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Optimal licensing under incomplete information: the case of the inside patent holder

Cuihong Fan (), Byoung Heon Jun () and Elmar Wolfstetter ()
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Cuihong Fan: Shanghai University of Finance and Economics
Byoung Heon Jun: Korea University

Economic Theory, 2018, vol. 66, issue 4, 979-1005

Abstract: Abstract We reconsider the inside patent holders’ optimal licensing problem of non-drastic and (super-) drastic innovations under incomplete information, taking into account restrictions concerning royalty rates and the use of exclusive licenses implied by antitrust rules. We employ methods developed in the analysis of license auctions with downstream interaction and optimal control theory. Our analysis differs from the literature which assumed particular patterns of cost reductions across firms induced by the innovation and either complete information or particular probability distributions.

Keywords: Innovation; Licensing; Optimal contracts; Asymmetric information (search for similar items in EconPapers)
JEL-codes: D21 D43 D45 L24 (search for similar items in EconPapers)
Date: 2018
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