Optimal bid disclosure in patent license auctions under alternative modes of competition

- We consider license auctions under Bertrand/Cournot competition.
- Is it optimal to disclose the winning (or any other or no) bid?
- Firms bid high under Cournot to signal an aggressive output strategy, and conversely bid low to signal acquiescent pricing in Bertrand competition.
- Nevertheless, unconditionally disclosing the winning bid is never optimal.

The literature on patent license auctions in oligopoly assumed that the auctioneer reveals the winning bid and stressed that this gives firms an incentive to bid high in order to signal an aggressive output strategy in a downstream Cournot market game, and conversely bid low to signal acquiescent pricing in a Bertrand market game. The present paper examines the information revealed by publishing the winning or the losing or no bid, assuming an oligopoly with differentiated goods. We rank disclosure rules and find that it is not optimal for the innovator to disclose the winning bid, regardless of the mode of competition.