This paper discusses the question of assigning responsibility and liability when one agent's actions cause another to deviate from their agreements with a third party. It introduces fixed-fraction rules as a way to balance accident prevention and fairness in assigning liabilities. These rules are characterized through an axiomatic approach and can be implemented through smart contracts for automated conflict resolution.
Establishing a standardized framework is crucial for the smooth functioning and efficiency of information and communication technologies. In particular, ensuring Fair, Reasonable, and Non-Discriminatory (FRAND) licensing terms is vital to minimize holdup problems. However, the lack of consensus on the precise meaning of FRAND poses challenges in both legal proceedings and industries. To address this, the paper introduces a new conceptual model that provides a clear distinction between fairness in royalty distribution among patent users and reasonableness in determining compensation for patent holders. The model incorporates well-known principles from the theory of fair allocation and characterizes specific royalty rules that exhibit desirable properties. By determining royalties relative to firm-specific liability indexes, the framework ensures equitable treatment of similar firms. The model's applicability is demonstrated through its implementation in various standard settings within the field of Industrial Organization.
We consider platforms’ choices of application compatibility in two-sided markets. Network effects on both market sides are crucial for equilibrium compatibility. Partial compatibility can be the unique coalition-proof market outcome. Coalition-proof market outcomes may go from full compatibility to incompatibility. Consumer surplus and total surplus can be the highest under partial compatibility.
We consider platforms’ choices of application compatibility in two-sided markets. Network effects on both market sides are crucial for equilibrium compatibility. Partial compatibility can be the unique coalition-proof market outcome. Coalition-proof market outcomes may go from full compatibility to incompatibility. Consumer surplus and total surplus can be the highest under partial compatibility.
This paper studies how technology transfer changes welfare in a Cournot oligopoly, taking rent dissipation into account. Firms engage in a patent competition for a cost-reducing innovation, and the winner of the competition may license the patent to its rivals. We show that welfare is reduced when innovations are minor under licensing auction, while royalty licensing never changes welfare. In addition, welfare generally fails to improve when the patentee may choose between licensing auction and royalty licensing.
We consider a model in which schools and colleges compete for high-ability students, which are independently identified through a costly screening procedure. This independence creates a channel through which students' preferences affect the strategic interaction between schools -- students with competing offers accept the most-preferred one, increasing the screening costs of unpopular schools. When preferences between schools are more heterogeneous, schools screen more, increasing the proportion of students with multiple offers, but paradoxically reducing the extent to which their preferences determine their outcomes. By observing the students' schools of origin, colleges can free-ride of the fierce competition that occurs during screening.
We study how a firm inside or outside an industry selects a partner among asymmetric firms to form a production joint venture (PJV), in which technology transfer takes place. We show that the partner selected under a two-part tariff contractis always (weakly) more efficient than the one selected under a first-price auction. Comparing these two schemes, we find that a two-part tariff contract can be superior for the most efficient incumbent firm or for an outside innovator, while a first-price auction is always superior for the least efficient incumbent firm. Moreover, in terms of consumer surplus and welfare, two-part tariff contract is always (weakly) superior.
An industry-wide research joint venture (RJV) does not lead to better technological development or a higher consumer surplus. In contrast, every non-industry-wide RJV leads to strict improvements in both measures. Our results continue to hold when technology transfer is possible. Independent collaboration with technology transfer is an alternative to establishing industry-wide research consortiums.
An industry-wide research joint venture (RJV) does not lead to better technological development or a higher consumer surplus. In contrast, every non-industry-wide RJV leads to strict improvements in both measures. Our results continue to hold when technology transfer is possible. Independent collaboration with technology transfer is an alternative to establishing industry-wide research consortiums.