Repeated Interaction in Standard Setting

Pierre Larouche, Florian Schütt

Research output: Working paperDiscussion paperOther research output

410 Downloads (Pure)

Abstract

As part of the standard-setting process, certain patents become essential.
This may allow the owners of these standard-essential patents to hold up implementers of the standard, who can no longer turn to substitute technologies. However, many real-world standards evolve over time, with several generations of standards succeeding each other. Thus, standard setting is a repeated game in which participants can condition future behavior on whether or not hold-up has occurred in the past. In the presence of complementarity between the different patents included in the standard, technology contributors have an incentive to discipline each other and keep royalties low, which can be
achieved by threatening to exclude contributors who have engaged in hold-up from future rounds of the process. We show that repeated standard setting can sustain FRAND royalties provided the probability that another round of standard setting will occur is sufficiently high. We also examine how the decision-making rules of standard-setting organizations affect the sustainability of FRAND royalties.
Original languageEnglish
Place of PublicationTilburg
PublisherDepartment of Economics
Number of pages36
Volume2016-010
Publication statusPublished - 9 Jun 2016

Publication series

NameTILEC Discussion Paper
Volume2016-010

Fingerprint

Repeated interaction
Royalty
Holdup
Patents
Technology standards
Repeated games
Substitute
Incentives
Owners
Sustainability
Decision making
Complementarity

Keywords

  • standard setting
  • repeated interaction
  • FRAND royalties

Cite this

Larouche, P., & Schütt, F. (2016). Repeated Interaction in Standard Setting. (TILEC Discussion Paper; Vol. 2016-010). Tilburg: Department of Economics.
Larouche, Pierre ; Schütt, Florian. / Repeated Interaction in Standard Setting. Tilburg : Department of Economics, 2016. (TILEC Discussion Paper).
@techreport{4a722c809eb347d8bea7b1057f1336dd,
title = "Repeated Interaction in Standard Setting",
abstract = "As part of the standard-setting process, certain patents become essential.This may allow the owners of these standard-essential patents to hold up implementers of the standard, who can no longer turn to substitute technologies. However, many real-world standards evolve over time, with several generations of standards succeeding each other. Thus, standard setting is a repeated game in which participants can condition future behavior on whether or not hold-up has occurred in the past. In the presence of complementarity between the different patents included in the standard, technology contributors have an incentive to discipline each other and keep royalties low, which can beachieved by threatening to exclude contributors who have engaged in hold-up from future rounds of the process. We show that repeated standard setting can sustain FRAND royalties provided the probability that another round of standard setting will occur is sufficiently high. We also examine how the decision-making rules of standard-setting organizations affect the sustainability of FRAND royalties.",
keywords = "standard setting, repeated interaction, FRAND royalties",
author = "Pierre Larouche and Florian Sch{\"u}tt",
year = "2016",
month = "6",
day = "9",
language = "English",
volume = "2016-010",
series = "TILEC Discussion Paper",
publisher = "Department of Economics",
type = "WorkingPaper",
institution = "Department of Economics",

}

Larouche, P & Schütt, F 2016 'Repeated Interaction in Standard Setting' TILEC Discussion Paper, vol. 2016-010, Department of Economics, Tilburg.

Repeated Interaction in Standard Setting. / Larouche, Pierre; Schütt, Florian.

Tilburg : Department of Economics, 2016. (TILEC Discussion Paper; Vol. 2016-010).

Research output: Working paperDiscussion paperOther research output

TY - UNPB

T1 - Repeated Interaction in Standard Setting

AU - Larouche, Pierre

AU - Schütt, Florian

PY - 2016/6/9

Y1 - 2016/6/9

N2 - As part of the standard-setting process, certain patents become essential.This may allow the owners of these standard-essential patents to hold up implementers of the standard, who can no longer turn to substitute technologies. However, many real-world standards evolve over time, with several generations of standards succeeding each other. Thus, standard setting is a repeated game in which participants can condition future behavior on whether or not hold-up has occurred in the past. In the presence of complementarity between the different patents included in the standard, technology contributors have an incentive to discipline each other and keep royalties low, which can beachieved by threatening to exclude contributors who have engaged in hold-up from future rounds of the process. We show that repeated standard setting can sustain FRAND royalties provided the probability that another round of standard setting will occur is sufficiently high. We also examine how the decision-making rules of standard-setting organizations affect the sustainability of FRAND royalties.

AB - As part of the standard-setting process, certain patents become essential.This may allow the owners of these standard-essential patents to hold up implementers of the standard, who can no longer turn to substitute technologies. However, many real-world standards evolve over time, with several generations of standards succeeding each other. Thus, standard setting is a repeated game in which participants can condition future behavior on whether or not hold-up has occurred in the past. In the presence of complementarity between the different patents included in the standard, technology contributors have an incentive to discipline each other and keep royalties low, which can beachieved by threatening to exclude contributors who have engaged in hold-up from future rounds of the process. We show that repeated standard setting can sustain FRAND royalties provided the probability that another round of standard setting will occur is sufficiently high. We also examine how the decision-making rules of standard-setting organizations affect the sustainability of FRAND royalties.

KW - standard setting

KW - repeated interaction

KW - FRAND royalties

M3 - Discussion paper

VL - 2016-010

T3 - TILEC Discussion Paper

BT - Repeated Interaction in Standard Setting

PB - Department of Economics

CY - Tilburg

ER -

Larouche P, Schütt F. Repeated Interaction in Standard Setting. Tilburg: Department of Economics. 2016 Jun 9. (TILEC Discussion Paper).