Repeated Interaction in Standard Setting

22 Pages Posted: 28 May 2020

See all articles by Pierre Larouche

Pierre Larouche

Université de Montréal; Center on Regulation in Europe (CERRE)

Florian Schuett

Tilburg Law and Economics Center (TILEC); Tilburg University - Tilburg University School of Economics and Management

Date Written: Fall 2019

Abstract

Standardization may allow the owners of standard‐essential patents to charge higher royalties than would have been negotiated ex ante. In practice, however, standard‐setting efforts are often characterized by repeated interaction and complementarities among technologies. These features give firms that contribute technology to standards both the ability and the incentive to avoid excessive royalties by threatening to exclude other technology contributors from future rounds of standardization if they charge royalties exceeding ‘fair, reasonable, and nondiscriminatory’ (FRAND) levels. We show that such an outcome can be sustained as a subgame‐perfect equilibrium of a repeated standard‐setting game and examine how the decision‐making rules of standard‐setting organizations (SSOs) affect the sustainability of FRAND royalties. Our analysis provides a novel justification for super‐majority requirements and other rules frequently adopted by SSOs.

Keywords: standardization, standard‐essential patents, FRAND royalties, royalty stacking, repeated games

Suggested Citation

Larouche, Pierre and Schuett, Florian, Repeated Interaction in Standard Setting (Fall 2019). Journal of Economics & Management Strategy, Vol. 28, Issue 3, pp. 488-509, 2019, Available at SSRN: https://ssrn.com/abstract=3607392 or http://dx.doi.org/10.1111/jems.12287

Pierre Larouche (Contact Author)

Université de Montréal ( email )

Montreal, Quebec H3T 1B9
Canada

Center on Regulation in Europe (CERRE) ( email )

Rue de l'Industrie 42
Brussels, 1040
Belgium

Florian Schuett

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
0
Abstract Views
130
PlumX Metrics