Price Commitments in Standard Setting under Asymmetric Information

Jan Boone, Florian Schuett, E. Tarantino

Research output: Working paperDiscussion paperOther research output

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Abstract

Many observers have voiced concerns that standards create essentiality and thus monopoly power for the holders of standard essential patents (SEPs). To address these concerns, Lerner and Tirole (2015) advocate structured price commitments, whereby SEP holders commit to the maximum royalty they would charge were their technology included in the standard. We consider a setting in which a technology implementer holds private information about demand. In this setting, price commitments increase efficiency not only by curbing SEP holders' market power, but also by alleviating distortions in the design of the royalty scheme. In the absence of price commitments, the SEP holder distorts the implementer's output downward in the low-demand state to reduce the high-demand type's information rent. Price commitments reduce this distortion.
Original languageEnglish
Place of PublicationTilburg
PublisherCentER, Center for Economic Research
Number of pages17
Volume2019-009
Publication statusPublished - 21 Mar 2019

Publication series

NameCentER Discussion Paper
Volume2019-009

Fingerprint

Asymmetric information
Patents
Royalty
Market power
Monopoly power
Price setting
Information rent
Private information
Observer
Charge

Keywords

  • standardization
  • standard-essential patents
  • price commitments
  • Information asymmetry

Cite this

Boone, J., Schuett, F., & Tarantino, E. (2019). Price Commitments in Standard Setting under Asymmetric Information. (CentER Discussion Paper; Vol. 2019-009). Tilburg: CentER, Center for Economic Research.
Boone, Jan ; Schuett, Florian ; Tarantino, E. / Price Commitments in Standard Setting under Asymmetric Information. Tilburg : CentER, Center for Economic Research, 2019. (CentER Discussion Paper).
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Boone, J, Schuett, F & Tarantino, E 2019 'Price Commitments in Standard Setting under Asymmetric Information' CentER Discussion Paper, vol. 2019-009, CentER, Center for Economic Research, Tilburg.

Price Commitments in Standard Setting under Asymmetric Information. / Boone, Jan; Schuett, Florian; Tarantino, E.

Tilburg : CentER, Center for Economic Research, 2019. (CentER Discussion Paper; Vol. 2019-009).

Research output: Working paperDiscussion paperOther research output

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Boone J, Schuett F, Tarantino E. Price Commitments in Standard Setting under Asymmetric Information. Tilburg: CentER, Center for Economic Research. 2019 Mar 21. (CentER Discussion Paper).