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Renting Ideas

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  • Hall, Christopher D

Abstract

Textbook models fail to explain royalty and fee-pricing arrangements in the patent and trade-secret licenses discussed here. A theory of royalty pricing as an efficient tax and as a performance bond explains more. Royalty taxes help coordinate user outputs to maximize the joint value of a common customer pool. Royalties, by tying owner income to licensee sales directly, also encourage owners to protect rights against infringement over time. Copyright 1991 by University of Chicago Press.

Suggested Citation

  • Hall, Christopher D, 1991. "Renting Ideas," The Journal of Business, University of Chicago Press, vol. 64(1), pages 21-48, January.
    • Handle: RePEc:ucp:jnlbus:v:64:y:1991:i:1:p:21-48
    DOI: 10.1086/296524
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    Cited by:

    1. Dan Elfenbein & Josh Lerner, 2001. "Links and Hyperlinks: An Empirical Analysis of Internet Portal Alliances, 1995-1999," NBER Working Papers 8251, National Bureau of Economic Research, Inc.
    2. Josh Lerner & Robert P. Merges, 1997. "The Control of Strategic Alliances: An Empirical Analysis of Biotechnology Collaborations," NBER Working Papers 6014, National Bureau of Economic Research, Inc.

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