Working Paper: CEPR ID: DP15703
Authors: John Asker; Mariagiovanna Baccara; Sangmok Lee
Abstract: Auctioneers of patents are observed to allow joint bidding by coalitions of buyers. These auctions are distinguished from standard ones by the patents being non-rivalrous, but still excludable, in consumption--that is, they are club goods. This affects the way coalitional bidding impacts auction performance. We study the implications of coalitions of bidders on second-price (or equivalently, ascending-price) auctions. Although the formation of coalitions per se can benefit the seller, we show that stable coalition profiles tend to consist of excessively large coalitions, to the detriment of both auction revenue and social welfare. We show that limiting the permitted coalition size increases efficiency and confers benefits on the seller. Lastly, we compare the revenues generated by patent auctions and multi-license auctions, and we find that the latter are superior in a large class of environments.
Keywords: Intellectual Property; Asymmetric Auctions; Club Goods; Patents
JEL Codes: D44; D47; K1; L14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Coalition formation (D71) | Seller benefits (L85) |
| Larger coalitions (D79) | Decreased expected revenues for the seller (D49) |
| Limiting coalition sizes (D71) | Increased auction efficiency (D44) |
| Limiting coalition sizes (D71) | Benefits the seller (D44) |
| Limiting coalition sizes (D71) | Expected revenue for the seller reaches an upper bound (D44) |
| Auction format (D44) | Revenue outcomes for sellers (D44) |
| Multilicense auctions (D44) | Superior revenue generation compared to patent auctions (D44) |