Information Disclosure in the Renewal of Patents.

This paper presents a patent choice model allowing strategic decisions in a sequential game with two agents: a patentholder, who perfectly knows thecharasteristics of the market, and a potential entrant who has no information about the value of demand. We study several Perfect Bayesian Equilibria. We show that there exists no separating equilibrium because the incumbent of a high-valued market always has some incentive to mimic the behavior of a firm in a bad market. Consequently, we find equilibria where the incumbent prefers not to pay the renewal fee for the patent hoping that it will be interpreted by the challenger as a signal of low market profitability.