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Intellectual property disclosure as threat

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  • Scott Baker
  • Pak Yee Lee
  • Claudio Mezzetti

Abstract

This paper models the disclosure of knowledge via licensing to outsiders or fringe Örms as a threat, useful in ensuring Örms keep their commitments. We show that Örms holding intellectual property are better able to enforce agreements than Örms that donít. In markets requiring innovation to make a product, IP disclosure presents a more powerful threat than entry by the punishing Örm alone. Occasionally, a punishing Örm wonít be able to translate its intellectual property into a full-blown product, making it impossible for it to enter the cheating Örmís market and punish. Even if it canít make a product itself, the punishing Örm can always credibly threaten to license the intellectual property it has on hand to someone else. With this intellectual property as a springboard, chances are at least one fringe Örm will be able to do the translation, make the product and enter the cheating Örmís market. In short, the potential for licensing increases the likelihood of punishment for uncooperative behavior. In the model, Örms contract explicitly to exchange knowledge and tacitly to coordinate the introduction of innovations to the marketplace. We Önd conditions under which Örms can self-enforce both agreements. The enforcement conditions are weaker when (1) Örms possess knowledge and (2) knowledge is easily transferable to other Örms. The disclosure threat has implications for antitrust law generally, which are considered.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Scott Baker & Pak Yee Lee & Claudio Mezzetti, 2011. "Intellectual property disclosure as threat," International Journal of Economic Theory, The International Society for Economic Theory, vol. 7(1), pages 21-38, March.
    • Handle: RePEc:bla:ijethy:v:7:y:2011:i:1:p:21-38
    DOI: j.1742-7363.2010.00147.x
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    File URL: https://hdl.handle.net/10.1111/j.1742-7363.2010.00147.x
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    1. Etienne Billette de Villemeur & Laurent Flochel & Bruno Versaevel, 2013. "Optimal collusion with limited liability," International Journal of Economic Theory, The International Society for Economic Theory, vol. 9(3), pages 203-227, September.

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