Optimal Licensing Contracts and the Value of a Patent |
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Authors: | Can Erutku Yves Richelle |
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Institution: | Economics Department York University, Glendon Campus Toronto (On), Canada; Département de sciences économiques Universitéde Montréal Montréal (Qc), Canada |
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Abstract: | We extend Kamien and Tauman's (1986) analysis of the value of a patent. We find that an inventor can always design a fixed fee plus royalty contract such that his revenue is equal to the profit a monopoly endowed with the innovation could make on the market. This implies that the social value of a patent can be strictly negative whenever the patented innovation is of bad quality. We also explain why a principal can have an interest in using performance-based contracts although the principal and the agents are risk-neutral, information is symmetric, and agents' actions are verifiable. |
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