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Price Commitments in Standard Setting under Asymmetric Information

Author

Listed:
  • Boone, Jan

    (Tilburg University, Center For Economic Research)

  • Schuett, Florian

    (Tilburg University, Center For Economic Research)

  • Tarantino, E.

    (Tilburg University, Center For Economic Research)

Abstract

Standards may create market power for the holders of standard essential patents (SEPs). To address these concerns, the literature advocates price commitments, whereby SEP holders commit to the maximum royalty they would charge were their technology included in the standard. We consider a setting in which a technology implementer holds private information about profitability. In this setting, price commitments increase efficiency not only by curbing SEP holders' market power, but also by alleviating distortions in the design of the royalty scheme. We derive conditions under which price commitments can be implemented using a simple royalty cap as used in practice.
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Suggested Citation

  • Boone, Jan & Schuett, Florian & Tarantino, E., 2019. "Price Commitments in Standard Setting under Asymmetric Information," Discussion Paper 2019-009, Tilburg University, Center for Economic Research.
    • Handle: RePEc:tiu:tiucen:b39207f5-f27a-451d-9e2e-d4cd9fe880dc
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    References listed on IDEAS

    as
    1. 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.
    2. Josh Lerner & Haris Tabakovic & Jean Tirole, 2016. "Patent Disclosures and Standard-Setting," NBER Working Papers 22768, National Bureau of Economic Research, Inc.
    3. Joseph Farrell & Timothy Simcoe, 2012. "Choosing the rules for consensus standardization," RAND Journal of Economics, RAND Corporation, vol. 43(2), pages 235-252, June.
    4. Mathias Dewatripont & Patrick Legros, 2013. "‘Essential’ Patents, FRAND Royalties and Technological Standards," Journal of Industrial Economics, Wiley Blackwell, vol. 61(4), pages 913-937, December.
    5. Klaus M. Schmidt, 2014. "Complementary Patents and Market Structure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(1), pages 68-88, March.
    6. Nancy T. Gallini & Brian D. Wright, 1990. "Technology Transfer under Asymmetric Information," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 147-160, Spring.
    7. repec:adr:anecst:y:1991:i:24:p:08 is not listed on IDEAS
    8. Bekkers, Rudi & Catalini, Christian & Martinelli, Arianna & Righi, Cesare & Simcoe, Timothy, 2023. "Disclosure rules and declared essential patents," Research Policy, Elsevier, vol. 52(1).
    9. Klaus M. Schmidt, 2014. "Complementary Patents and Market Structure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(1), pages 68-88, March.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    standardization; standard-essential patents; price commitments; Information asymmetry;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

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