nep-cta New Economics Papers
on Contract Theory and Applications
Issue of 2017‒01‒08
five papers chosen by
Guillem Roig
University of Melbourne

  1. Contracting for technology transfer: patent licensing and know-how in Brazil By Martinez, Catalina; Zuniga, Pluvia
  2. Analytic Foundations: Measuring the Redistributive Impact of Taxes and Transfers - Working Paper 446 By Ali Enami , Nora Lustig and Rodrigo Aranda
  3. The Effect of Observability on the Noncontractible Investment of a Regulated Firm By Saglam, Ismail
  4. Design of Public Procurement Auctions: Evidence from Cleaning Contracts By Hyytinen, Ari; Lundberg, Sofia; Toivanen, Otto
  5. Secret contracting in multilateral relations By Rey, Patrick; Verge, T.

  1. By: Martinez, Catalina (CSIC-IPP, Institute of Public Goods and Policies, Madrid, Spain); Zuniga, Pluvia (UNU-MERIT, and OECD)
    Abstract: Using contract level data, we study the relation between the inclusion of know-how in cross-border patent licensing agreements and the contractual terms used by firms to deal with moral hazard risks. We use official data on international technology contracts with patent licensing terms registered by affiliated and unaffiliated parties before the Department of Technology Transfer of the National Institute of Intellectual Property (INPI) in Brazil between 1996 and 2012. We find that contracts between unaffiliated parties involving know-how transfer show distinctive contractual and technology features compared to the rest: (i) they involve younger but lower quality technologies (compared to contracts without know-how); (ii) they are more prone to up front lump-sum payments than royalty or combined payments (royalty and fixed); and (iii) they are more likely to be accompanied by the licensing of other IPRs, in addition to patents, such as trademarks.
    Keywords: patents, licensing, know-how, trademarks, technology contracts, Brazil
    JEL: O32 D23 L24
    Date: 2016–11–21
  2. By: Ali Enami , Nora Lustig and Rodrigo Aranda
    Abstract: This paper uses contract theory to suggest simple contract designs that could be used by the Global Fund. Using a basic model of procurement, we lay out five alternative options and consider when each is likely to be most appropriate. The rest of the paper then discusses how one can build a realworld contract from these theoretical foundations, and how these contracts should be adapted to different contexts when the basic assumptions do not hold. Finally, we provide a synthesis of these various results with the aim of guiding policy makers as to when and how ‘results-based’ incentive contracts can be used in practice.
    Keywords: Taxes, subsidies, redistribution, fiscal transfers
    Date: 2017–01
  3. By: Saglam, Ismail
    Abstract: We study the effect of observability on the noncontractible investment of a regulated firm with private marginal cost information. We show that the observability reduces investment, pointing to the regulated firm's prevention of ratcheting. This result, which is in line with an earlier finding of Tirole (1986) obtained in a bargaining model of procurement with two-sided asymmetric information, reveals that 'underinvestment due to observability' is independent of whether only the investing firm or all of the parties affected by its investment decision have some private information.
    Keywords: Monopoly; Regulation; Investment; Observability; Asymmetric Information
    JEL: D82 L51 O32
    Date: 2017–01–03
  4. By: Hyytinen, Ari; Lundberg, Sofia; Toivanen, Otto
    Abstract: We analyze a regime change from beauty contests to first-price sealed-bid and scoring auctions, using data on public procurement of cleaning services in Swe-dish municipalities. In beauty contests, the lowest bid often lost and municipalities left substantial money on the table. The procurement costs were similar before and after the regime change, for two reasons: i) Entry strongly decreases the procure-ment cost, but did not change. Entry would have decreased with the regime change had the municipalities not adjusted the objects of auctions. ii) Municipali-ties were less price-sensitive and favored inhouse suppliers in the old regime, leading to more aggressive bidding by others. When the scope for favoritism re-duced, these changes balanced each other out. We discuss the implications of our findings for efficiency and welfare
    Keywords: auction design; beauty contests; Entry; public procurement; scoring
    JEL: D44 H57 P16
    Date: 2016–12
  5. By: Rey, Patrick; Verge, T.
    Abstract: We develop a flexible and tractable framework of (secret) vertical contracting between multiple upstream suppliers and downstream retailers. This framework does not put any restriction on the tari¤s that can be negotiated, and yet does take account of the impact of these tariffs on downstream firms'behavior. We show that equilibrium tariffs must be cost-based; as a result, retail prices are the same as with a multi-brand oligopoly. Interestingly, this finding is in line with the empirical analysis of a recent Norwegian merger. We then use this flexible framework to endogenize market structure as well as to analyze the e¤ects of various vertical restraints, such as resale price maintenance and retail price parity clauses. Finally, we show that our framework also applies to the agency relationships that characterize most online platforms.
    Keywords: Bilateral contracting, vertical relationships, agency, resale price maintenance, price parity clauses.
    Date: 2016–12

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