Licensing process innovations when losers' messages determine royalty rates

초록

We consider a licensing mechanism for process innovations that awards a limited number of unrestricted licenses to those firms that report the highest cost reductions, combined with royalty licenses to others. Firms' messages are dual signals of their cost reductions: the message of those who win an unrestricted license signals their cost reduction to rival firms, while losers' messages influence the royalty rate set by the innovator. We explain why a sufficiently high threshold level for awarding the unrestricted license is essential to induce truth-telling, show that the innovator generally benefits from the proposed mechanism, and derive conditions for implementability by a modified second-price auction. (C) 2013 Elsevier Inc. All rights reserved.

키워드