Li Guo 郭力

We study the division of total surplus between buyers and sellers in patent transactions and its impact on the development of ideas. Using comprehensive data on U.S. patent transactions from 1975 to 2012, we estimate gains from trade for both parties based on how their stock prices react to patent transaction news. Additionally, we quantify bargaining shares as the proportion of their gains from trade within the total surplus. We find that firms’ bargaining shares are heterogeneous and proportional to their size relative to their counterparties, starkly contrasting to the conventional assumption of homogeneous and fixed bargaining shares in the literature. We further show that the relationship between relative size and bargaining share is stronger among firms with weaker corporate governance. To study the implications of these findings, we develop a model with size-dependent bargaining power in the patent market. Our analysis shows that the substantial bargaining power of large firms diminishes the incentive for innovation among smaller firms.

We study a model in which a sender allocates limited treatment to agents with heterogeneous quality and later recommends selected agents to a receiver, seeking to maximize the number of agents accepted by the receiver. All agents value treatment, which improves agents’ quality, but treatment must be allocated before the sender observes agents’ initial quality; recommendation occurs only after quality is learned. A natural benchmark is to design the two instruments separately: allocate treatment randomly first, and then recommend agents from the top down afterward. Our main result shows that the sender can do strictly better by coordinating treatment allocation with recommendations. In the optimal joint mechanism, treatment is non-monotone in quality: an intermediate group has a lower treatment probability than both higher- and lower-quality agents, but is compensated with a guaranteed recommendation when treatment is realized. We provide an implementation through contracts that induce self-selection and discuss applications to education, industrial policy, and startup incubation.