2009 42nd Hawaii International Conference on System Sciences, 2009
ABSTRACT Investments in innovative technologies face uncertainties and are often made in stages. ... more ABSTRACT Investments in innovative technologies face uncertainties and are often made in stages. We develop a multi-period game-theoretical model where the potential of a new technology is uncertain, and players involved can only learn about its true potential over time. Players involved include a decision maker and a project manager (or manager in short). The manager gains knowledge through direct access to the project and updates his beliefs about the potential of the new technology accordingly, while the decision maker learns about the new technology from knowledge transferred from the manager. We show that the manager with misaligned incentives may transfer his knowledge untruthfully and distort the learning process of the decision maker. As a result, the decision maker will discount the manager's report due to expectations of possible misreporting, leading to inefficient investment decisions. We also propose solutions to this problem.
Online healthcare communities often experience high churn rates. Our study investigates this phen... more Online healthcare communities often experience high churn rates. Our study investigates this phenomenon by integrating the concepts of social stigma, psychological capital, and social identity. Based on survey data from an online community serving lymphoma patients, we found that 1) users’ positive social identity increased their participation and recommendation intentions through enhanced psychological capital empowered by the online community; 2) stigmatized social identity hampered participation and recommendation intentions through decreased psychological capital; 3) users’ personal identity moderated the mediated impacts of positive and stigmatized social identities on participation and recommendation intentions through psychological capital, and 4) participation intention positively influenced recommendation intention. Our study applied the identity theory with a novel approach and offered insights on the development and management of online healthcare communities for both res...
Fee-based membership free shipping is an important shipping fee schedule in E-Commerce. This pape... more Fee-based membership free shipping is an important shipping fee schedule in E-Commerce. This paper studies how the membership free shipping (MFS) program affects firm competition and how to set the membership fee optimally. We find MFS relaxes price competition. The firm that adopts MFS has a higher pricing band than the other firm. Both firms have positive profits, strictly better than when membership free shipping is not a choice. The MFS firm subsidizes subscribers, so the subscribers always have a lower average total cost (price plus shipping fee) per order. The MFS firm could still earn a higher profit than the other firm, although the MFS firm’s profit excluding membership fee is lower than that of the other firm. The paper also characterizes how to set the optimal membership fee and shows that an intermediate percentage of subscribers is optimal for the firm that adopts the free shipping program.
Gamification has been widely employed in online learning systems to enhance users’ gratification ... more Gamification has been widely employed in online learning systems to enhance users’ gratification and to retain them from dropping out. Compared with core learning modules, gamification modules provide more hedonic value, which increases user engagement in the short term but these modules may also cause distraction and impede learning performance. Thus, time management and self-control are crucial for users of online learning systems. Our study proposes that users tend to treat on-the-hour time points (i.e., the strike of the traditional clock) as temporal cues, which substantially influence their interactions with the core learning versus gamification modules, as well as both the instrumental and experiential outcomes of these interactions. Through a set of three multi-method studies that focus on the sharp clock-striking time points, we find that i) users are more (versus less) likely to begin using core learning modules (versus gamification modules) after clock-striking time points; ii) beginning the use of core learning modules at clock-striking time points has a positive relationship with learning persistence and learning performance; iii) beginning the use of gamification modules at clock-striking time points results in a lower level of perceived enjoyment than beginning at random time points. Further, the results of studies 2 and 3 indicate that clock-striking time points can activate users’ implemental mindset, which supports them in building a longer learning persistence and achieving better learning performance. Our findings add to the design of online learning systems by understanding the mindset effects of temporal cues in user-system interactions of gamified learning systems, based on which notification and reminder systems can be implemented to further facilitate the effectiveness of online learning.
Communications of the Association for Information Systems, 2015
We gathered information about junior faculty research productivity in the information systems (IS... more We gathered information about junior faculty research productivity in the information systems (IS) field in North America and in a set of top Asian schools. Our work complements prior studies on IS faculty research productivity in several ways. First, we focused on junior faculty research productivity, which refers to publication records of current tenure-track assistant professors. To provide statistics with a greater coverage of IS researchers, we also collected information about the pre-tenure publication records of associate professors. Second, we covered IS researchers who obtained their doctoral degrees in or after the year 2000 and counted their publications until 2013 to provide the most up-to-date information about junior faculty research productivity. Third, we collected information about IS researchers' publications in leading IS journals (based on the AIS Senior Scholar basket of journals) and in elite broader business journals (based on the Financial Times list and UT Dallas list). Finally, examining junior faculty research productivity in the IS field in Asian schools and in North America enabled us to provide recommendations for promotion and tenure standards for Asian schools in light of the research productivity and tenure standards in North America.
Crowdsourcing platforms specialize in hosting open contests and usually charge a percentage of th... more Crowdsourcing platforms specialize in hosting open contests and usually charge a percentage of the prizes as service fees. While prior research has studied the design of contests and the behavior of contestants, the strategy of a crowdsourcing platform has remained largely unexplored. We develop a game-theoretic model of crowdsourcing services and find the optimal fee structure of a platform. We prove for the case of a single contest that the service fees should be an increasing concave function of task prizes and show that this also holds true for the case of multiple contests. We further find that for a platform with many users and tasks, there is an optimal ratio of the number of contestants and contests. Our research is one of the first to focus on the strategies of crowdsourcing platforms and our results have interesting managerial implications. We show that the linear fee schedule widely used in practice is not optimal and that a platform is better off lowering the fee rate for contests with high prizes. It is also in the best interests of a platform to develop both sides of the crowdsourcing market proportionally and keep the ratio of contestants and contests at the optimal level. [web URL: http://onlinelibrary.wiley.com/doi/10.1111/deci.12201/full]
2014 47th Hawaii International Conference on System Sciences, 2014
ABSTRACT Firms increasingly use enterprise social media for knowledge activities such as knowledg... more ABSTRACT Firms increasingly use enterprise social media for knowledge activities such as knowledge transfer. In an enterprise setting, it is often the case that the receiver of transferred knowledge will make decisions that have ramifications for the knowledge sender. Using a game-theoretic approach, this paper studies the consequences when a knowledge sender has incentive to transfer knowledge strategically and the mechanisms that can be designed to deter such strategic behavior. We find that knowledge transfer may fail when senders transfer knowledge strategically, but knowledge receivers can design a probabilistic auditing mechanism to ensure truthful knowledge transfer. Our results suggest that a knowledge receiver's own knowledge can facilitate truthful knowledge transfer, but the receiver should not let her own knowledge be known by the sender. This research contributes to the knowledge management literature, and has interesting implications for the adoption and use of enterprise social media.
2015 International Conference on Logistics, Informatics and Service Sciences (LISS), 2015
This paper studies optimal fee schedules of crowdsourcing services. The paper finds that service ... more This paper studies optimal fee schedules of crowdsourcing services. The paper finds that service fees should be an increasing concave function of task prizes. This result implies that optimal service fee rates, measured as the ratios of fees to prizes, decrease with task prizes. The paper shows that low-type crowdsourcing contest sponsors might be priced out of the market under the optimal fee schedule. The paper also finds that crowdsourcing websites should charge higher service fees for hosting consumer-contest type crowdsourcing contests than for research-tournament type crowdsourcing contests.
Open source software (OSS), and open innovation in general, has received increasing attention fro... more Open source software (OSS), and open innovation in general, has received increasing attention from both researchers and practitioners. Based on recent literature on social preference from behavior economics, we propose a finite-horizon dynamic model to study the interactions between OSS developers who are either purely self-interested or conditional cooperators. We find that selfinterested developers who are predicted to free ride under conventional analysis may contribute to a public good, and the existence of purely these developers may, under certain conditions, even benefit the provision of a public good. We further analyze how code architecture affects OSS development outcome and propose that a higher level of code modularity leads to more code contributions overall, due to the strategic behavior of self-interested developers. However, a right mix of the two types of developers plays a critical role for modular design to make an impact. The findings bear important theoretical as well as practical implications and provide guidelines for OSS development and the collective innovation in general.
ABSTRACT An intelligence and security information system must meet the challenge of processing va... more ABSTRACT An intelligence and security information system must meet the challenge of processing vast volume of information that come from diverse sources with distinctive incentives and credibility and providing actionable intelligence based on the processed information. We focus on solving the problem of analyzing the incentives and credibility of information sources and propose an information economics perspective to investigate the incentives of the information providers in the intelligence and security domain.
Thesis (Ph. D.)--University of Texas at Austin, 2002. Vita. Includes bibliographical references. ... more Thesis (Ph. D.)--University of Texas at Austin, 2002. Vita. Includes bibliographical references. Requires PDF file reader.
A model is developed to study how the code architecture affects open source software (OSS) develo... more A model is developed to study how the code architecture affects open source software (OSS) development. The model incorporates the resource heterogeneity and diverse motivations of various groups of programmers as well as the strategic interactions among them. We argue that the major advantage brought by a modular architecture of OSS code base is that it reduces both the cognitive cost and the coordination cost associated with OSS development, thus allowing programmers more easily to locate, manage, and contribute to the code base. We show that in OSS development, while modular architecture can potentially increase code contribution, it does not necessarily reduce free-riding; in fact it may well increase free-riding due to the strategic interactions among the programmers. We further empirically test the predictions using the SourceForge OSS development data, and the results confirm our theoretical predictions. The findings bear important theoretical as well as practical implications and provide guidelines for practitioners of OSS development and the collective innovation in general.
Performance of firms in network industries depends much on the creation of standards around their... more Performance of firms in network industries depends much on the creation of standards around their technologies, products, or services. Establishing standards require committing large, irreversible, upfront investment while demand remains uncertain. This paper focuses on the real options involved in this investment problem. The conventional real options literature recognizes the waiting-to-invest option where firms could avoid regret by waiting until at least some of the uncertainty is resolved. However, early commitment of network investment has vital strategic effects on shaping the expectations of potential users and inducing them to adopt the standard, thus creating a strategic growth option. We develop a simple model to explore the tradeoff between this strategic growth option against the waiting-to-invest option. We solve for the optimal investment rules and find that for high uncertainty, the strategic growth option often dominates the waiting-to-invest option and reduces the investment threshold. Furthermore, the intensity of network effect enhances the strategic growth option. Our results have important implications to the strategies of firms in technology industries.
Many key industries (e.g., biomedical, pharmaceuticals, telecommunications, and information techn... more Many key industries (e.g., biomedical, pharmaceuticals, telecommunications, and information technologies) are characterized by cumulative innovations, where the introduction of a new product or service often requires many complementary technologies. When these technologies are protected by intellectual property rights owned by many firms, patent thickets exist, which researchers have argued may hinder the development of cumulative innovations. Specifically, patent thickets may lead to excessive royalty burdens for potential licensees, which is called ''royalty stacking,'' and if such costs are passed on to consumers, prices of products based on cumulative technologies will be driven up, dubbed as ''double marginalization.'' The literature, however, does not address these issues under different forms of licensing contracts. This article develops a game-theoretic model where a downstream firm seeks to license N patents that read on its product from upstream firms. It discusses a variety of licensing forms widely used in practice and attempts to discover whether royalty stacking and double marginalization occur under these forms of licenses. It also studies the impact of bargaining power between parties. It is found that when patent ownership becomes more fragmented, neither royalty stacking nor double marginalization occurs under profit-based royalty, fixed fee, and hybrid licenses. Such problems occur only under pure quantity-based or pure revenue-based royalty licenses when the downstream firm's bargaining power is low. It is also shown that no matter how fragmented the ownership structure of patent is, hybrid licenses consisting of a fixed fee and a quantity-or revenue-based royalty rate lead to the same market outcomes as a fully integrated firm that owns all the patents and the downstream market. This article has interesting implications for both research and practice. First, the results show that even under the same patent ownership structure, different forms of licenses lead to quite different market outcomes. Therefore, it is suggested that firms and policy makers pay more attention to contractual forms of licenses when trying to minimize the negative impact of patent thickets. Second, the extant literature has largely assumed that quantity-based royalties are used, where double marginalization is the most severe. In practice, revenue-based royalties are most common, under which double marginalization is much milder. Third, the results show that patent pools can be most effective in mitigating royalty stacking and double marginalization when quantity-based or revenue-based royalties are the sole or primary payment form, especially when downstream firms have low bargaining power.
ABSTRACT Abstract: Because uncertainties around innovative technologies resolve over time, invest... more ABSTRACT Abstract: Because uncertainties around innovative technologies resolve over time, investments in such technologies are often made in stages so that organizations can use the knowledge gained from earlier stages to decide the next step. Previous studies usually assume that once some uncertainty is resolved, it becomes common knowledge within the investing organization. We develop a game-theoretical model to study how different parties within an organization gain and transfer knowledge about new technologies while investing in these technologies, and how the learning process may affect the investment decisions. We show that managers with incentives misaligned with the organization may transfer their knowledge untruthfully and distort the learning process of decision makers. Such behavior may lead to inefficient investment decisions. We also study the effect of uncertainty on the misreporting problem and the investment decisions. Mechanisms to mitigate or prevent untruthful knowledge transfer are also proposed. In particular, powerful incentive schemes may alleviate, but not prevent, the misreporting problem; punishing managers who are caught misreporting may deter the misreporting behavior, but in practice such mechanisms are difficult to implement.
2009 42nd Hawaii International Conference on System Sciences, 2009
ABSTRACT Investments in innovative technologies face uncertainties and are often made in stages. ... more ABSTRACT Investments in innovative technologies face uncertainties and are often made in stages. We develop a multi-period game-theoretical model where the potential of a new technology is uncertain, and players involved can only learn about its true potential over time. Players involved include a decision maker and a project manager (or manager in short). The manager gains knowledge through direct access to the project and updates his beliefs about the potential of the new technology accordingly, while the decision maker learns about the new technology from knowledge transferred from the manager. We show that the manager with misaligned incentives may transfer his knowledge untruthfully and distort the learning process of the decision maker. As a result, the decision maker will discount the manager's report due to expectations of possible misreporting, leading to inefficient investment decisions. We also propose solutions to this problem.
Online healthcare communities often experience high churn rates. Our study investigates this phen... more Online healthcare communities often experience high churn rates. Our study investigates this phenomenon by integrating the concepts of social stigma, psychological capital, and social identity. Based on survey data from an online community serving lymphoma patients, we found that 1) users’ positive social identity increased their participation and recommendation intentions through enhanced psychological capital empowered by the online community; 2) stigmatized social identity hampered participation and recommendation intentions through decreased psychological capital; 3) users’ personal identity moderated the mediated impacts of positive and stigmatized social identities on participation and recommendation intentions through psychological capital, and 4) participation intention positively influenced recommendation intention. Our study applied the identity theory with a novel approach and offered insights on the development and management of online healthcare communities for both res...
Fee-based membership free shipping is an important shipping fee schedule in E-Commerce. This pape... more Fee-based membership free shipping is an important shipping fee schedule in E-Commerce. This paper studies how the membership free shipping (MFS) program affects firm competition and how to set the membership fee optimally. We find MFS relaxes price competition. The firm that adopts MFS has a higher pricing band than the other firm. Both firms have positive profits, strictly better than when membership free shipping is not a choice. The MFS firm subsidizes subscribers, so the subscribers always have a lower average total cost (price plus shipping fee) per order. The MFS firm could still earn a higher profit than the other firm, although the MFS firm’s profit excluding membership fee is lower than that of the other firm. The paper also characterizes how to set the optimal membership fee and shows that an intermediate percentage of subscribers is optimal for the firm that adopts the free shipping program.
Gamification has been widely employed in online learning systems to enhance users’ gratification ... more Gamification has been widely employed in online learning systems to enhance users’ gratification and to retain them from dropping out. Compared with core learning modules, gamification modules provide more hedonic value, which increases user engagement in the short term but these modules may also cause distraction and impede learning performance. Thus, time management and self-control are crucial for users of online learning systems. Our study proposes that users tend to treat on-the-hour time points (i.e., the strike of the traditional clock) as temporal cues, which substantially influence their interactions with the core learning versus gamification modules, as well as both the instrumental and experiential outcomes of these interactions. Through a set of three multi-method studies that focus on the sharp clock-striking time points, we find that i) users are more (versus less) likely to begin using core learning modules (versus gamification modules) after clock-striking time points; ii) beginning the use of core learning modules at clock-striking time points has a positive relationship with learning persistence and learning performance; iii) beginning the use of gamification modules at clock-striking time points results in a lower level of perceived enjoyment than beginning at random time points. Further, the results of studies 2 and 3 indicate that clock-striking time points can activate users’ implemental mindset, which supports them in building a longer learning persistence and achieving better learning performance. Our findings add to the design of online learning systems by understanding the mindset effects of temporal cues in user-system interactions of gamified learning systems, based on which notification and reminder systems can be implemented to further facilitate the effectiveness of online learning.
Communications of the Association for Information Systems, 2015
We gathered information about junior faculty research productivity in the information systems (IS... more We gathered information about junior faculty research productivity in the information systems (IS) field in North America and in a set of top Asian schools. Our work complements prior studies on IS faculty research productivity in several ways. First, we focused on junior faculty research productivity, which refers to publication records of current tenure-track assistant professors. To provide statistics with a greater coverage of IS researchers, we also collected information about the pre-tenure publication records of associate professors. Second, we covered IS researchers who obtained their doctoral degrees in or after the year 2000 and counted their publications until 2013 to provide the most up-to-date information about junior faculty research productivity. Third, we collected information about IS researchers' publications in leading IS journals (based on the AIS Senior Scholar basket of journals) and in elite broader business journals (based on the Financial Times list and UT Dallas list). Finally, examining junior faculty research productivity in the IS field in Asian schools and in North America enabled us to provide recommendations for promotion and tenure standards for Asian schools in light of the research productivity and tenure standards in North America.
Crowdsourcing platforms specialize in hosting open contests and usually charge a percentage of th... more Crowdsourcing platforms specialize in hosting open contests and usually charge a percentage of the prizes as service fees. While prior research has studied the design of contests and the behavior of contestants, the strategy of a crowdsourcing platform has remained largely unexplored. We develop a game-theoretic model of crowdsourcing services and find the optimal fee structure of a platform. We prove for the case of a single contest that the service fees should be an increasing concave function of task prizes and show that this also holds true for the case of multiple contests. We further find that for a platform with many users and tasks, there is an optimal ratio of the number of contestants and contests. Our research is one of the first to focus on the strategies of crowdsourcing platforms and our results have interesting managerial implications. We show that the linear fee schedule widely used in practice is not optimal and that a platform is better off lowering the fee rate for contests with high prizes. It is also in the best interests of a platform to develop both sides of the crowdsourcing market proportionally and keep the ratio of contestants and contests at the optimal level. [web URL: http://onlinelibrary.wiley.com/doi/10.1111/deci.12201/full]
2014 47th Hawaii International Conference on System Sciences, 2014
ABSTRACT Firms increasingly use enterprise social media for knowledge activities such as knowledg... more ABSTRACT Firms increasingly use enterprise social media for knowledge activities such as knowledge transfer. In an enterprise setting, it is often the case that the receiver of transferred knowledge will make decisions that have ramifications for the knowledge sender. Using a game-theoretic approach, this paper studies the consequences when a knowledge sender has incentive to transfer knowledge strategically and the mechanisms that can be designed to deter such strategic behavior. We find that knowledge transfer may fail when senders transfer knowledge strategically, but knowledge receivers can design a probabilistic auditing mechanism to ensure truthful knowledge transfer. Our results suggest that a knowledge receiver's own knowledge can facilitate truthful knowledge transfer, but the receiver should not let her own knowledge be known by the sender. This research contributes to the knowledge management literature, and has interesting implications for the adoption and use of enterprise social media.
2015 International Conference on Logistics, Informatics and Service Sciences (LISS), 2015
This paper studies optimal fee schedules of crowdsourcing services. The paper finds that service ... more This paper studies optimal fee schedules of crowdsourcing services. The paper finds that service fees should be an increasing concave function of task prizes. This result implies that optimal service fee rates, measured as the ratios of fees to prizes, decrease with task prizes. The paper shows that low-type crowdsourcing contest sponsors might be priced out of the market under the optimal fee schedule. The paper also finds that crowdsourcing websites should charge higher service fees for hosting consumer-contest type crowdsourcing contests than for research-tournament type crowdsourcing contests.
Open source software (OSS), and open innovation in general, has received increasing attention fro... more Open source software (OSS), and open innovation in general, has received increasing attention from both researchers and practitioners. Based on recent literature on social preference from behavior economics, we propose a finite-horizon dynamic model to study the interactions between OSS developers who are either purely self-interested or conditional cooperators. We find that selfinterested developers who are predicted to free ride under conventional analysis may contribute to a public good, and the existence of purely these developers may, under certain conditions, even benefit the provision of a public good. We further analyze how code architecture affects OSS development outcome and propose that a higher level of code modularity leads to more code contributions overall, due to the strategic behavior of self-interested developers. However, a right mix of the two types of developers plays a critical role for modular design to make an impact. The findings bear important theoretical as well as practical implications and provide guidelines for OSS development and the collective innovation in general.
ABSTRACT An intelligence and security information system must meet the challenge of processing va... more ABSTRACT An intelligence and security information system must meet the challenge of processing vast volume of information that come from diverse sources with distinctive incentives and credibility and providing actionable intelligence based on the processed information. We focus on solving the problem of analyzing the incentives and credibility of information sources and propose an information economics perspective to investigate the incentives of the information providers in the intelligence and security domain.
Thesis (Ph. D.)--University of Texas at Austin, 2002. Vita. Includes bibliographical references. ... more Thesis (Ph. D.)--University of Texas at Austin, 2002. Vita. Includes bibliographical references. Requires PDF file reader.
A model is developed to study how the code architecture affects open source software (OSS) develo... more A model is developed to study how the code architecture affects open source software (OSS) development. The model incorporates the resource heterogeneity and diverse motivations of various groups of programmers as well as the strategic interactions among them. We argue that the major advantage brought by a modular architecture of OSS code base is that it reduces both the cognitive cost and the coordination cost associated with OSS development, thus allowing programmers more easily to locate, manage, and contribute to the code base. We show that in OSS development, while modular architecture can potentially increase code contribution, it does not necessarily reduce free-riding; in fact it may well increase free-riding due to the strategic interactions among the programmers. We further empirically test the predictions using the SourceForge OSS development data, and the results confirm our theoretical predictions. The findings bear important theoretical as well as practical implications and provide guidelines for practitioners of OSS development and the collective innovation in general.
Performance of firms in network industries depends much on the creation of standards around their... more Performance of firms in network industries depends much on the creation of standards around their technologies, products, or services. Establishing standards require committing large, irreversible, upfront investment while demand remains uncertain. This paper focuses on the real options involved in this investment problem. The conventional real options literature recognizes the waiting-to-invest option where firms could avoid regret by waiting until at least some of the uncertainty is resolved. However, early commitment of network investment has vital strategic effects on shaping the expectations of potential users and inducing them to adopt the standard, thus creating a strategic growth option. We develop a simple model to explore the tradeoff between this strategic growth option against the waiting-to-invest option. We solve for the optimal investment rules and find that for high uncertainty, the strategic growth option often dominates the waiting-to-invest option and reduces the investment threshold. Furthermore, the intensity of network effect enhances the strategic growth option. Our results have important implications to the strategies of firms in technology industries.
Many key industries (e.g., biomedical, pharmaceuticals, telecommunications, and information techn... more Many key industries (e.g., biomedical, pharmaceuticals, telecommunications, and information technologies) are characterized by cumulative innovations, where the introduction of a new product or service often requires many complementary technologies. When these technologies are protected by intellectual property rights owned by many firms, patent thickets exist, which researchers have argued may hinder the development of cumulative innovations. Specifically, patent thickets may lead to excessive royalty burdens for potential licensees, which is called ''royalty stacking,'' and if such costs are passed on to consumers, prices of products based on cumulative technologies will be driven up, dubbed as ''double marginalization.'' The literature, however, does not address these issues under different forms of licensing contracts. This article develops a game-theoretic model where a downstream firm seeks to license N patents that read on its product from upstream firms. It discusses a variety of licensing forms widely used in practice and attempts to discover whether royalty stacking and double marginalization occur under these forms of licenses. It also studies the impact of bargaining power between parties. It is found that when patent ownership becomes more fragmented, neither royalty stacking nor double marginalization occurs under profit-based royalty, fixed fee, and hybrid licenses. Such problems occur only under pure quantity-based or pure revenue-based royalty licenses when the downstream firm's bargaining power is low. It is also shown that no matter how fragmented the ownership structure of patent is, hybrid licenses consisting of a fixed fee and a quantity-or revenue-based royalty rate lead to the same market outcomes as a fully integrated firm that owns all the patents and the downstream market. This article has interesting implications for both research and practice. First, the results show that even under the same patent ownership structure, different forms of licenses lead to quite different market outcomes. Therefore, it is suggested that firms and policy makers pay more attention to contractual forms of licenses when trying to minimize the negative impact of patent thickets. Second, the extant literature has largely assumed that quantity-based royalties are used, where double marginalization is the most severe. In practice, revenue-based royalties are most common, under which double marginalization is much milder. Third, the results show that patent pools can be most effective in mitigating royalty stacking and double marginalization when quantity-based or revenue-based royalties are the sole or primary payment form, especially when downstream firms have low bargaining power.
ABSTRACT Abstract: Because uncertainties around innovative technologies resolve over time, invest... more ABSTRACT Abstract: Because uncertainties around innovative technologies resolve over time, investments in such technologies are often made in stages so that organizations can use the knowledge gained from earlier stages to decide the next step. Previous studies usually assume that once some uncertainty is resolved, it becomes common knowledge within the investing organization. We develop a game-theoretical model to study how different parties within an organization gain and transfer knowledge about new technologies while investing in these technologies, and how the learning process may affect the investment decisions. We show that managers with incentives misaligned with the organization may transfer their knowledge untruthfully and distort the learning process of decision makers. Such behavior may lead to inefficient investment decisions. We also study the effect of uncertainty on the misreporting problem and the investment decisions. Mechanisms to mitigate or prevent untruthful knowledge transfer are also proposed. In particular, powerful incentive schemes may alleviate, but not prevent, the misreporting problem; punishing managers who are caught misreporting may deter the misreporting behavior, but in practice such mechanisms are difficult to implement.
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