Intellectual Property Contracts: Theory and Evidence from Screenplay Sales
University of Chicago - Finance
S. Abraham Ravid
Yeshiva University - Syms School of Business
University of Oklahoma - Division of Marketing
August 14, 2012
Chicago Booth Research Paper No. 13-04
Fama-Miller Working Paper
This paper presents a model of intellectual property contracts. We explain why many intellectual property contracts are contingent on eventual production or success, even without moral hazard on the part of risk-averse sellers. The explanation is based on differences of opinion between buyers and sellers, and reputation building through multiple transactions. Our model predicts that more reputable sellers will be offered a very different mix of cash and contingency payments than inexperienced sellers. We also discuss the probability of sales as a function of seller and product characteristics. The theoretical model is tested on a data base of screenplay contracts.
Number of Pages in PDF File: 59
Keywords: Intellectual property, contracting, divergence of beliefs, reputation, screenplays
JEL Classification: G30, L14
Date posted: March 12, 2012 ; Last revised: April 11, 2013
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