KTH/CESIS Working Paper Series in Economics and Institutions of Innovation
FROM PERSONAL TO IMPERSONAL EXCHANGE IN IDEAS: An Experimental Study of Patent Markets with Transparent Prices
Abstract: The question of how prices on patents rights should be
determined in impersonal exchanges is examined in a laboratory environment.
Dynamic gains from such organized trade with public prices are recorded.
The experiment introduces a competitive market with impersonal exchange
mechanisms and prices in the traditionally hierarchical and personal
exchange of patents. A tradable linear contract (fixed fee plus royalty)is
investigated with three mechanism designs for demand-side bidding and two
levels of presumed legal validity of the underlying patent. A “trader” can
split contracts useful for multiple “industries,” creating dynamic gains,
potentially increasing the use of technology in the economic system.
Previous research on licensing has mostly been limited to one-dimensional
auction mechanisms or static environments. The results indicate that agents
appear to price the blocking value in the fixed fee and the investment
value, net what is paid in fixed, in the royalty component, supporting a
proposed theory of prices. Risks are thereby shifted from the invention to
the consumer by means of this producer market, increasing the incentives
for investment in invention, potentially resulting in a more competitive
technology being developed and a more efficient economic system. The
results give indications on proper integration of information and rules for
mechanisms for organized market on patents with transparent prices. It also
shows that intermediaries (traders) are critical to achieve dynamic gains
from the system as are high presumed validity of patents.
Keywords: patents; trade; licensing; intellectual property; experiments; (follow links to similar papers)
JEL-Codes: D02; D23; L14; L24; O32; O34; (follow links to similar papers)
44 pages, August 25, 2010
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