Selling Complementary Patents: Experimental Investigation
- ORNL
- University of Tennessee
Production requiring licensing groups of complementary patents implements a coordination game among patent holders, who can price patents by choosing among combinations of fixed and royalty fees. Summed across patents, these fees become the total producer cost of the package of patents. Royalties, because they function as excise taxes, add to marginal costs, resulting in higher prices and reduced quantities of the downstream product and lower payoffs to the patent holders. Using fixed fees eliminates this inefficiency but yields a more complex coordination game in which there are multiple equilibria, which are very fragile in that small mistakes can lead the downstream firm to not license the technology, resulting in inefficient outcomes. We report on a laboratory market investigation of the efficiency effects of coordinated pricing of patents in a patent pool. We find that pool-like pricing agreements can yield fewer coordination failures in the pricing of complementary patents.
- Research Organization:
- Oak Ridge National Lab. (ORNL), Oak Ridge, TN (United States)
- Sponsoring Organization:
- USDOE Office of Science (SC)
- DOE Contract Number:
- DE-AC05-00OR22725
- OSTI ID:
- 986450
- Journal Information:
- Journal of Law and Economics, The, Vol. 53, Issue 1; ISSN 0022-2186
- Country of Publication:
- United States
- Language:
- English
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