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Cooperation in R&D: Patenting, Licensing, and Contracting

In: Game Theory and Business Applications

Author

Listed:
  • Sudipto Bhattacharya

    (London School of Economics)

  • Claude d’Aspremont

    (CORE, Universite Catholique de Louvain)

  • Sergei Guriev

    (New Economic School (Moscow))

  • Debapriya Sen

    (Ryerson University)

  • Yair Tauman

    (Stony Brook University
    Arison School of Business, IDC Herzliya)

Abstract

Innovative activity uses anihd produces knowledge. This is both costly and risky and the resulting product has (at least partially) the main characteristics of a public good: it is non-rival and non-excludable. Without any sort of protection, individual agent would have little incentive to do research for fear of unsuccessful research effort or for fear of imitation by others (through spillovers or free access). In this chapter, we use game-theoretic concepts to analyze R&D collective arrangements in settings involving both complete and incomplete contracts. The first topic is patent protection and the comparison of the main forms of licensing in various industry contexts, structures or sizes – including the role of various factors such as product differentiation, innovation magnitude, and asymmetric information. The second focus is the long-debated relationship between innovative activity and the intensity of competition. Here, we review the benefits of various types of cooperative R&D agreements in the presence of externalities. The last two topics concern contracting issues. In a complete contracting setting, we review the design of licensing mechanisms allowing for full knowledge sharing under incomplete information. Finally, we consider incomplete contracts designed to deal with cumulative or sequential innovation and the associated moral hazard problems combining research and development efforts, and the possibility of several buyers for the innovation.

Suggested Citation

  • Sudipto Bhattacharya & Claude d’Aspremont & Sergei Guriev & Debapriya Sen & Yair Tauman, 2014. "Cooperation in R&D: Patenting, Licensing, and Contracting," International Series in Operations Research & Management Science, in: Kalyan Chatterjee & William Samuelson (ed.), Game Theory and Business Applications, edition 2, chapter 0, pages 265-286, Springer.
    • Handle: RePEc:spr:isochp:978-1-4614-7095-3_10
    DOI: 10.1007/978-1-4614-7095-3_10
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    Cited by:

    1. Amir, Rabah & Encaoua, David & Lefouili, Yassine, 2014. "Optimal licensing of uncertain patents in the shadow of litigation," Games and Economic Behavior, Elsevier, vol. 88(C), pages 320-338.
    2. Eric Bahel & Christian Trudeau, 2018. "Consistency requirements and pattern methods in cost sharing problems with technological cooperation," International Journal of Game Theory, Springer;Game Theory Society, vol. 47(3), pages 737-765, September.
    3. Mendi, Pedro & Moner-Colonques, Rafael & Sempere-Monerris, José J., 2020. "Cooperation for innovation and technology licensing: Empirical evidence from Spain," Technological Forecasting and Social Change, Elsevier, vol. 154(C).

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    More about this item

    Keywords

    Incumbent Firm; Incomplete Contract; Downstream Firm; Sequential Innovation; Research Joint Venture;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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