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Screening for Good Patent Pools through Price Caps on Individual Licenses †

Screening for Good Patent Pools through Price Caps on Individual Licenses † Abstract Patent pools reduce prices when selling complementary inputs to technologies, but can also effectively cartelize markets when involving substitutes. Independent licensing, by reintroducing competition, ensures that only good pools form when there are two patent holders involved. For larger pools, independent licensing needs to be complemented by other policy tools. We propose to constrain the royalties for the patents individually licensed outside the pool with price caps replicating the pool's sharing rule. This information-free screening device works with asymmetries, even when licensors try to stabilize pools by readjusting the sharing rule in a way that may not reflect contributions. (JEL D21, D45, K11, L12, L24, O31, O34 ) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Microeconomics American Economic Association

Screening for Good Patent Pools through Price Caps on Individual Licenses †

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Publisher
American Economic Association
Copyright
Copyright © 2016 by the American Economic Association
Subject
Articles
ISSN
1945-7685
eISSN
1945-7685
DOI
10.1257/mic.20140237
Publisher site
See Article on Publisher Site

Abstract

Abstract Patent pools reduce prices when selling complementary inputs to technologies, but can also effectively cartelize markets when involving substitutes. Independent licensing, by reintroducing competition, ensures that only good pools form when there are two patent holders involved. For larger pools, independent licensing needs to be complemented by other policy tools. We propose to constrain the royalties for the patents individually licensed outside the pool with price caps replicating the pool's sharing rule. This information-free screening device works with asymmetries, even when licensors try to stabilize pools by readjusting the sharing rule in a way that may not reflect contributions. (JEL D21, D45, K11, L12, L24, O31, O34 )

Journal

American Economic Journal: MicroeconomicsAmerican Economic Association

Published: Aug 1, 2016

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