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Refusal to Deal, Intellectual Property Rights, and Antitrust

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  • Yongmin Chen

Abstract

A vertically integrated firm, having acquired the intellectual property (IP) through innovation to become an input monopolist, can extract surplus by supplying efficient downstream competitors. That the monopolist would refuse to do so is puzzling and has led to numerous debates in antitrust. In this article, I clarify the economic logic of refusal to deal and identify conditions under which prohibiting such conduct would raise or lower consumer and social welfare. I further show how IP protection (as determined by IP laws) and restrictions on IP holders’ conduct (as determined by antitrust laws) may interact to affect innovation incentive and post-innovation market performance. (JEL K2, L4, O3).

Suggested Citation

  • Yongmin Chen, 2014. "Refusal to Deal, Intellectual Property Rights, and Antitrust," Journal of Law, Economics, and Organization, Oxford University Press, vol. 30(3), pages 533-557.
  • Handle: RePEc:oup:jleorg:v:30:y:2014:i:3:p:533-557.
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    File URL: http://hdl.handle.net/10.1093/jleo/ewt004
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    References listed on IDEAS

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    1. Jerry R. Green & Suzanne Scotchmer, 1995. "On the Division of Profit in Sequential Innovation," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 20-33, Spring.
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    7. Ilya Segal & Michael D. Whinston, 2007. "Antitrust in Innovative Industries," American Economic Review, American Economic Association, vol. 97(5), pages 1703-1730, December.
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    Cited by:

    1. Jacob Seifert, 2015. "Welfare effects of compulsory licensing," Journal of Regulatory Economics, Springer, vol. 48(3), pages 317-350, December.

    More about this item

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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