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Journal Articles Journal of Industrial Economics Year : 2010

Contracting for an Innovation under Bilateral Asymmetric Information

Abstract

We analyze licensing contracts between informed innovators and developers exerting profit-increasing effort. Those contracts must simultaneously induce innovators to convey information on the value of their ideas, while inducing developers to exert effort and protecting the innovators' intellectual property rights. We show that the best innovators signal themselves by taking more royalties even if it reduces the developers' share of returns and their incentives. Moreover, royalties are more likely to be used when property rights are easy to enforce and pre-contractual evidence on innovation quality is hard to produce.

Dates and versions

halshs-00754443 , version 1 (20-11-2012)

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David Martimort, Jean-Christophe Poudou, Wilfried Sand-Zantman. Contracting for an Innovation under Bilateral Asymmetric Information. Journal of Industrial Economics, 2010, 58, pp.324-348. ⟨10.1111/j.1467-6451.2010.00421.x⟩. ⟨halshs-00754443⟩
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