R E S E A R C H
Work in progress
Pay-for-Delay with Settlement Externalities
Emil Palikot and Matias Pietola
This paper studies settlements between an incumbent patent holder and multiple potential entrants to the market in the shadow of patent litigation. We show that there exists litigation in equilibrium for patents of intermediate strength, whereas sufficiently weak or strong patents are not taken to court. The incumbent uses divide and conquer strategies by paying to delay some entrants while accommodating the others, either through licensing or litigation. We identify a new source of sequentiality in equilibrium entry to markets governed by patents. Settlement externalities between the entrants are the driving force behind our results: when one more entrant is delayed from entering the market, there is less competition and litigation threat from the other entrants is increased. Our results bring new important insights for the hotly debated topic of pay-for-delay agreements witnessed in the pharmaceutical industry and sanctioned by antitrust authorities both in the US and Europe.
Work in progress
Inverse Pricing in Two-Sided Markets
This article derives a robust pricing mechanism for two-sided markets, when users on each side privately know their network benefits. The mechanism is optimal in the class of Bayesian incentive compatible and interim individually rational mechanisms, allowing the platform to do better than with posted prices (Rochet and Tirole, 2003). The mechanism is robust in the sense of dominant strategy incentive compatibility and ex post individual rationality.