title: Optimal strategies in network-driven markets
title: patent licensing with network goods and quality regulation in crowdfunding platforms
titleType: Subtitle
Creators: name: Min, Hyunki
Publisher: name: University of Iowa
Year: 2024
Subjects: crowdfunding platform
network effects
network externalities
network goods
patent licensing
quality regulation

description: This dissertation explores strategic economic decisions in network-driven markets, focusing on two primary areas: the optimal licensing strategies for patented technologies and the internal policy management of crowdfunding platforms. It investigates how these strategies affect market efficiency, technology diffusion, and overall social welfare, providing a nuanced understanding of network effects in modern economic environments.
description: In the first chapter, Patent Licensing for Single-network Goods, we explore the role of network effects on licensing schemes and technology diffusion. In markets where products exhibit direct network effects—such as telecommunications or software where the value of a product increases as more users adopt it—deciding the optimal licensing strategy for patented technologies is crucial. Focusing on industry-wide networks, we analyze how these effects influence the optimal licensing strategies for an external lab with advanced technology. The study integrates foundational theories of patent licensing and network externalities to demonstrate that network effects significantly alter traditional licensing outcomes, impacting licensing revenue, firm profits, and social welfare. Comparing fixed-fee and royalty licensing across different network scenarios, the findings suggest that while both schemes improve social welfare, fixed-fee licensing tends to yield higher industry output and lab revenue, thus offering greater consumer benefits. We further extend the analysis by introducing a network strength parameter, bridging the classical licensing and industry-wide network externalities models. This extension reveals that when network effects are introduced (\$0<b></b>
description: In the next chapter, Patent Licensing for Network Goods: Firm-Specific versus Single Network, we further examine the optimal patent licensing strategies within industries characterized by firm-specific networks and assess the impact on technology diffusion and licensing dynamics. It builds upon foundational theories established in the previous chapter, specifically contrasting these strategies against both traditional Cournot competition and industry-wide single network scenarios. The primary analysis employs the Fulfilled Expectation Cournot Equilibrium (FECE) to evaluate how various licensing mechanisms—fixed fee versus royalty—affect market outcomes, such as firm profitability, consumer surplus, and overall social welfare in a firm-specific network setting. The study reveals that the strength of network effects plays a pivotal role in determining the optimal licensing strategy. In firm-specific networks, weaker network effects mean that licensing strategies resemble those in traditional non-network markets, often leading to partial licensing and competitive disadvantages for unlicensed firms. Conversely, in industry-wide networks, strong network effects significantly enhance the speed of technology diffusion and increase the overall revenue from licensing. The research highlights that fostering product compatibility can be a strategic move to leverage network effects, boost innovation, and improve market performance.
description: In the last chapter, Crowdfunding Platform Policies: Balancing Quality Regulation and Market Efficiency, crowdfunding platforms, such as Kickstarter and Indiegogo, play a critical role in the financial ecosystem by connecting project creators with potential backers. These platforms often implement quality regulation policies to ensure that only viable and trustworthy projects are listed. This chapter examines how these internal policies impact the platform's revenue, project diversity, and social welfare. Utilizing a theoretical framework, the study challenges the assumption that stricter quality controls always enhance market outcomes. Instead, the findings suggest that while improving project quality can attract more backers and enhance funding success, it doesn't necessarily lead to an increase in the size of the backer network or the platform's profits. This, in turn, could potentially limit market inclusivity and stifle innovation. We emphasize these results are dependent on specific market conditions: the fraction of high-quality projects and the backer's quality-preference parameter. We show numerically through the simulation of various scenarios that quality regulation to make the platform profitable and increase the size of backers' networks is very sensitive to the underpinning factors. Our result has immediate and direct policy implications for managers of crowdfunding platforms and policymakers in that quite a subtle touch of regulation is essential for attaining desirable economic outcomes in this fast-developing crowdfunding landscape.
description: Collectively, this thesis provides a comprehensive analysis of how network effects and internal policy decisions shape economic strategies in markets driven by innovation and connectivity. The insights are valuable for market players such as platform managers, technology licensors, and policymakers navigating the complexities of network-driven economic environments.