility of technology transfer from a technologically advanced foreign firm to a domestic firm of a less developed country when the product market is characterized by cournot nash competition the foreign firm is not allowed to enter the home market by a prohibitive tariff but the backward firm may not face any such resistance in the foreign markets this means that technology transfer under this situation involves potential threat of competition from the latecomer it is shown that by designing a suitable payment policy the host country government can induce the foreign firm to transfer the best technology however there are possible equilibria where worse than the best technologies are transferred

technology licensing contracts with network effects we study the optimal technology licensing contracts with network effects and investigate the welfare implications when the product innovator is an insider that acts as a stackelberg leader we show that i the market is fully covered when relatively small network intensity matches quality differentiations that are sufficiently large ii with regard to profit maximization the optimal licensing strategy varies from one of royalty licensing to two part tariff licensing as network effects increase not including fixed fee licensing iii consumer surplus is optimal under non licensing conditions in comparison to other licensing strategies due to the covered market iv depending on network effects the preferred strategies to achieve social welfare maximization change from no licensing or fixed fee licensing to two part tariff licensing and royalty licensing is not preferred in this instance v conflict does not always or necessarily occur between the goals of enterprise profit maximization and social welfare optimization two part tariff licensing is preferred both by the licensor and by society when the network effect is large

exact consumer s surplus and deadweight loss consumer s surplus is a widely used tool in applied welfare economics both economic theorists and cost benefit analysis often use consumer s surplus despite its somewhat dubious reputation the basic idea is to evaluate the value to a consumer or his willingness to pay for a change in price of a good from say pricep to pricep because price changes affect consumer welfare an evaluation of this effect is often a key input to public policy decisions yet consumer s surplus is probably the most controversial of widely used economic concepts both paul samuelson and ian little conclude that the economics profession would be better off without it it is my feeling of the situation that substantial agreement exists on the correct quantities to be measured the amount the consumer would pay or would need to be paid to be just as well off after the price change as he was before the price change the quantities correspond to john hicks compensating variation measures an alternative measure which takes ex post price change utility as the basis of comparison is hicks equivalent variation the controversy arises in the measurement of these quantities the usual measurement procedure is to use the area to the left of the marshallian market demand curve between two price levels jules dupuit originated this measure of welfare change and alfred marshall and hicks derived appropriate conditions for its use the primary condition for the area to the left of the demand curve to correspond to the compensating variation is to have constant marginal utility of income marshall gave this condition and if it holds the same quantity will be derived as the area to the left of the compensated hicksian demand curve this area to the left of the compensated demand curve is exactly what the compensating variation and equivalent variation measure thus the constant marginal utility of income is a sufficient condition for marshallian consumer s surplus to be equal to hicks consumer s surplus in this case arnold harberger s plea to use the welfare triangle as one half times the product of the price change times the quantity change to measure deadweight loss corresponds to the correct theoretical amount of welfare change in a recent paper robert willig derives bounds for the percentage difference between the correct measure of either the compensating or equivalent variation and the marshallian measure derived form the market demand curve his bounds which depend on the income elasticity of demand for the single good in the region of price change being considered as well as the proportion of the consumer s income spent on the good demonstrate that the marshallian consumer s surplus is often a good approximation to hicks consumer s surplus the fact that the proportion of the consumer s income spent matters as well as the income elasticity was first pointed out by harold hotelling willig contends that the approximation error will be less than the errors involved in estimating the demand curve thus he hopes to remove the need for apology that applied economists often need to give to theorists who remark on the inappropriateness of using marshallian consumer s surplus to measure welfare change however in this paper i show that for the case primarily considered by willig of a single price change which is also the situation in which consumer s surplus is often used in applied work no approximation is necessary professor of economics massachusetts institute of technology and research associate national bureau of economic research i would like to thank peter diamond erwin diewert daniel mcfadden robert merton robert solow hal varian joel yellin and the referees for help and comments research support from the national science foundation is acknowledged the reason that we still have two rather than one of samuelson s six measures of consumer s surplus arises from an index number problem of the correct basis for the welfare comparison i will give both measures but plan to concentrate on the compensating variation

patents learning by doing and market structure in the chemical processing industries for a sample of 24 chemical products count data models are used to evaluate firms propensity to patent and the link between patented process innovations and output prices the results show that process patenting was largely an outgrowth of learning by doing propensity to patent increased with firm size but decreased with market concentration reductions in output prices were strongly linked to learning by doing and more weakly to the rate of patenting producer firms appear to have been more successful than non producers in appropriating the value of patented process innovations

drastic innovations and multiplicity of optimal licensing policies abstract considering the licensing of a drastic cost reducing innovation by an outside innovator in an n firm cournot oligopoly we show that when the innovator uses combinations of fees and royalties there are either n 1 or n optimal licensing policies

a monopolistic market for information abstract we analyze a model where traders buy information from a monopolistic seller which is subsequently used in a speculative market in order to overcome the dilution in the value of information due to its leakage through informative prices the seller of information may prefer to sell noisier versions of the information he actually has moreover to obtain higher profits it is desirable for the seller to sell different signals to different traders so that the added noise realizations do not affect equilibrium prices one way of doing so which does not require discrimination is to sell identically distributed personalized signals to each of a large number of traders

impact of licensing on investment and financing of technology development technology innovations continue to be one of the greatest drivers of economic growth realizing the value of such innovations however requires substantial follow on investments in development and commercialization the value of these investments is difficult to capture because of uncertain demand and potential competition this often leads to difficulties in obtaining outside financing for these investments in this paper we explore how licensing contracts can both dissuade other firms from developing alternative technologies and alleviate the financing problem we develop a model in which a firm that invests in the development efforts of an innovation can license its technology to a potential competitor a variety of licensing possibilities is considered including fixed fees royalty schedules and two part licenses consisting of an up front payment and a capped royalty schedule when the firm has no financial constraint a royalty schedule that depends on realized demand dominates a fixed fee per license when investment funds are constrained a royalty cap license with an up front payment can serve as a source of financing we also study the investment problem conditional on the licensing and financing decisions

on the competitive effects of vertical integration by a research laboratory abstract an independent research laboratory owns a patented process innovation ready to be used by an industry that produces differentiated goods we analyze whether the laboratory prefers to license the innovation as an external patentee or to merge with one of the firms in the industry licensing the innovation as an internal patentee under linear demand and cournot competition we show first that the vertical merger is profitable only in the case of small innovations whereas a merger increases welfare only for significant innovations second all profitable vertical mergers reduce welfare however some profitable mergers are welfare improving under price competition

demographic variables in demand analysis in this paper the authors discuss five procedures for incorporating demographic variables into theoretically plausible demand systems translating scaling and the gorman reverse gorman and implicit prais houthakker procedures these five procedures are used to incorporate a single demographic variable the number of children in a household into the generalized ces demand system using household budget data for the united kingdom for the period 1966 1972 excerpt

horizontal mergers with synergies cash vs profit share auctions we consider takeover bidding in a cournot oligopoly when firms have private information concerning the synergy effect of merging with a takeover target and bidders can influence rivals beliefs through their bids we compare cash and profit share auctions first and second price supplemented by entry fees since non merged firms benefit from a merger if synergies are low bidders are subject to a positive externality with positive probability nevertheless pooling does not occur unlike cash auctions profit share auctions are not revenue equivalent and the second price profit share auction is more profitable than the other auctions

licensing weak patents in this paper we revisit the issue of licensing weak patents under the shadow of litigation departing from the seminal paper by farrell and shapiro 2008 we consider innovations of any size and not only small innovations and we allow the number of licensees to be less than the number of firms in the downstream industry it is shown that the optimal two part tariff license from the patent holder s perspective may either deter or trigger litigation and conditions under which each case arises are provided we also reexamine the claim that the licensing revenues from weak patents overcompensate the patent holder relative to what a natural benchmark would command finally we suggest two policy levers that may alleviate the harm raised by the licensing of weak patents

estimating the demand for the characteristics of housing a hstract estimates of the demand for the characteristics contained in a differentiated product such as housing can be based on hedonic regressions however previous studies have not dealt with several potential problems in such estimation a more appropriate framework for the estimation is provided in this paper also data from a number of cities are used to eliminate the identification problem and the endogeneity of the marginal prices derived from non linear hedonic equations is considered in the estimation the results on own and cross price elasticities expenditure elasticities and the effects of socio economic vafiables accord well with expectations

the incidence of cross licensing a theory and new evidence on the firm and contract level determinants abstract this paper examines the firm and contract level determinants of the incidence of cross licensing among manufacturing firms it develops a simple stochastic theory explaining such incidence which implies that cross licensing compared with unilateral licensing is more prevalent between large and symmetric firms under a reasonable set of assumptions we find strong empirical support to these implications based on a new dataset of more than 1100 licensing contracts by japanese manufacturing firms we also find that the incidence of cross licensing is higher when the contract covers only patent than when it covers only know how consistent with the theory the licensing probability between two firms depends primarily on the size of a potential licensor which according to the theory is consistent with the fact that a licensor is larger than a licensee on the average

innovative strategic groups in multinational industries abstract differences in innovative strategies between groups of domestic and multinational enterprises are analyzed within a two stage game model that incorporates the asymmetries in transaction costs between the two species of enterprises nash and cooperative behaviour is shown to result in different equilibrium r d strategies with the multinational companies doing typically more r d for larger markets and domestic companies focusing on specific market segments survey data from companies operating in eleven high tech multinational industries in belgium provide support for these strategic differences and show how they are related to company performance

valuing air quality with hedonic and discrete choice models environmental economists have been using property values in attempts to measure the value residents place on air quality as far back as the 1960s however in the years since then we have learned a great deal about how complex valuing nonmarginal changes in air quality is rosen presented a hedonic model that is still extremely influential today but the estimation strategy he outlined in that paper had some shortcomings many of these identification and endogeneity issues were corrected subsequently in papers such as palmquist 1984 parsons and bartik but none of these papers concentrated on environmental issues a central issue in estimating the demand or marginal willingness to pay functions for characteristics of housing is the identification of those behavioral functions as distinct from

milestone payments or royalties contract design for r d licensing we study how innovators can optimally design licensing contracts when there is incomplete information on the licensee s valuation of the innovation and limited control over the licensee s development efforts a licensing contract typically contains an up front payment milestone payments at successful completion of a project phase and royalties on sales we use principal agent models to formulate the licensor s contracting problem and we find that under adverse selection the optimal contract structure changes with the licensee s valuation of the innovation as the licensee s valuation increases the licensor s optimal level of involvement in the development directly or through royalties should decrease only a risk averse licensor should include both up front and milestone payments moral hazard alone is not detrimental to the licensor s value but may create an additional value loss when combined with adverse selection our results inform managerial practice about the advantages and disadvantages of the different terms included in licensing contracts and recommend the optimal composition of the contract

patent licensing entry and the incentive to innovate abstract we analyze the economic impact of process innovations where the innovator auctions off licenses to both potential entrants and incumbent firms it is shown that opening the market to entrant licensees the incentive to innovate is maximized if the industry is initially a monopoly as was envisioned by schumpeter 1942 this is in contrast to previous literature on licensing of process innovations when entry is excluded the incentive to innovate is maximized in an oligopoly market if licenses are sold by auction sen and tauman 2007 or in a competitive market if licenses are sold by royalty arrow 1962 the post innovation market structure the diffusion of the innovation and the social welfare are analyzed and compared with the case where entry is excluded

abuse of dominance and licensing of intellectual property patent thickets layers of licenses a firm needs to be able to offer products that embody technologies owned by multiple firms and licensing policies have drawn increasing scrutiny from policy makers patent thickets involve complementary products which gives rise to double marginalization the so called royalty stacking problem and has the potential to retard diffusion of new technologies and reduce consumer welfare this paper examines the impact of licensing policies of one or more upstream owners essential intellectual property ip on the downstream firms that require access to that ip the terms under which downstream firms can access this ip affects entry decisions product diversity prices and welfare we consider both the case in which a single party controls the essential ip and the case in which different parties control complementary pieces of essential ip we compare the outcome of several alternative standard licensing arrangements such as flat rate access fees royalty percentages per unit fees patent pools and cross licensing arrangements with or without vertical integration we first consider the case where there is a single upstream owner of essential ip increasing the number of licenses enhances product variety which creates added value but it also intensifies downstream competition which dissipates profits we derive conditions under which the upstream ip monopoly will then want to provide an excessive or insufficient number of licenses relative to the number that maximizes consumer surplus or social welfare when there are multiple owners of essential ip royalty stacking can reduce the number of the downstream licensees but also the downstream equilibrium prices the consumers face the paper derives conditions determining whether this reduction in downstream price and variety is beneficial to consumers or society finally the paper explores the impact of alternative licensing policies with fixed license fees or royalties expressed as a percentage of the price an upstream ip owner cannot control the intensity of downstream competition in contrast volume based license fees i e per unit access fees do permit an upstream owner to control downstream competition and to replicate the outcome of complete integration the paper also shows that vertical integration can have little impact on downstream competition and licensing terms when ip owners charge fixed or volume based access fees

the structure of payments as a way to alleviate contractual hazards in international technology licensing this article proposes an empirical model in which the option of choosing between royalties fixed payments or a combination of the two is made to mitigate contractual hazards in licensing contracts we examine licensing contracts between spanish and foreign firms during the 1960s and early 1970s using a new data source of 925 contracts the link between patenting and licensing is also analyzed the work provides evidence to support the hypothesis that the moral hazard problem truly influences the type of payment established in arm s length contracts when there is an important technological gap between unaffiliated firms this study also shows that the payment chosen depends on the size of the licensee firm copyright 2009 the author 2009 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

fee versus royalty reconsidered for an outsider innovator in a cournot oligopoly royalty licensing could be superior to both fixed fee and auction the result depends on a simple fact that has been overlooked in the existing literature namely the number of licenses can take only integer values

overoptimism and the performance of entrepreneurial firms recent theoretical and empirical research on cognitive bias in decision making suggests that overoptimism critically influences entrepreneurs decisions to establish and sustain new ventures we investigate whether such cognitive bias influences entrepreneurial venture performance using data on commercialization efforts for university inventions in contrast to prior studies our results suggest that entrepreneurial overoptimism does not appear to be the determining factor in the decision to found a firm we do find that entrepreneurs continue unsuccessful development efforts for longer periods of time than do established firms which is consistent with entrepreneurial overoptimism in the development of technologies with uncertain market prospects this latter finding is also consistent with rationality based models of decision making behavior however we find that the economic returns associated with many of the technologies in our sample are realized after the start up has been acquired by an established firm suggesting that start ups may serve as a transitional organizational form in the market for technology commercialization

an analysis of intellectual property licensing strategy under duopoly competition component or product based abstract a component supplier holding patents can calculate the intellectual property licensing fees either as a percentage of sales prices of its customer manufacturers products i e product based strategy or as a percentage of the wholesale price of its component i e component based strategy selecting which strategy to license the patent plays a vital role in supply chain players strategic interactions especially when the downstream manufacturers compete this paper investigates which strategy is favored more by players of a supply chain which consists of a component supplier and two duopoly manufacturers the manufacturers are assumed to be heterogeneous in production cost but produce and competitively sell homogenous goods employing a supplier stackelberg game model we demonstrate that the component supplier prefers to implement the product based strategy nevertheless the manufacturers preferences are dependent on how effectively they produce products specifically the product based strategy could be favored by the manufacturer with a sufficiently high cost advantage over the rival furthermore we find that the supply chain players preferences of licensing strategy could be dependent on factors such as the market size the differences of the production costs and unit royalty fees when the products are imperfect substitutes

a discrete choice equilibrium approach to valuing large environmental changes abstract this study develops a discrete choice locational equilibrium model to evaluate the benefits of the air quality improvements that occurred in the los angeles area following the 1990 clean air act amendments caaa the discrete choice equilibrium approach accounts for the fact that air quality improvements brought about by the 1990 caaa will change housing choices and prices the study also provides new evidence for the distributional welfare impacts of the 1990 caaa in the los angeles area findings suggest that the air quality improvements that occurred in the los angeles area between 1990 and 2000 provided substantial general equilibrium benefits to households the analysis reveals noticeable differences between partial and general equilibrium welfare gains demonstrating that ignoring equilibrium effects will likely misrepresent the benefits of large environmental changes in addition we find that the equilibrium welfare impacts of the 1990 caaa in the los angeles area varied significantly across income groups

technology transfer with moral hazard abstract this paper develops an incomplete contract model of the licensing relationship that is susceptible to the moral hazard problem the optimal contractual form of licensing derived in the model generates predictions that seem to be consistent with actual practice for instance the introduction of inputs that are not contractible and costly explains the prevalence of royalty contracts in the licensing relationship moreover the model is able to relate the size of the royalty rate to the parameters that represent the environments under which the concerned parties operate finally the model can be naturally extended to analyze the choice of a technology holder between direct investment and licensing in an attempt to serve a foreign market

licensing under general demand and cost functions abstract we consider a cournot duopoly under general demand and cost functions where an incumbent patentee has a cost reducing technology that it can license to its rival by using combinations of royalties and upfront fees two part tariffs we show that for drastic technologies a licensing occurs and both firms stay active if the cost function is superadditive and b licensing does not occur and the patentee monopolizes the market if the cost function is additive or subadditive for non drastic technologies licensing takes place provided the average efficiency gain from the cost reducing technology is higher than the marginal gain computed at the licensee s reservation output optimal licensing policies have both royalties and fees for significantly superior technologies if the cost function is superadditive by contrast for additive and certain subadditive cost functions optimal licensing policies have only royalties and no fees

fees versus royalties and the private value of a patent we compare how much profit an owner of a patented cost reducing invention can realize by licensing it to an oligopolistic industry producing a homogeneous product by means of a fixed fee or a per unit royalty our analysis is conducted in terms of a noncooperative game involving n 1 players the inventor and the n firms in this game the inventor acts as a stackelberg leader and it has a unique subgame perfect equilibrium in pure strategies it is shown that licensing by means of a fixed fee is superior to licensing by means of a royalty for both the inventor and consumers only a drastic innovation is licensed to a single producer

nonlinear budget constraints and consumer demand an application to public programs for residential housing abstract this study presents a methodology for exploiting the nonlinear hedonic nature of housing prices to estimate the compensated demands of households for particular housing attributes the methodology is employed to provide hicksian benefit measures of a particular housing subsidy program typical of those undertaken recently in developing countries

how to license intangible property we examine the optimal licensing strategy of a research lab selling to firms who are product market competitors we consider an independent lab as well as a research joint venture we show that 1 demands are interdependent and hence the standard price mechanism is not the profit maximizing licensing strategy 2 the seller s incentives to develop the innovation may be excessive 3 the seller s incentives to disseminate the innovation typically are too low 4 larger ventures are less likely to develop the innovation and more likely to restrict its dissemination in those cases where development occurs and 5 a downstream firm that is not a member of the research venture is worse off as a result of the innovation

dynamic patent licensing abstract this paper shows one way a fixed fee can dominate an auction if no one knows whether the innovation will succeed or not when it appears and if its life exceeds the life of the patent then selling one licence by fixed fee maximizes inventor profit for some probabilities of success the reason is a nonlicensee is better off when a rival buys a license because this reveals the nature of the innovation if it succeeds the nonlicensee can adopt in the future after the patent has expired this expected future gain can outweigh the expected loss during the life of the patent

on intrabrand and interbrand competition the strategic role of fees and royalties abstract we examine oligopolistic markets with both intrabrand and interbrand competition we characterize equilibrium contracts involving a royalty or wholesale price and a fee when each upstream firm contracts with multiple downstream firms royalties control competition between own downstream firms at the expense of making them passive against rivals when the number of downstream firms is endogenous each upstream firm chooses to have only one downstream firm this result is in sharp contrast to previous literature where competitors benefit by having a larger number of independent downstream firms under only fixed fee payments we discuss why allowing upstream firms to charge per unit payments in addition to fixed fees dramatically alters their strategic incentives

general licensing schemes for a cost reducing innovation optimal combinations of upfront fees and royalties are considered for a cost reducing innovation in a cournot oligopoly for both outside and incumbent innovators it is shown that for any nondrastic innovation a the license is practically sold to all firms ensuring full diffusion of the innovation b consumers are better off firms are worse off and the social welfare is improved c the optimal licensing policy involves positive royalty for relatively significant innovations d compared to an incumbent firm an outsider invests more in r d and has higher incentive to innovate and e as a function of the magnitude of the innovation the industry size that provides the highest incentive to innovate is u shaped

incomplete adoption of a superior innovation we consider a model in which an innovating monopolist of a technologically superior intermediate input must sell this product to final output producers prior research shows that with complete information the monopolist s optimal strategy will lead to complete adoption of this technologically superior innovation in this article we show that when the price of some competitively supplied input used in the final product market is endogenous and is altered by adoption of the innovation then the optimal pricing strategy of the monopolist may lead to incomplete innovation thus the standard result of complete adoption of the superior technology is partly attributable to the partial equilibrium nature of prior models

on the duration of technology licensing abstract we model an innovator s choice of payment scheme and duration as a joint decision in a multi period licensing game with potential future innovations and some irreversibility of technology transfer we find that it may be optimal to license the innovation for less than the full length of the patent and that royalty contracts can be more profitable than fixed fee licensing even in the absence of information asymmetry and risk aversion moreover licensing contracts based on royalty have a longer duration than fixed fee licenses and are more likely to be used in industries where innovations are frequent and intellectual property protection is weak our paper also highlights an important link between the study of technology licensing and the theory of durable goods

per unit vs ad valorem royalties under asymmetric information we study an inside patent holder s optimal licensing policy when it has imperfect information about the value of the patent to its rival the patent holder can choose any two part licensing fee with either per unit or ad valorem royalties we demonstrate that the equilibrium will be either a fully separating contract with different per unit royalty rates or a contract with a single ad valorem royalty that excludes a high cost rival fixed fees will not be used the presence of asymmetric information uniquely drives the per unit royalties that otherwise would not be adopted per unit royalties always generate higher social welfare than ad valorem royalties

preservation of trade secrets and multinational wage premia this paper considers the strategic behavior of a multinational rm with superiortechnologyoperatinginadevelopingcountry domestic rmsdonothaveaccesstothesuperior technology other than by hiring away multinational corporation mnc workers the mnc can retain its workers by paying a wage premia and wedetermine how the industry structure and the nature of strategic competitionbetween rms affects the mnc s incentive to pay this premia and thus preserveits informational advantage we characterize conditions under which mncsinef ciently divide job tasks in order to raise the cost to domestic rms ofacquiring the mnc s trade secrets jel f23 j31 o33

automobiles and implicit markets an estimate of a structural demand model for automobile characteristics economists have always found it difficult to investigate the demand for the automobile good due to its heterogeneity in this paper the automobile is treated as a differentiated product and a two step approach is used to estimate a system of structural demand equations for automobile attributes the obtained results are statistically sound and in conformity with theoretical expectations this should be taken as an indication of the validity and robustness of the procedure used in this analysis

the impact of royalty contract revision in a multistage strategic r d alliance this paper investigates the impact of royalty revision on incentives and profits in a two stage research and development r d stage and marketing stage alliance with a marketer and an innovator the marketer offers royalty contracts to the innovator we find that the potential for royalty revision leads to more severe distortions in the optimal initial royalty contracts offered by the marketer we show that if the innovator plays a significant role in the marketing stage the marketer should offer a low royalty rate initially and then revise the royalty rate up later otherwise she should do the opposite we identify two major effects of royalty revision first royalty revision provides the marketer with a flexibility to dynamically adjust royalty rates across the two stages of the alliance to better align the innovator s incentives this incentive realigning effect improves the marketer s profit second royalty revision makes it harder for the marketer to obtain private information from the innovator because the innovator worries that the marketer will take advantage of the information to revise the initial contract to a more favorable one to herself later this information revealing effect hurts the marketer s profit we characterize in what kind of alliances marketers would benefit the most from royalty revision so that managers should clearly establish the expectation for royalty revision and in what kind of alliances markerters would not benefit from royalty revision so that managers should commit not to revise the initial royalty contract with royalty contracts that are contingent on the r d outcome of the r d stage we find that contingent contract structure could be either substitutable by fully capturing the incentive re aligning effect or complementary by weakening the information revealing effect to royalty revision depending on whether the innovator plays a significant role in the marketing stage managers may need to use a contingent contract if possible either to replace or with royalty revision accordingly to improve profits this paper was accepted by kamalini ramdas entrepreneurship and innovation

uncertainty spillovers and cooperative r d abstract this paper extends the literature on cooperative r d in an oligopoly with spillovers the model has three new features it introduces uncertainty focuses on spillover of innovation instead of effort spillover and offers a new definition of the research joint venture rjv the rjv is an arrangement to coordinate r d efforts and also to share the innovation firms form an rjv only if the innovation raises flow industry profit but independently of the speed of spillovers and the degree of uncertainty the model is robust when we allow for licensing the single lab endogenous spillovers and r d effort spillovers

reputational spillovers innovation licensing and entry abstract adoption of a new product by a multiproduct finn may affect all its sales by altering its reputation as an innovator if adopting a success has a halo effect that enhances the adopter s reputation then an inventor s licensing profit exceeds monopoly profit from the new product if adopting a failure has a black eye effect that damages the adopter s reputation then an inventor s licensing profit is maximized by a fixed fee not an auction when both effects are present an inventor licenses new products that are likely to succeed but enters with those that are likely to fail