Gaston Llanes

Visiting Scholar

I am an Assistant Professor at the School of Business Administration of the Catholic University of Chile (UC). I will be visiting Harvard Business School from September to November 2013. I have a MSc and PhD in Economics from Carlos III University (Madrid, Spain) and a BSc in Economics from the National University of Cordoba (Argentina). Before joining UC, I was a Postdoctoral Research Fellow at Harvard Business School.

Journal Articles

  1. Patent Policy, Patent Pools, and the Accumulation of Claims in Sequential Innovation

    Gaston Llanes and Stefano Trento

    We present a dynamic model where the accumulation of patents generates an increasing number of claims on sequential innovation. We compare innovation activity under three regimes—patents, no-patents, and patent pools—and find that none of them can reach the first best. We find that the first best can be reached through a decentralized tax-subsidy mechanism, by which innovators receive a subsidy when they innovate, and are taxed with subsequent innovations. This finding implies that optimal transfers work in the exact opposite way as traditional patents. Finally, we consider patents of finite duration and determine the optimal patent length.

    Keywords: Patents; Taxation; Innovation and Invention;

    Citation:

    Llanes, Gaston, and Stefano Trento. "Patent Policy, Patent Pools, and the Accumulation of Claims in Sequential Innovation." Economic Theory 50, no. 3 (August 2012): 703–725. View Details
  2. Industry Equilibrium with Open-Source and Proprietary Firms

    Gaston Llanes and Ramiro de Elejalde

    We present a model of industry equilibrium to study the coexistence of open-source and proprietary firms. Two novel aspects of the model are (i) participation in open source arises as the optimal decision of profit-maximizing firms, and (ii) open-source and proprietary firms may (or may not) coexist in equilibrium. Firms decide their type and investment in R&D, and sell packages composed of a primary good and a complementary private good. Open-source firms share their technological advances on the primary good, whereas proprietary firms keep their innovations private. The main contribution of the paper is to determine conditions under which open-source and proprietary firms coexist in equilibrium. Interestingly, this equilibrium is characterized by an asymmetric market structure, with few large proprietary firms and many small open-source firms. We also study the limiting economy and present conditions under which large numbers favor cooperation in R&D.

    Keywords: Open Source Distribution; Balance and Stability; Software; Knowledge Management; Supply and Industry; Collaborative Innovation and Invention; Research and Development; Cooperation;

    Citation:

    Llanes, Gaston, and Ramiro de Elejalde. "Industry Equilibrium with Open-Source and Proprietary Firms." International Journal of Industrial Organization 31, no. 1 (January 2013): 36–49. View Details
  3. Ex-Ante Agreements in Standard Setting and Patent Pool Formation

    We present a model of standard setting and patent-pool formation. We study the effects of alternative standard-setting and pool-formation rules on technology choice, prices, and welfare. We find three main results. First, we show that allowing patent pools may reduce welfare when standards are negotiated and patent pools need to be ex-post incentive compatible. Second, we show that ranking combinations of standard-setting and pool-formation rules in welfare terms when patent pools need to be ex-post incentive compatible is not possible. Third, we show that allowing firms to sign ex-ante agreements regarding pool participation dominates (in terms of welfare) any other policy rule. This policy does not require the standard-setting organization to have information on patent ownership, the terms of license agreements, or the value added of patents.

    Keywords: standard setting; patent pools; royalty stacking; ex-ante agreements; coalition formation; Motivation and Incentives; Patents; Agreements and Arrangements; Standards;

    Citation:

    Llanes, Gaston, and Joaquin Poblete. "Ex-Ante Agreements in Standard Setting and Patent Pool Formation." Special Issue on Innovation Economics. Journal of Economics & Management Strategy 23, no. 1 (Spring 2014): 50–67. View Details
  4. Investment Incentives in Open-Source and Proprietary Two-Sided Platforms

    Ramon Casadesus-Masanell and Gaston Llanes

    We study incentives to invest in platform quality in open-source and proprietary two-sided platforms. Open platforms have open access, and developers invest to improve the platform. Proprietary platforms have closed access, and investment is done by the platform owner. We present five main results. First, open platforms may benefit from limited developer access. Second, an open platform may lead to higher investment than a proprietary platform. Third, opening one side of a proprietary platform may lower incentives to invest in platform quality. Fourth, the structure of access prices of the proprietary platform depends on (i) how changes in the number of developers affect the incentives to invest in the open platform, and (ii) how investment in the open platform affects the revenues of the proprietary platform. Finally, a proprietary platform may benefit from higher investment in the open platform. This result helps explain why the owner of a proprietary platform such as Microsoft has chosen to contribute to the development of Linux.

    Keywords: Motivation and Incentives; Technology Platform; Open Source Distribution; Investment;

    Citation:

    Casadesus-Masanell, Ramon, and Gaston Llanes. "Investment Incentives in Open-Source and Proprietary Two-Sided Platforms." Journal of Economics & Management Strategy (forthcoming). View Details
  5. Mixed Source

    Ramon Casadesus-Masanell and Gaston Llanes

    We study competitive interaction between a profit-maximizing firm that sells software and complementary services and a free open source competitor. We examine the firm's choice of business model between the proprietary model (where all software modules are proprietary), the open source model (where all modules are open source), and the mixed source model (where some-but not all-modules are open). When a module is opened, users can access and improve the code, which increases quality and value creation. Opened modules, however, are available for others to use free of charge. We derive the set of possibly optimal business models when the modules of the firm and the open source competitor are compatible (and thus can be combined) and incompatible and show the following: 1) when the firm's modules are of high (low) quality, the firm is more open under incompatibility (compatibility) than under compatibility (incompatibility); 2) firms are more likely to open substitute, rather than complementary, modules to existing open source projects; and 3) there may be no trade-off between value creation and value capture when comparing business models with different degrees of openness.

    Keywords: Competition; Open Source Distribution; Profit; Sales; Software; Service Operations; Business Model; Decision Choices and Conditions; Quality; Value Creation;

    Citation:

    Casadesus-Masanell, Ramon, and Gaston Llanes. "Mixed Source." Management Science 57, no. 7 (July 2011): 1212–1230. View Details

Working Papers

  1. Mixed Source

    Ramon Casadesus-Masanell and Gaston Llanes

    We study competitive interaction between a profit-maximizing firm that sells software and complementary services and a free open source competitor. We examine the firm's choice of business model between the proprietary model (where all software modules are proprietary), the open source model (where all modules are open source), and the mixed source model (where some-but not all-modules are open). When a module is opened, users can access and improve the code, which increases quality and value creation. Opened modules, however, are available for others to use free of charge. We derive the set of possibly optimal business models when the modules of the firm and the open source competitor are compatible (and thus can be combined) and incompatible and show that: (i) when the firm's modules are of high (low) quality, the firm is more open under incompatibility (compatibility) than under compatibility (incompatibility); (ii) firms are more likely to open substitute, rather than complementary, modules to existing open source projects; and (iii) there may be no trade-off between value creation and value capture when comparing business models with different degrees of openness.

    Keywords: Business Model; Duopoly and Oligopoly; Monopoly; Open Source Distribution; Quality; Competition; Information Technology Industry;

    Citation:

    Casadesus-Masanell, Ramon, and Gaston Llanes. "Mixed Source." Harvard Business School Working Paper, No. 10-022, September 2009. (Revised October 2010.) View Details
  2. Industry Equilibrium with Open Source and Proprietary Firms

    We present a model of industry equilibrium to study the coexistence of Open Source (OS) and Proprietary (P) firms. Two novel aspects of the model are: (1) participation in OS arises as the optimal decision of profit-maximizing firms, and (2) OS and P firms may (or may not) coexist in equilibrium. Firms decide their type and investment in R&D, and sell packages composed of a primary good (like software) and a complementary private good. The only difference between both kinds of firms is that OS share their technological advances on the primary good, while P keep their innovations private. The main contribution of the paper is to determine conditions under which OS and P coexist in equilibrium. Interestingly, this equilibrium is characterized by an asymmetric market structure, with a few large P firms and many small OS firms.

    Keywords: Investment; Technological Innovation; Knowledge Sharing; Industry Structures; Open Source Distribution; Research and Development;

    Citation:

    Llanes, Gaston, and Ramiro de Elejalde. "Industry Equilibrium with Open Source and Proprietary Firms." Harvard Business School Working Paper, No. 09-149, June 2009. View Details