Discussion paper

DP13173 Verifying High Quality: Entry for Sale

When and how do entrepreneurs sell their inventions? To address this issue, we develop an endogenous entry-sale asymmetric information oligopoly model. We show that low quality inventions are sold directly or used for own entry. Inventors who sell post-entry use entry to credibly reveal information on quality. Incumbents are then willing to pay high prices for high-quality inventions to preempt rivals from obtaining them. Using Swedish data on patents granted to small firms and individuals, we find evidence that high-quality inventions are sold under preemptive bidding competition, post entry.


Persson, L, P Norbäck and R Svensson (2018), ‘DP13173 Verifying High Quality: Entry for Sale‘, CEPR Discussion Paper No. 13173. CEPR Press, Paris & London. https://cepr.org/publications/dp13173