Intellectual property clearinghouses: The effects of reduced transaction costs in licensing

Reiko Aoki, Aaron Schiff

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)

Abstract

We focus on downstream uses of intellectual property (IP) that combine multiple rights and examine the effects of introducing an IP clearinghouse. We identify the two sometimes conflicting functions of clearinghouses: transaction cost reductions and coordination. We show that reduced transaction costs cause licensors to raise royalties in some cases, which makes them worse off due to the 'tragedy of the anticommons'. Downstream welfare effects may also be positive or negative and we characterize the effects on downstream manufacturers and final consumers. We also show that total welfare is most likely to increase following a transaction cost reduction when the number of intellectual property rights per downstream use is small, or if rights are relatively substitutable in downstream use, but it is also possible for welfare to decrease.

Original languageEnglish
Pages (from-to)218-227
Number of pages10
JournalInformation Economics and Policy
Volume22
Issue number3
DOIs
Publication statusPublished - Jul 2010

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics
  • Management, Monitoring, Policy and Law

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