Journal of Law, Finance, and Accounting > Vol 2 > Issue 2

Intellectual Property Contracts: Theory and Evidence from Screenplay Sales

Milton Harris, University of Chicago Booth School of Business, USA, , S. Abraham Ravid, Yeshiva University, USA and Lund University, Sweden, , Ronald Sverdlove, New Jersey Institute of Technology, USA, , Suman Basuroy, University of Texas San Antonio, USA,
Suggested Citation
Milton Harris, S. Abraham Ravid, Ronald Sverdlove and Suman Basuroy (2017), "Intellectual Property Contracts: Theory and Evidence from Screenplay Sales", Journal of Law, Finance, and Accounting: Vol. 2: No. 2, pp 275-323.

Publication Date: 06 Nov 2017
© 2017 M. Harris, S. A. Ravid, R. Sverdlove, and S. Basuroy


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In this article:
1. Introduction 
2. Literature Review 
3. Model 
4. Comparative Statics Results 
5. Empirical Implications and Testing 
6. Conclusions 
A. Empirical Variable Definitions 
B. Notation 
C. Solution of the Equilibrium Problem 
D. Proofs of Propositions 
E. Selling a Screenplay – The Institutional Background 
F. Further Tests 


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.