Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/94148
Authors: 
Fan, Cuihong
Jun, Byoung Heon
Wolfstetter, Elmar G.
Year of Publication: 
2010
Series/Report no.: 
SFB/TR 15 Discussion Paper 292
Abstract: 
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 auction the winning bid is made public. Bidders may signal strength to their rivals through aggressive bidding, which may however backfire and mislead the innovator to set an excessively high royalty rate. We provide sufficient conditions for existence of monotone bidding strategies and for the profitability of combining auctions and royalty contracts for losers.
Subjects: 
Patents
licensing
auctions
royalty
innovation
R&D
mechanism design
JEL: 
D21
D43
D44
D45
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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