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A Sequential Signaling Model of the Sale of an Invention to an Oligopolist

King John T
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King John T: Georgia Southern University, jking@georgiasouthern.edu

The B.E. Journal of Theoretical Economics, 2004, vol. 4, issue 1, 27

Abstract: I consider the problem of an independent inventor attempting to sell a cost-reducing innovation in an oligopoly setting. There are N potential buyers and the inventor possesses private information regarding the value of the invention. A revealing equilibrium is characterized in which the inventor's demand signals the value of the invention to each potential buyer. I find that both the inventor's demand and his continuation value increase as the number of firms left in the sequence of potential buyers increases. I also find that a firm's probability of rejecting the inventor's demand is higher the sooner the firm is approached in the sequence.

Keywords: Innovation; Sequential Signaling; Private Information (search for similar items in EconPapers)
Date: 2004
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DOI: 10.2202/1534-598X.1117

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