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Optimal Licensing Contracts and the Value of a Patent
Author(s) -
Erutku Can,
Richelle Yves
Publication year - 2007
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/j.1530-9134.2007.00144.x
Subject(s) - monopoly , verifiable secret sharing , principal (computer security) , microeconomics , value (mathematics) , revenue , profit (economics) , economics , business , quality (philosophy) , industrial organization , computer science , computer security , finance , philosophy , set (abstract data type) , epistemology , machine learning , programming language
We extend Kamien and Tauman's (1986) analysis of the value of a patent. We find that an inventor can always design a fixed fee plus royalty contract such that his revenue is equal to the profit a monopoly endowed with the innovation could make on the market. This implies that the social value of a patent can be strictly negative whenever the patented innovation is of bad quality. We also explain why a principal can have an interest in using performance‐based contracts although the principal and the agents are risk‐neutral, information is symmetric, and agents' actions are verifiable.