Intellectual Property Contracts: Theory and Evidence from Screenplay Sales

43 Pages Posted: 20 Jul 2016

See all articles by Milton Harris

Milton Harris

University of Chicago - Finance

S. Abraham Ravid

Yeshiva University - Syms School of Business

Ronald Sverdlove

New Jersey Institute of Technology, School of Management

Suman Basuroy

University of Oklahoma - Division of Marketing

Multiple version iconThere are 2 versions of this paper

Date Written: April 5, 2016

Abstract

This paper presents a model of contracts for the sale of intellectual property. 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. Our explanation is based on differences of opinion between buyers and sellers with regard to the seller’s competence. Unlike signaling models, our framework is founded on learning by buyers and sellers and on the sellers’ reputation building. Thus, we are able to derive predictions regarding the impact of the seller’s experience on the nature of the contract. In particular, our model predicts that more experienced sellers will be offered a 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. Some predictions of the theoretical models are supported by an analysis of screenplay sales data.

Keywords: Intellectual Property, Contracts, Movie Industry

JEL Classification: M52, K12

Suggested Citation

Harris, Milton and Ravid, S. Abraham and Sverdlove, Ronald and Basuroy, Suman, Intellectual Property Contracts: Theory and Evidence from Screenplay Sales (April 5, 2016). Available at SSRN: https://ssrn.com/abstract=2811482 or http://dx.doi.org/10.2139/ssrn.2811482

Milton Harris

University of Chicago - Finance ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
(773) 702-2549 (Phone)
(773) 753-8310 (Fax)

HOME PAGE: http://faculty.chicagobooth.edu/milton.harris/

S. Abraham Ravid

Yeshiva University - Syms School of Business ( email )

United States

Ronald Sverdlove (Contact Author)

New Jersey Institute of Technology, School of Management ( email )

United States
973-596-8569 (Phone)

Suman Basuroy

University of Oklahoma - Division of Marketing ( email )

United States

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