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Technology sharing and tacit collusion

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  • Levy, Nadav
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    Abstract

    I study the prospects for collusion between rival firms that share technological know-how. Two common forms of technology sharing are compared: a research joint venture (RJV) and licensing. Under licensing, firms can use the licensing fee to elicit higher levels of R&D than with an RJV. However, firms must also be induced to license innovations ex post. For a broad set of cases, licensing yields higher collusive profits to firms and higher prices to consumers. In other cases, licensing can only be induced through a very high license fee, leading to excessive R&D and lower profits. In these cases, the colluding firms prefer to share technology through an RJV.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0167718711000816
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    Bibliographic Info

    Article provided by Elsevier in its journal International Journal of Industrial Organization.

    Volume (Year): 30 (2012)
    Issue (Month): 2 ()
    Pages: 204-216

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    Handle: RePEc:eee:indorg:v:30:y:2012:i:2:p:204-216

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    Web page: http://www.elsevier.com/locate/inca/505551

    Related research

    Keywords: Collusion; Technology sharing; Research joint ventures; Licensing;

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    1. Baumol, William J, 1992. "Horizontal Collusion and Innovation," Economic Journal, Royal Economic Society, vol. 102(410), pages 129-37, January.
    2. Lin, Ping, 1996. "Fixed-Fee Licensing of Innovations and Collusion," Journal of Industrial Economics, Wiley Blackwell, vol. 44(4), pages 443-49, December.
    3. Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, vol. 76(3), pages 390-407, June.
    4. Jorde, Thomas M & Teece, David J, 1990. "Innovation and Cooperation: Implications for Competition and Antitrust," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 75-96, Summer.
    5. Kaz Miyagiwa, 2009. "COLLUSION AND RESEARCH JOINT VENTURES -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 57(4), pages 768-784, December.
    6. Baumol, William J., 2001. "When is inter-firm coordination beneficial? The case of innovation," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 727-737, April.
    7. Brodley, Joseph F, 1990. "Antitrust Law and Innovation Cooperation," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 97-112, Summer.
    8. Shapiro, Carl & Willig, Robert D, 1990. "On the Antitrust Treatment of Production Joint Ventures," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 113-30, Summer.
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