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Coalition Formation for a Consortium Standard Through a Standard Body and a Patent Pool: Theory and Evidence from MPEG2, DVD and 3G

Reiko Aoki and Sadao Nagaoka

No 05-01, IIR Working Paper from Institute of Innovation Research, Hitotsubashi University

Abstract: We examine why cooperation among essential patent holders for a standard may not occur, despite significant gains for patent holders and users of the standard. Utilizing Maskin's (2003) framework, we show that a grand coalition can be implemented only if the number of patent holders (n) is small. When n is large, emergence of an outsider is inevitable, so that voluntary sequential negotiation cannot secure the socially efficient outcome. We also show that a firm specialized in research is more likely to become an outsider. We discuss the MPEG2, DVD and 3G patent pools in light of these results.

Date: 2005-02
Note: Presented to the Conference on IT Innovation, Tokyo, December 2004.
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