Abstract
I consider the problem of an independent inventor attempting to sell a cost-reducing innovation in an oligopoly setting. There are N potential buyers and the inventor possesses private information regarding the value of the invention. A revealing equilibrium is characterized in which the inventor's demand signals the value of the invention to each potential buyer. I find that both the inventor's demand and his continuation value increase as the number of firms left in the sequence of potential buyers increases. I also find that a firm's probability of rejecting the inventor's demand is higher the sooner the firm is approached in the sequence.
| Original language | American English |
|---|---|
| Journal | The B.E. Journal of Theoretical Economics: Topics |
| Volume | 4 |
| DOIs | |
| State | Published - May 13 2004 |
Disciplines
- Business
- Economics
Keywords
- Invention
- Oligopolist
- Sale
- Sequential signaling model