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Ex-ante Agreements and FRAND Commitments in a Repeated Game of Standard-Setting Organizations

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  • Gastón Llanes

    (Pontificia Universidad Católica de Chile)

Abstract

I study licensing and technology choice in standard setting. I find that there may be inefficient adoption of technologies, even when firms commit to a maximum royalty or price cap for the use of their patents. When firms interact repeatedly to develop standards, a commitment to set fair, reasonable and non-discriminatory (FRAND) royalty fees may lead to more efficient technologies and higher surplus for all parties. This result can explain why standard-setting organizations favor FRAND commitments over more structured licensing commitments—such as price caps—and why there are been relatively few cases of hold-up in practice, even though such opportunistic behavior has been a primary cause of concern for innovation economists.

Suggested Citation

  • Gastón Llanes, 2019. "Ex-ante Agreements and FRAND Commitments in a Repeated Game of Standard-Setting Organizations," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 54(1), pages 159-174, February.
    • Handle: RePEc:kap:revind:v:54:y:2019:i:1:d:10.1007_s11151-018-9647-7
    DOI: 10.1007/s11151-018-9647-7
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    References listed on IDEAS

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    1. Josh Lerner & Jean Tirole, 2015. "Standard-Essential Patents," Journal of Political Economy, University of Chicago Press, vol. 123(3), pages 547-586.
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    5. Gastón Llanes & Joaquín Poblete, 2014. "Ex Ante Agreements in Standard Setting and Patent‐Pool Formation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(1), pages 50-67, March.
    6. Carl Shapiro, 2001. "Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard Setting," NBER Chapters, in: Innovation Policy and the Economy, Volume 1, pages 119-150, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Schuett, Florian & Wipusanawan, Chayanin, 2023. "Essentiality Checks for Standard Essential Patents," Other publications TiSEM 94ab0818-65ab-4135-8fa6-f, Tilburg University, School of Economics and Management.
    2. Ke Feng & Bas Karreman & Deming Zeng & Enrico Pennings, 2024. "R&D collaboration, social coordination, and standardization: evidence from the Chinese automotive industry," The Journal of Technology Transfer, Springer, vol. 49(1), pages 158-190, February.
    3. Jan Boone & Florian Schuett & Emanuele Tarantino, 2024. "Price Commitments in Standard Setting under Asymmetric Information," Journal of Industrial Economics, Wiley Blackwell, vol. 72(1), pages 3-19, March.
    4. Fiedler, Clemens & Larrain, Maria & Prüfer, Jens, 2023. "Membership, governance, and lobbying in standard-setting organizations," Research Policy, Elsevier, vol. 52(6).

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