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Barigozzi, Francesca

The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Ludwig, Sandra / Schmitz, Hendrik

Ed. by Auriol, Emmanuelle / Brunner, Johann / Fleck, Robert / Mastrobuoni, Giovanni / Mendola, Mariapia / Requate, Till / de Vries, Frans / Wenzel, Tobias / Zulehner, Christine

4 Issues per year


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Online
ISSN
1935-1682
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Volume 12, Issue 1

Issues

Volume 6 (2006)

Volume 4 (2004)

Volume 2 (2002)

Volume 1 (2001)

A Patent System with a Contingent Delegation Fee under Asymmetric Information

Weonseek Kim / Bonwoo Koo
Published Online: 2012-05-20 | DOI: https://doi.org/10.1515/1935-1682.2702

Abstract

Under the framework of a two-stage innovation process in which the first-stage innovation is commercialized by multiple firms at the second stage, this study proposes an optimal patent system for efficient commercialization by a lower cost firm when the R&D costs are private information. Under the existing patent system of granting patents sequentially to successful innovators, the commercialization can be achieved by an inefficient firm (called control loss) and duplicative R&D efforts may occur through competitive innovation race. This study shows that the problems of control loss and duplicative R&D efforts can be prevented if the patent office grants a patent with a mandatory contingent delegation fee only to the first innovator. A carefully designed contingent fee function can induce the first innovator to internalize the patent office’s objective function, leading to efficient commercialization by a lower cost firm.

Keywords: patent design; contingent delegation fee; control loss; commercialization

About the article

Published Online: 2012-05-20


Citation Information: The B.E. Journal of Economic Analysis & Policy, Volume 12, Issue 1, ISSN (Online) 1935-1682, DOI: https://doi.org/10.1515/1935-1682.2702.

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