Thursday, April 18, 2019

Patent Pools, Vertical Integration, and Downstream Competition

By: Markus ReisingerEmanuele Tarantino
Abstract: Patent pools are commonly used to license technologies to manufacturers. Whereas previous studies focused on manufacturers active in independent markets, we analyze pools licensing to competing manufacturers, allowing for multiple licensors and non-linear tariffs. We find that the impact of pools on welfare depends on the industry structure: Whereas they are procompetitive when no manufacturer is integrated with a licensor, the presence of vertically integrated manufacturers triggers a novel trade-off between horizontal and vertical price coordination. Specifically, pools are anticompetitive if the share of integrated firms is large, procompetitive otherwise. We then formulate information-free policies to screen anticompetitive pools.
Keywords: patent pools and horizontal pricing agreements, complementary patents, vertical integration and restraints, antitrust policy
JEL: K11 L41 L42 O34
Date: 2018–11

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