nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2010‒06‒11
three papers chosen by
Rui Baptista
Technical University of Lisbon
  1. Licensing a common value innovation when signaling strength may backfire By Cuihong Fan; Byoung Heon Jun; Elmar G. Wolfstetter
  2. Quality Competition or Quality Cooperation? License-Type and the Strategic Nature of Open Source vs. Closed Source Business Models By Sebastian von Engelhardt
  3. Inside Innovation Persistence: New Evidence from Italian Micro-data By Antonelli Cristiano; Crespi Francesco; Scellato Giuseppe
  1. By: Cuihong Fan (Shanghi University of Finance and Economics School of Economics); Byoung Heon Jun (Korea University, Seoul); Elmar G. Wolfstetter (Humboldt-University at Berlin and Korea University, Seoul)
    Abstract: This paper reconsiders the licensing of a common value innovation to a downstream duopoly, assuming a dual licensing scheme that combines a first-price license auction with royalty contracts for losers. Prior to bidding firms observe imperfect signals of the expected cost reduction; after the auction the winning bid is made public. Bidders may signal strength to their rivals through aggressive bidding, which may however backfire and mislead the innovator to set an excessively high royalty rate. We provide sufficient conditions for existence of monotone bidding strategies and for the profitability of combining auctions and royalty contracts for losers.
    Keywords: Patents, licensing, auctions, royalty, innovation, R&D, mechanism design
    JEL: D21 D43 D44 D45
    Date: 2010
    URL: http://d.repec.org/n?u=RePEc:iek:wpaper:1010&r=tid
  2. By: Sebastian von Engelhardt (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: In the ICT sector, product-software is an important factor for the quality of the products (e.g. cell phones). In this context, open source software enables firms to avoid quality competition as they can cooperate on quality without an explicit contract. The economics of open source (OS) versus closed source (CS) business models are analyzed in a general two- stage model that combines aspects of non-cooperative R&D with the theory of differentiated oligopolies: In stage one, firms develop software, either as OS or CS, or as a an OS-CS-mix if the license allows. In stage two, firms bundle this with complementary products and compete à la Cournot. The model allows for horizontal product differentiation in stage two. The finding are: 1.) While CS-decisions are always strategic substitutes, OS-decisions can be strategic complements. Furthermore, CS is a strategic substitute to OS and vice versa. 2.) The type of OS-license plays a crucial role: only if the license prohibits a direct OS-CS code mix (like the GPL), then Nash-equilibria with firms producing OS code exist for all parameters. 3.) In the equilibrium of a mixed industry with restricted licenses, OS-firms offer lower quality than their CS-rivals.
    Keywords: open source, commercial open source, Cournot, R&D
    JEL: D43 L17 O34
    Date: 2010–06–03
    URL: http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2010-034&r=tid
  3. By: Antonelli Cristiano (University of Turin); Crespi Francesco; Scellato Giuseppe
    Date: 2010–06
    URL: http://d.repec.org/n?u=RePEc:uto:labeco:201010&r=tid
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