CONTRACTING FOR AN INNOVATION UNDER BILATERAL ASYMMETRIC INFORMATION*

David Martimort, Jean-Christophe Poudou and Wilfried Sand‐zantman
Authors registered in the RePEc Author Service: Wilfried Sand-Zantman

Journal of Industrial Economics, 2010, vol. 58, issue 2, 324-348

Abstract: We analyze licensing contracts between informed innovators and developers exerting profit‐increasing effort. Those contracts must simultaneously induce innovators to convey information on the value of their ideas, while inducing developers to exert effort and protecting the innovators' intellectual property rights. We show that the best innovators signal themselves by taking more royalties even if it reduces the developers' share of returns and their incentives. Moreover, royalties are more likely to be used when property rights are easy to enforce and pre‐contractual evidence on innovation quality is hard to produce.

Date: 2010
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Citations: View citations in EconPapers (11)

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https://doi.org/10.1111/j.1467-6451.2010.00421.x

Related works:
Working Paper: Contracting for an Innovation under Bilateral Asymmetric Information (2010)
Working Paper: Contracting for an Innovation under Bilateral Asymmetric Information (2009)
Working Paper: Contracting for an Innovation under Bilateral Asymmetric Information (2009)
Working Paper: Contracting for an Innovation under Bilateral Asymmetric Information (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jindec:v:58:y:2010:i:2:p:324-348

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