Ex-ante Agreements and FRAND Commitments in a Repeated Game of Standard-Setting Organizations

Gastón Llanes ()
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Gastón Llanes: Pontificia Universidad Católica de Chile

Review of Industrial Organization, 2019, vol. 54, issue 1, No 8, 159-174

Abstract: Abstract I study licensing and technology choice in standard setting. I find that there may be inefficient adoption of technologies, even when firms commit to a maximum royalty or price cap for the use of their patents. When firms interact repeatedly to develop standards, a commitment to set fair, reasonable and non-discriminatory (FRAND) royalty fees may lead to more efficient technologies and higher surplus for all parties. This result can explain why standard-setting organizations favor FRAND commitments over more structured licensing commitments—such as price caps—and why there are been relatively few cases of hold-up in practice, even though such opportunistic behavior has been a primary cause of concern for innovation economists.

Keywords: Standard formation; Standard-setting organizations; Hold-up; Price caps; FRAND commitments; Repeated games; Relational contracts; O31; O34; L15; L40 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s11151-018-9647-7

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