Control Rights over Intellectual Property: Corporate Venturing and Bankruptcy Regimes

We develop a theory of control rights in the context of licensing interim innovative knowledge for further development, which is consistent with the inalienability of initial innovator's intellectual property rights (IPR). Control rights of a downstream development unit, a buyer of the interim innovation, arise from his ability to prevent the upstream research unit from forming financial coalitions at the ex interim stage of bargaining, over the amount and structure of licensing fees as well as the mode of licensing, either based on trade secrets or via patenting. We model explicitly the equilibrium choice of the financial structure of licensing fees and show that the innovator's financial constraint is more likely to bind when the value of her innovation is low. By constraining the flexibility of the upstream unit regarding her choice of the mode of licensing of her interim knowledge, the controlling development unit is able to reduce the research unit's payoffs in such contingencies. This incentivises the research unit to expend costly e¤ort ex ante to generate more productive interim innovations. We show that such interim control rights can be renegotiation-proof.

Non-Committed Procurement under Intricate Uncertainty

This paper studies asymmetric first-price menu auctions in the procurement environment where the buyer does not commit to a decision rule and asymmetric sellers have interdependent costs and statistically affiliated signals. Sellers compete in bidding a menu of contracts, where a contract specifies a vector of characteristics and a payment required from the buyer for delivering these characteristics. The buyer does not commit ex-ante to a decision rule but rather upon observing all the menus offered by sellers chooses the best contract. This paper establishes the existence of a continuum of separating monotone equilibria in this game bounded above by the jointly ex-post efficient outcome and below by the jointly interim efficient outcome. It shows that the jointly ex-post efficient equilibrium outcome is the only ex-post renegotiation proof outcome and it is also ex-ante robust to all continuation equilibria.first-price menu auctions; procurement; interdependent values; monotone equilibria; joint ex-post efficiency; ex-post renegotiation-proofness; ex-ante robustness

Asymmetric First-Price Menu Auctions under Intricate Uncertainty

This paper studies asymmetric first-price menu auctions in the procurement environment where the buyer does not commit to a decision rule and asymmetric sellers have interdependent costs and statistically affiliated signals. Sellers compete in bidding a menu of contracts, where a contract specifies a vector of characteristics and a payment required from the buyer for delivering these characteristics. The buyer does not commit ex-ante to a decision rule but rather upon observing all the menus offered by sellers chooses the best contract. This paper establishes the existence of a continuum of separating monotone equilibria in this game bounded above by the jointly ex-post efficient outcome and below by the jointly interim efficient outcome. It shows that the jointly ex-post efficient equilibrium outcome is the only ex-post renegotiation proof outcome and it is also ex-ante robust to all continuation equilibriafirst-price menu auction, interdependent values, monotone equilibria, joint ex-post renegotiation-proofness, ex-ante robustness

On simple contracts, renegotiation under asymmetric information, and the hold-up problem

In this paper it is demonstrated that voluntary bargaining over a collective decision under asymmetric information may well lead to ex post efficiency if the default decision is non-trivial. It is argued that the default decision may be interpreted as a 'simple' contract that the parties have written ex ante. This result is used in order to show that simple unconditional contracts which are renegotiated may allow the hold-up problem to be solved, even if the parties' valuations are private information.Contract theory; Private information; Hold-up problem

Incomplete Information, Renegotiation, and Breach of Contract

Once a contract has been agreed by two agents, the problem of renegotiating breach under two-sided asymmetric information on the agents' outside options is equivalent to the problem of bilateral trade with uncertain gains. Thus, the theorem of Myerson and Satterthwaite (1983) implies the impossibility of efficient renegotiation. We also show that, assuming no renegotiation, the optimal breach mechanism in this setting corresponds to the expectation damage rule.Contract Breach

Optimal Income Taxation, Public-Goods Provision and Public-Sector Pricing: A Contribution to the Foundations of Public Economics

The paper develops an integrated model of optimal nonlinear income taxation, public-goods provision and pricing in a large economy. With asymmetric information about labour productivities and publicgoods preferences, the multidimensional mechanism design problem becomes tractable by requiring renegotiation proofness of the final allocation of private goods and admission tickets for excludable public goods. Under an affiliation assumption on the underlying distribution, optimal income taxation, public-goods provision and admission fees have the same qualitative properties as in unidimensional models. These properties are obtained for utilitarian welfare maximization and for a Ramsey-Boiteux formulation with interim participation constraints.Optimal Income Taxation, Public Goods, Public-Sector Pricing, Multidimensional Mechanism Design, Ramsey-Boiteux Pricing

Stock-Returns and Inflation in a Principal-Agent Economy

We study a monetary in which final goods sell on spot markets, while labor and dividends sell through contracts. Firms and workers confuse absolute and relative price changes: A positive price-level shock makes sellers think they are producing better goods than they really are. They split this apparent windfall with workers who get a higher real wage. Hence, unexpected inflation shifts real income from firms (the principals) to workers (the agents) and thereby lowers stock-returns.MONEY SUPPLY ; PRICES ; STOCKS

Mechanism Design with Renegotiation and Costly Messages

The paper studies a general model of hold-up in a setting encompassing the models of Segal (1999) and Che and Hausch (1999) among others. It is shown that if renegotiation is modelled as an infinite-horizon non-cooperative bargaining game then, with a simple initial contract, an efficient equilibrium will generally exist. The contract gives authority to one party to set the terms of trade and gives the other party a non-expiring option to trade at these terms. The difference from standard results arises because the existing contract ensures that the renegotiation game has multiple equilibria; the multiplicity of continuation equilibria can be used to enforce efficient investment