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Title: Intellectual property disclosure as "threat"
Authors: Baker, Scott
Lee, Pak Yee
Mezzetti, Claudio
First Published: Aug-2007
Publisher: Dept. of Economics, University of Leicester
Abstract: 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.
Series/Report no.: Papers in Economics
Type: Report
Appears in Collections:Reports, Dept. of Economics

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