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Intellectual Property Contracts: Theory and Evidence from Screenplay Sales

59 Pages Posted: 12 Mar 2012 Last revised: 11 Apr 2013

Milton Harris

University of Chicago - Finance

S. Abraham Ravid

Yeshiva University - Syms School of Business

Suman Basuroy

University of Oklahoma - Division of Marketing

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Date Written: August 14, 2012

Abstract

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.

Keywords: Intellectual property, contracting, divergence of beliefs, reputation, screenplays

JEL Classification: G30, L14

Suggested Citation

Harris, Milton and Ravid, S. Abraham and Basuroy, Suman, Intellectual Property Contracts: Theory and Evidence from Screenplay Sales (August 14, 2012). Chicago Booth Research Paper No. 13-04; Fama-Miller Working Paper. Available at SSRN: https://ssrn.com/abstract=2017802 or http://dx.doi.org/10.2139/ssrn.2017802

Milton Harris

University of Chicago - Finance ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
(773) 702-2549 (Phone)
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HOME PAGE: http://faculty.chicagobooth.edu/milton.harris/

S. Abraham Ravid (Contact Author)

Yeshiva University - Syms School of Business ( email )

United States

Suman Basuroy

University of Oklahoma - Division of Marketing ( email )

United States

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