Premium
Patent pools, vertical integration, and downstream competition
Author(s) -
Reisinger Markus,
Tarantino Emanuele
Publication year - 2019
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/1756-2171.12266
Subject(s) - license , vertical integration , industrial organization , competition (biology) , downstream (manufacturing) , business , vertical restraints , welfare , economics , computer science , market economy , marketing , ecology , biology , operating system
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 nonlinear 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.