DP6207 | Exclusive versus Non-exclusive Licensing Strategies and Moral Hazard

Author(s)

Patrick W Schmitz

Publication Date

23/03/2007

JEL Code(s)

  • D45, D82, L12

Keyword(s)

  • Innovation, Licences, Monopoly, private information

Programme Area(s)

  • Industrial Organization

Abstract

An upstream firm can license its innovation to downstream firms that have to exert further development effort. There are situations in which more licenses are sold if effort is a hidden action. Moral hazard may thus increase the probability that the product will be developed.