Article ID Journal Published Year Pages File Type
8948002 International Journal of Industrial Organization 2018 48 Pages PDF
Abstract
Intellectual property and its protection is one of the most valuable assets for entrepreneurs and firms in the information economy. This article describes a relatively straightforward approach to measuring patent value with aggregate market data and the BLP model. We apply the approach to United States smartphones. The demand estimates and recovered marginal costs produce sensible simulations of equilibria prices and shares from several hypothetical patent infringements. In one simulation, the presence of near field communication on the dominant firm's flagship smartphone results in a 29% increase in profits. This estimate provides a starting point for establishing a reasonable royalty between the patent holder and the dominant firm in a hypothetical negotiation. This simulation also shows that law-abiding firms inside the market may be damaged by the dominant firm's patent infringing behavior.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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