Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Tuesday, September 13, 2011

Competitive Price Coordination in Technology Sharing Agreements

Posted by D. Daniel Sokol

Nancy Gallini (UBC Econ) has posted Competitive Price Coordination in Technology Sharing Agreements.

ABSTRACT: This paper examines technology-sharing arrangements, the incentives to join them and the type of products that develop when they are anticipated. Particular attention is given to patent pools that admit members with overlapping ownership; that is, patentees with a stake in both complementary pooled inputs and downstream products that do not depend on the pool but compete with products that do. We ask whether this ownership structure under which pool members are vertically and horizontally related, facilitates anticompetitive price collusion. In a Bertrand framework it is shown that if the downstream products inside and outside the pool are strategic complements, then technology-sharing agreements are both privately and socially efficient in making the market more competitive, although prices increase in the degree to which pool members are involved in competing products. For strong substitutes and asymmetric outside owne! rship, efficient patent pools may not be profitable in which case allowing full coordination in which the pool sets the prices of both inside and outside products owned by its members will encourage the formation of efficient pools and, possibly, the selection of more complementary products. In analyzing the efficiencies of cooperative agreements for sharing technologies, this paper makes a case for incorporating private incentives to cooperate, as well as to innovate and litigate, into the debate on effective systems for encouraging innovation and its diffusion.

http://lawprofessors.typepad.com/antitrustprof_blog/2011/09/competitive-price-coordination-in-technology-sharing-agreements-.html

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