An inherent characteristic of Ramp;D projects is technological uncertainty, which may result in project failure, and time and resources spent without any tangible return. In pharmaceutical projects, for instance, stringent scientific procedures have to be followed to ensure patient safety and...

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 upfront payment, milestone payments at...