The Licensing of Patents under Asymmetric Information.
- This paper seeks to explain the use of royalty payments rather than fixed fees in the licensing of patents by the presence of asymmetric information. The licensee is assumed to know the value of the patent and makes a single offer of a contract to the licensee. It is shown that there is a unique equilibrium satisfying the intuitive criterion of I. Cho and D. Kreps (1987). Qualitative properties of the equilibrium contract are derived by considering a continuum of types.
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