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The Problem of Trading Patents in Organized Markets: A Dynamic Experimental Microeconomic System Model and Informal Price Theory

Author

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  • Eskil Ullberg

    (Interdisciplinary Center for Economic Science, George Mason University)

Abstract
We are well familiar with the economic analysis of a patent system in terms of a temporary monopoly on products, benefitting from marginal process inventions, formulated under conditions of certain future demands. This article develops an experimental and dynamic microeconomic model useful for studying the patent system as a trade system, where patented technology is exchanged in organized competitive markets, under uncertain future demands. An economic system design is developed to study transparent prices of patents, dynamic gains from using a patent in multiple industries and the coordination of invention, intermediary and innovation activities using a linear contract on patents (fixed fee plus royalty on revenues). A trader is introduced together with inventor and innovator agents in order to multiply the value (use) of the technology. Three mechanism designs and two levels of presumption of validity of the underlying patent right are proposed. The analysis differs from previous work on patents, trade and economics in that the focus is on the competitive pricing of the rights themselves, using demand side bidding. An informal theory is outlined to price the dual values of a patent (investing and blocking). Based on this proposition tentative hypothesis are outlined for two initial experiments using the outlined economic system design.Creation-Date: 2010-04

Suggested Citation

  • Eskil Ullberg, 2010. "The Problem of Trading Patents in Organized Markets: A Dynamic Experimental Microeconomic System Model and Informal Price Theory," Working Papers 1016, George Mason University, Interdisciplinary Center for Economic Science.
    • Handle: RePEc:gms:wpaper:1016
    as

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    File URL: http://www.gmu.edu/schools/chss/economics/icesworkingpapers.gmu.edu/pdf/1016.pdf
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    References listed on IDEAS

    as
    1. R. J. Aumann & J. H. Dreze, 2009. "Assessing Strategic Risk," American Economic Journal: Microeconomics, American Economic Association, vol. 1(1), pages 1-16, February.
    2. Hart, Oliver D, 1988. "Incomplete Contracts and the Theory of the Firm," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 4(1), pages 119-139, Spring.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Eskil Ullberg, 2017. "Coordination of Inventions and Innovations Through Patent Markets with Prices," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 8(2), pages 704-738, June.
    2. Ullberg, Eskil, 2015. "Coordination of Inventions and Innovations through patent markets with prices," Ratio Working Papers 260, The Ratio Institute.

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    More about this item

    Keywords

    patents; organized markets; trade; licensing; technology;
    All these keywords.

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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