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Intellectual property disclosure as "threat"

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posted on 04.02.2010, 11:30 by Scott Baker, Pak Yee Lee, Claudio Mezzetti
This paper models the disclosure of knowledge as a "threat", useful in ensur- ing rms keep their commitments. We show that rms holding knowledge are better able to enforce agreements than rms that don t. In markets requir- ing innovation to make a product, disclosure is a more powerful threat than entry by the punishing rm alone. Occasionally, the punishing rm won t be able to innovate, making it impossible for it to enter the cheating rm s market and punish. The punishing rm, however, can through disclosure credibly ensure that one, if not many, rms enter the cheating rm s market. In the model, rms contract explicitly to exchange knowledge and tacitly to coordinate the introduction of innovations to the marketplace. We nd con- ditions under which rms can self-enforce both agreements. The enforcement conditions are weaker when (1) rms possess knowledge and (2) knowledge is easily transferable to other rms. The disclosure threat has implication for antitrust law generally, which are considered.



Dept. of Economics, University of Leicester

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Papers in Economics;07/8



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