Job Market Paper
Intermediaries versus trolls in contests for patents [pdf] (Last updated on 10/31)
Patents are increasingly perceived as ambiguous property rights, as their boundaries are often ill-defined, thereby leading to potential inadvertent infringement and to an explosion in patent litigation. I study the emergence of non-practicing entities and their interaction in the market for patents. While patent trolls monetize their patents through the threat of litigation against alleged infringers, intermediaries instead protect their affiliated firms by buying patents that would otherwise fall in trolls’ hands. I develop a model of patent acquisition through a common-value auction incorporating both trolls and intermediaries. I find that firms can never win the auction when individually competing against the troll, and identify conditions under which the seller’s revenue increases in response to the troll’s participation in the auction. In particular, the results suggest that patent trolls effectively deter producing firms from willfully infringing patents (“efficient infringement”) and that sellers of patents that have a mild likelihood of being upheld and found infringed by courts benefit from patent trolls. I then introduce an intermediary who, in exchange for an endogenous membership fee, participates in the auction on firms’ behalf by aggregating their bids. While the intermediary’s probability to outbid the troll in the auction is positive, his funding mechanism, as a subscription game, greatly hampers his performance in the auction. The results further suggest that the competition between offensive and defensive NPEs in contests for patents harms the patentholder’s revenue. Finally, I elaborate on various policy relevant facets of this complex interaction.
Publications
Price competition with differentiated goods and incomplete product awareness [pdf]
forthcoming in Economic Theory
(joint with F. Garcia and M. Knauff)
(joint with F. Garcia and M. Knauff)
We investigate the effects of increased transparency on prices in the Bertrand duopoly model. Market transparency is defined as the proportion of consumers that are fully informed about the market and thus not captive to one firm. We consider two main cases of strategic interaction, prices as strategic complements and as strategic substitutes. For the former class of games, conventional wisdom concerning prices is confirmed, in that they decrease with market transparency. Consumer welfare always increases with higher transparency but changes in firms’ profits are ambiguous. For the latter class of games, an increase in market transparency may lead to an increase in one of the prices, which implies ambiguous effects on both consumer welfare and firms’ profits. An example with linear demand for differentiated products is also investigated. The results of the paper shed light on the mixed evidence concerning the effects of the Internet on retail markets and may illuminate some of the ongoing related public policy debates.
Equal treatment and socially optimal R&D in duopoly with one-way spillovers [pdf]
forthcoming in Journal of Public Economic Theory
(joint with G. De Feo and M. Knauff)
(joint with G. De Feo and M. Knauff)
This paper examines the standard symmetric two-period R&D model with a determin- istic one-way spillover structure: know-how flows only from the high R&D firm to the low R&D firm (but not vice-versa). Though firms are ex-ante identical, one obtains a unique asymmetric equilibrium (pair) in R&D investments, leading to inter-firm heterogeneity in the industry. R&D cooperation by means of a joint lab is considered and compared to the non-cooperative solution. The main part of the paper provides a second-best welfare analysis in which we show that the joint lab yields a socially optimal R&D level subject to an equal treatment (of firms) constraint, which also coincides with the non-cooperative solution in the abscence of spillovers. We also investigate the welfare costs of this equal treatment constraint and find that they can be quite significant.
Work in Progress
Inferior and subsistence goods (joint with R. Amir)
On the provision of inferior public goods (joint with R. Amir)
Collusion in almost common-value auctions