We consider a licensing mechanism for process innovations that combines a license auction with royalty contracts to those who lose the auction. Firms' bids are dual signals of their cost reductions: the winning bid signals the own cost reduction to rival oligopolists, whereas the losing bid...

This paper reconsiders the licensing of a common value innovation to a downstream duopoly, assuming a dual licensing scheme that combines a first-price license auction with royalty contracts for losers. Prior to bidding firms observe imperfect signals of the expected cost reduction; after the...

The present paper reconsiders the inside innovators’ licensing problem under incomplete information. Employing an optimal mechanism design approach, we show that, contrary to what is claimed in the literature, the optimal mechanism may prescribe fixed fees, royalty rates lower than the cost...

We consider licensing of non-drastic innovations by a patent holder who interacts with a potential licensee in a downstream market. We compare two kinds of license contracts: per unit and ad valorem royalties, combined with fixed fees. Assuming that antitrust authorities apply the same principle...

We reconsider the optimal licensing of technology by an incumbent firm in the presence of multiple potential licensees. In a first step we consider the standard case of one license and show that competition among potential licensees has a drastic effect on optimal two-part tariff contracts. We...

We reconsider the inside patent holders' optimal licensing problem of non-drastic and (super-) drastic innovations under incomplete information, taking into account restrictions concerning royalty rates and the use of exclusive licenses implied by antitrust rules. We employ methods developed in...

This paper reconsiders the licensing of a common value innovation to a downstream duopoly, assuming firms observe imperfect signals of the cost reduction induced by the innovation. The innovator adopts a direct revelation mechanism and awards an unrestricted license to the firm that reports the...

We analyze spying out a rival’s price in a general duopoly model with differentiated prod- ucts where payoff functions are strictly supermodular and firms are subject to incomplete information about costs. Spying has two effects: it induces a sequential game and eliminates the spying firm’s...

A principal uses security bid auctions to award an incentive contract to one among several agents, in the presence of hidden action and hidden information. Securities range from cash to equity and call options. 'Steeper' securities are better surplus extractors that narrow the gap between the...

This paper reconsiders the explanation of R&D subsidies by Spencer and Brander (1983) and others by allowing firms to license their innovations and to pool their R&D investments. We show that in equilibrium R&D joint ventures are formed and licensing occurs in a way that eliminates the strategic...