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

storable good monopoly the role of commitment we study dynamic monopoly pricing of storable goods in an environment where demand changes over time the literature on durables has focused on incentives to delay purchases our analysis focuses on a different intertemporal demand incentive for consumers the key force on the consumer side is advance purchases or stockpiling this stockpiling motive can be present in the case of standard durables as well in environments unmodeled in the prior literature we show that if the monopolist cannot commit then prices are higher in all periods and social welfare is lower than in the case in which the monopolist can commit this is in contrast with the durable goods analysis in the literature on the coase conjecture

durable goods monopolists durable goods monopolists face special problems because the sale of their products creates a secondhand market not controlled by the monopolist to the extent the monopolist is able to rent his product rather than sell it or to make binding promises about his future production such problems are ameliorated given the inability to do the above the monopolist is led to producing goods less durable than those produced by either competitive firms or monopolist returns a reverse averch johnson result that monopolist sellers may invest less in fixed costs including plant modernization and research and development than would the renters is shown it is also shown that even though sellers have less monopoly power than renters and nondurable goods monopolists it is possible that the seller will cause a greater deadweight loss than the other types of monopolies

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

corporate contracting for health care this paper examines the process used by fortune 500 companies to contract with health care carriers for complex and hard to observe services we confirm in part the conventional view that large companies partner with health care insurers however we show that the picture is more complex and that most of these companies do not engage in several aspects of partnering the complete nature of our data allows us to describe the distribution of company practices from tough bargaining without continuing relationships to partnering we also show that contract length can be a poor proxy for length of relationship

durable goods monopoly learning by doing and the coase conjecture abstract the coase conjecture states that if a durable goods monopolist can make offers to sell arbitrarily frequently then in equilibrium she will charge the competitive price and the market will be saturated quickly this conjecture is shown to be refuted when production of the durable good is subject to learning by doing for the linear case it is shown that there exist a stationary strategy perfect equilibrium in which the monopolist charges competitive prices but the market is saturated slowly an interesting analogy between bargaining and durable goods monopoly with learning by doing is also pointed out

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

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

durable good monopoly and best price provisions best price provisions guarantee buyers that the prices they pay are the lowest available if the seller subsequently cuts price then each previous buyer is entitled to a refund a durable good monopolist who offers certain forms of these provisions can construct a consistent plan yielding the same profits as rental agreements and contracts with explicit quantity commitments the provisions require special circumstances to be practical but they are simple and effective and appear in a variety of economic settings three applications are discussed international commodity agreements markets for electric turbogenerators and markets for financial claims copyright 1990 by american economic association

on requiring the durable goods monopolist to sell abstract requiring a monopolist to sell its output rather than renting it my lead to beneficial output adjustments or harmful quality adjustments in a durable goods model we show that requiring sales decreases welfare in only a small fraction of cases but it strictly increases welfare in a majority of cases

an information good market with symmetrical externalities in 3 the author investigated how an information good is supplied from its owner to users through trades in a case where all the traders are located at geographically separated points and thus a transmission of the good implies certain costs and moreover its external effects are negligibly small in general however information goods possess negative external effects as seen from the following suppose a firm possessing a new technology gains a profit by monopolistically utilizing it once this technology is known to and used by other firms the firm can no longer enjoy its monopolistic position and might incur a significant loss of profit the aim of this paper is to analyze how a concealable information good with external effects is diffused from its monopolistic owner to demanders through trades generally information goods have their own peculiar properties among them we suppose in this paper the following typical ones the first one is a possibility of free replication namely each trader can replicate the good as many times as he wants without any cost immediately after he obtains it each replica is supposed to be exactly the same as the original good the second one is an indivisibility which implies that each trader gains a benefit just from one unit of the good the third one is an irreversibility in trading the good in the case of trading ordinary goods it would be possible for a buyer to return the good to a seller by cancelling the trade for information goods however this would not be possible since a buyer may replicate it immediately after he purchases because of free replication namely a seller must refuse a buyer s proposal to return it since a buyer might already have its replica the fourth one is a negative external effect mentioned above namely a benefit brought by the good is affected by how the good is possessed among other traders and if some trader newly gets it then the benefit for each possessor is decreased throughout this paper we further assume that costs for transmitting the good are negligibly small a new process for producing chemical products a new computer program and so on are information goods which we have in mind for further description of information goods refer to 1 2 and 5 here we remark that in the case of trading such an information good it might occur from free replication that once each demander owns the good he will

language meaning and games a model of communication coordination and evolution comment demichelis and weibull 2008 aer show that adding lexicographic lying costs to coordination games with cheap talk yields a sharp prediction only the efficient outcome is evolutionarily stable i show that this result is caused by the discontinuity of preferences rather than by small lying costs per se finally i discuss why discontinuity may not be an appealing assumption in evolutionary models

deterrence by market sharing a strategic incentive for licensing the potential of an incumbent firm to retain its dominant position in a market is a focal point of the modem theory of industrial organization a recent literature examines this issue for markets in which challengers threaten an incumbent s position by engaging in research for a new technology richard gilbert and david newbery 1982 show that an incumbent firm with a firstmover advantage will preempt potential entrants by inventing a new technology slightly earlier than would its rivals in a stochastic r d therefore its introduction does not alter the decision to research when the pre innovation market is characterized by an incumbent and potential entrants stephen salant 1984 shows that licensing ex post to innovation can alter the research decision as anticipation of the returns from future licensing encourages research by the entrant as a counterpoint to the salant result i find that licensing ex ante to research may discourage further research by the entrant indeed this strategic incentive for licensing may be so strong as to persuade the incumbent as well as the entrant to terminate research activity to isolate this incentive for licensing from the one discussed by salant a simple model is constructed in which licensing of future technologies is not desirable anecdotal evidence suggests that the strategic incentive does lead innovators in some markets to license their technologies examples of this information sharing are prevalent in markets where technological change is rapid in the 1940 s standard oil of new jersey discovered a process for synthetic rubber it traded patent rights on this process for a synthetic oil production process discovered by farben a german rubber company in both the synthetic oil and synthetic rubber markets rival companies were department of economics scarsborough college university of toronto toronto ontario canada m5s lal i thank jon cohen and ron saunders for discussions that inspired this paper i am also grateful to yehuda kotowitz andy mclennan jennifer reinganum ralph winter myma wooders two anonymous referees and seminar participants at the university of toronto for helpful comments on earlier drafts

licensing information goods abstract a significant amount of research on patent licensing and the diffusion of knowledge is organized around static frameworks of analysis patent holders however may face a dynamic problem namely the intertemporal consistency problem of the durable goods monopolist that is induced by durability on the demand side licensing practices such as exclusive licensing contracts and most favored customer clauses allow patentees to solve or mitigate this dynamic consistency problem there are situations however where these practices are not possible either due to the nature of the patent the case of information goods or due to compulsory patenting laws we study the effects of the intertemporal consistency problem on patent licensing in these situations relative to the existing literature we obtain the following main results i all of the firms that remain in the industry will be using the innovation ii royalty licensing may be superior to fixed fee or auction licensing from the licensor s point of view iii social welfare and consumer surplus may be lower than when the patent holder can commit not to make additional sales iv even for non drastic innovations the price of the good that is produced may be lower than the competitive price corresponding to the initial situation before the innovation was discovered

cross licensing of competing patents as a facilitating device this paper hypothesizes that when their products are imperfect substitutes firms can promote collusion by cross licensing their competing patents cross licensing is shown to enhance the degree of collusion achieved in a repeated game by credibly introducing the threat of increased rivalry in the market for each firm s product the paper then examines the consistency of the theory developed with the available evidence antitrust implications of the practice of cross licensing of competing patents are discussed

stable payoffs in resale proof trades of information abstract this paper consider what payoff allocations can be outcomes of resales proof trades of information with a monopolistic seller the concept of resale proofness has been introduced by m nakayama l quintas and s muto 1988 resale proof trades of information discussin paper 776 northwestern university in formulating a trade such that no agent has an incentive to resell when the resale is freely allowed with appropriate modifications we consider the core of such a trade and derive a necessary and sufficient condition for the trade to have a single outcome the monopolistic imputation it is also shown that generally the sole seller cannot enjoy the monopolistic position in a resale proof trade

a note on welfare in the durable goods monopoly depending upon the shape of the rental demand curve facing a durable goods monopolist social welfare may be raised or lowered by requiring the monopolist to sell rather than rent its output indeed the equilibrium under rentals may pareto dominate the equilibrium under sales copyright 1989 by the london school of economics and political science

welfare reducing licensing abstract in this paper we characterize situations where licensing a cost reducing innovation to a rival firm using two part tariff contracts a fixed fee plus a linear per unit of output royalty reduces social welfare we show that it occurs if i the firms compete in prices ii the innovation is large enough but not drastic and iii the goods are close enough substitutes moreover we show that regardless of the type of competition first the optimal contract always includes a positive royalty and second even drastic innovations are licensed whenever the goods are not homogeneous

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

on licensing policies in bertrand competition abstract three licensing policies the auction the fee and the royalty are studied in a bertrand type duopoly with differentiated goods the analysis is conducted in terms of a multistage noncooperative game involving an external patentee and two firms each producing a differentiated good in bertrand price competition a principal finding is that for a patentee the royalty may be superior to the other two policies journal of economic literature classification numbers 026 611 621

the diffusion of new technology and the market for an innovation this article shows that the diffusion of a capital embodied process innovation results from a pattern of decreasing incremental benefits and adoption costs for later adoptions strategic behavior is inessential to this finding we develop a method for comparing diffusion rates for different market structures in the capital equipment market we consider cases with market power on the seller s side of the market and on the buyers side of the market a case with no market power and the welfare optimal case we find that a joint venture adopts an innovation more slowly than other market regimes to protect existing capital investments and that the adoption rate is slower than is socially optimal a monopoly supplier on the other hand adopts at a rate faster than is socially optimal this result is usually also the case when there is no market power finally we show that the monopoly supplier accelerates adoptions faster than in the case where there is no market power but retards later adoptions market power thus makes a difference in diffusion rates and on which side of the market that power lies makes a considerable difference

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

coase and hotelling a meeting of the minds in this paper we tie together the two literatures of durable goods monopoly and exhaustible resource pricing we show that the intertemporal no arbitrage condition that arises if the durable good monopolist seller can commit to a price path mirrors the intertemporal no arbitrage condition if the monopsonist buyer of an exhaustible resource can commit to a price path the intuition is that the durable good monopolist initially announces high future prices to get high valuation buyers to buy early and subsequently lowers the price to attract additional buyers on the other hand the monopsonist buyer of the exhaustible resource initially announces low future prices to encourage sellers to supply their units early and subsequently as the stock of the resource declines raises the price to call forth additional supply as the period of commitment shrinks to zero the durable good s price drops to its marginal cost and the exhaustible resource s price jumps to its choke level all in a twinkling of the eye a

damaged durable goods i analyze a durable goods monopolist s incentives to introduce a damaged good a stripped down version of the original good in an infinite horizon framework the damaged good helps the monopolist to mitigate the coasian time inconsistency problem however it may lead to a welfare reduction low valuation buyers are induced to purchase the low quality damaged good early rather than buy the high quality original good later and when the players are patient the surplus loss from quality reduction outweighs the gain from earlier consumptions this welfare result contrasts with the previous literature based on a static framework