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Abstract
There has been a sharp increase in the number of patented fruit varieties developed by breeding
programs at public universities in the United States. We developed an experiment to examine
the revenue stream to universities from the licensing of these varietal innovations. In the
experiment we asked subjects to bid for access for a patented input that would be used to
manufacture a differentiated product; treatments were employed to solicit bids that were financed
by fees, royalties, and a combination of the two mechanisms under exclusive and non-exclusive
contracts. All treatments also considered the impact of demand uncertainty for the product that
used the patented input. Our empirical results suggest that innovator revenues are greatest when
royalties are used alone. In the absence of demand uncertainty, innovator revenues are greatest
with an exclusive contract, but with demand uncertainty innovator revenues are greatest with
non-exclusive contracts.