Intellectual Property Contracts: Theory and Evidence from Screenplay Sales

Milton Harris, S. Abraham Ravid, Ronald Sverdlove and Suman Basuroy

Journal of Law, Finance, and Accounting, 2017, vol. 2, issue 2, 275-323

Abstract: This paper presents a model of contracts for the sale of intellectual property. We explain why many intellectual property contracts are contingent on eventual production or success, even without moral hazard on the part of risk-averse sellers. Our explanation is based on differences of opinion between buyers and sellers with regard to the seller’s competence. Unlike signaling models, our framework is founded on learning by buyers and sellers and on the sellers’ reputation building. Thus, we are able to derive predictions regarding the impact of the seller’s experience on the nature of the contract. In particular, our model predicts that more experienced sellers will be offered a different mix of cash and contingency payments than inexperienced sellers. We also discuss the probability of sales as a function of seller and product characteristics. Some predictions of the theoretical models are supported by an analysis of screenplay sales data.

Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:now:jnllfa:108.00000020

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