Events at CERGE-EI

Prof. Elmar Wolfstetter

Humboldt University, Berlin, Germany

Authors: Cuihong Fan, Byoung Heon Jun, and Elmar G. Wolfstetter

Abstract: The literature on license auctions in oligopoly assumed that the auctioneer reveals the winning bid prior to the oligopoly game and stressed that this gives firms an incentive to signal strength through their bids, to the benefit of the innovator. In the present paper we examine whether revealing the winning bid is optimal. We consider three disclosure rules: full, partial, and no disclosure of bids, which are closely linked with standard auction formats. We show that more information disclosure increases the total surplus divided between firms and the innovator. More information disclosure also increases bidders’ payoff. However, no disclosure maximizes the innovator’s expected revenue.

Keywords: Auctions, innovation, licensing, information sharing.

JEL Classifications: D21, D43, D44, D45

Full Text:  “Optimal Information Disclosure in License Auctions”