Sequential innovation, naked exclusion, and upfront lump-sum payments

Economic Theory - 2017
Jay Pil Choi1,2, Christodoulos Stefanadis3
1Department of Economics, Michigan State University, East Lansing, USA
2Hitotsubashi Institute for Advanced Study, Hitotsubashi University, Tokyo, Japan
3Department of Banking and Financial Management, University of Piraeus, Piraeus, Greece

Tóm tắt

We present a potentially benign naked exclusion mechanism that can be applied to sequential innovation; a non-patentable original innovation by the incumbent supplier fosters derivative innovation by rivals. In the absence of an appropriate legal framework, the original innovator’s equilibrium exclusivity contracts block subsequent efficient entry even if there is (leader–follower) competition in the contracting phase. However, the legal framework may maximize social welfare by imposing a ban on upfront lump-sum payments in exclusivity contracts (by all suppliers) combined with an outright ban on exclusivity contracts by the derivative innovator. The former ban precludes the exclusion of socially beneficial derivative innovation by causing the incumbent supplier to resort to accommodation, rather than to pure exclusion, strategies. The latter ban complements the former by preventing inefficient or excessive derivative innovation.

Từ khóa


Tài liệu tham khảo

Aghion, P., Bolton, P.: Contracts as a barrier to entry. Am. Econ. Rev. 77, 388–401 (1987)

Anand, B.N., Khanna, T.: The structure of licensing contracts. J. Ind. Econ. 48, 103–135 (2000)

Anton, J.J., Yao, D.A.: Expropriation and inventing: appropriable rents in the absence of property rights. Am. Econ. Rev. 84, 190–209 (1994)

Anton, J.J., Yao, D.A.: The sale of ideas: strategic disclosure, property rights, and contracting. Rev. Econ. Stud. 69, 513–531 (2002)

Anton, J.J., Yao, D.A.: Attracting skeptical buyers: negotiating for intellectual property rights. Int. Econ. Rev. 49, 319–348 (2008)

Armstrong, M., Wright, J.: Two-sided markets, competitive bottlenecks, and exclusive contracts. Econ. Theory 32, 353–380 (2007)

Bernheim, D.B., Peleg, B., Whinston, M.D.: Coalition-proof Nash equilibria I: concepts. J. Econ. Theory 42, 1–12 (1987)

Bernheim, D.B., Whinston, M.D.: Exclusive dealing. J. Polit. Econ. 106, 64–103 (1998)

Bessen, J., Hunt, R.M.: An empirical look at software patents. J. Econ. Manag. Strategy 16, 157–189 (2007)

Bessen, J., Maskin, E.: Sequential innovation, patents, and imitation. RAND J. Econ. 40, 611–635 (2009)

Biais, B., Perotti, E.: Entrepreneurs and new ideas. RAND J. Econ. 39, 1105–1125 (2008)

De Meza, D., Selvaggi, M.: Exclusive contracts foster relationship-specific investment. RAND J. Econ. 38, 85–97 (2007)

Dewatripont, M., Maskin, E.: Contract renegotiation in models of asymmetric information. Eur. Econ. Rev. 34, 311–321 (1990)

Federal Trade Commission: Slotting Allowances in the Retail Grocery Industry: Selected Case Studies in Five Product Categories (2003)

Flannery, R.: Why imitation bests innovation. Forbes. http://www.forbes.com/2010/05/11/china-america-innovation-leadership-mangement-imitation-book.html (May 11th, 2010). Accessed 15 Mar 2017

Fumagalli, C., Motta, M.: Exclusive dealing and entry, when buyers compete. Am. Econ. Rev. 96, 785–795 (2006)

Fumagalli, C., Motta, M.: Buyers’ miscoordination, entry and downstream competition. Econ. J. 118, 1196–1222 (2008)

Fumagalli, C., Motta, M., Ronde, T.: Exclusive dealing: investment promotion may facilitate inefficient foreclosure. J. Ind. Econ. 60, 599–608 (2012)

Green, J.R., Scotchmer, S.: On the division of profit in sequential innovation. RAND J. Econ. 26, 20–33 (1995)

Grossman, G.M., Lai, E.L.C.: International protection of intellectual property. Am. Econ. Rev. 94, 1635–1653 (2004)

Hart, O., Tirole J.: Vertical integration and market foreclosure. Brookings Papers on Economic Activity: Microeconomics, pp. 205–286 (1990)

Ide, E., Montero, J.P., Figueroa, N.: Discounts as a barrier to entry. Am. Econ. Rev. 106, 1849–1877 (2016)

Inderst, R., Shaffer, G.: Market-share contracts as facilitating practices. RAND J. Econ. 41, 709–729 (2010)

Innes, R., Sexton, R.: Strategic buyers and exclusionary contracts. Am. Econ. Rev. 84, 566–584 (1994)

Iwaisako, T., Futagami, K.: Patent protection, capital accumulation, and economic growth. Econ. Theory 52, 631–668 (2013)

Levitt, T.: Innovative imitation. Harvard Business Review. https://hbr.org/1966/09/innovative-imitation (1966). Accessed 15 Mar 2017

Mansfield, E.: How rapidly does new industrial technology leak out? J. Ind. Econ. 34, 217–223 (1985)

Marvel, H.P.: Exclusive dealing. J. Law Econ. 25, 1–25 (1982)

Marx, L.M., Shaffer, G.: Upfront payments and exclusion in downstream markets. RAND J. Econ. 38, 823–843 (2007)

Moser, P.: Patents and innovation: evidence from economic history. J. Econ. Perspect. 27, 23–44 (2013)

Rajan, R.G., Zingales, L.: The firm as a dedicated hierarchy. Q. J. Econ. 116, 805–852 (2001)

Rasmusen, E., Ramseyer, M., Wiley Jr., J.: Naked exclusion. Am. Econ. Rev. 81, 1137–1145 (1991)

Rasmusen, E., Ramseyer, M., Wiley Jr., J.: Naked exclusion: reply. Am. Econ. Rev. 90, 310–311 (2000)

Segal, I.R., Whinston, M.D.: Naked exclusion: comment. Am. Econ. Rev. 90, 296–309 (2000a)

Segal, I.R., Whinston, M.D.: Exclusive contracts and protection of investments. RAND J. Econ. 31, 603–633 (2000b)

Shaffer, G.: Slotting allowances and retail price maintenance: a comparison of facilitating practices. RAND J. Econ. 22, 120–135 (1991)

Shenkar, O.: Copycats: How Smart Companies Use Imitation to Gain a Strategic Edge. Harvard Business Review Press, Boston (2010)

Simpson, J., Wickelgren, A.L.: Naked exclusion, efficient breach, and downstream competition. Am. Econ. Rev. 97, 1305–1320 (2007)

Spector, D.: Exclusive contracts and demand foreclosure. RAND J. Econ. 42, 619–638 (2011)

Stefanadis, C.: Naked exclusion and the volatility of innovation. Am. Econ. J. Microecon. 8, 39–50 (2016)

U.S. Senate: Slotting: Fair for Small Business and Consumers? Hearing before the Senate Committee on Small Business, 106th Congress, 1st Session 388 (1999)

Thông tin
Thông tin xuất bản

Economic Theory

Thông tin tác giả