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Using aggregate market data to estimate patent value: An application to United States smartphones 2010 to 2015

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  • Hiller, R. Scott
  • Savage, Scott J.
  • Waldman, Donald M.

Abstract

Intellectual property and its protection is one of the most valuable assets for entrepreneurs and firms in the information economy. This article describes a relatively straightforward approach to measuring patent value with aggregate market data and the BLP model. We apply the approach to United States smartphones. The demand estimates and recovered marginal costs produce sensible simulations of equilibria prices and shares from several hypothetical patent infringements. In one simulation, the presence of near field communication on the dominant firm's flagship smartphone results in a 29% increase in profits. This estimate provides a starting point for establishing a reasonable royalty between the patent holder and the dominant firm in a hypothetical negotiation. This simulation also shows that law-abiding firms inside the market may be damaged by the dominant firm's patent infringing behavior.

Suggested Citation

  • Hiller, R. Scott & Savage, Scott J. & Waldman, Donald M., 2018. "Using aggregate market data to estimate patent value: An application to United States smartphones 2010 to 2015," International Journal of Industrial Organization, Elsevier, vol. 60(C), pages 1-31.
    • Handle: RePEc:eee:indorg:v:60:y:2018:i:c:p:1-31
    DOI: 10.1016/j.ijindorg.2018.07.002
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    Cited by:

    1. Nie, Pu-yan & Chen, Zi-rui & Wang, Chan, 2021. "Intellectual property pricing under asymmetric duopoly," Journal of Retailing and Consumer Services, Elsevier, vol. 58(C).
    2. Lukasz Grzybowski & Ambre Nicolle, 2021. "Estimating Consumer Inertia in Repeated Choices of Smartphones," Journal of Industrial Economics, Wiley Blackwell, vol. 69(1), pages 33-82, March.

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    More about this item

    Keywords

    Competition; Intellectual property; Random-coefficient logit demand; Patent; Smartphones;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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