A BEJTE Topics article.

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.

Submitted: October 1, 2003 · Accepted: April 30, 2004 · Published: May 13, 2004

Originally published in Topics in Theoretical Economics.

Recommended Citation

King, John T. (2004) "A Sequential Signaling Model of the Sale of an Invention to an Oligopolist," Topics in Theoretical Economics: Vol. 4 : Iss. 1, Article 4.
Available at: http://www.bepress.com/bejte/topics/vol4/iss1/art4