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Merging to License: Internal vs. External Patentee

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  • Sandonís, Joel
  • Faulí Oller, Ramón

Abstract

In this paper, we endogenize the decision of a research laboratory that owns a patented process innovation on whether to remain independent as an external patentee or to merge with a manufacturing firm, becoming an internal to the industry patentee. We show that a merger is profitable only for the case of small innovations whereas only large innovations make it welfare improving. As a consequence, the antitrust authority should forbid all (profitable) mergers.

Suggested Citation

  • Sandonís, Joel & Faulí Oller, Ramón, 2003. "Merging to License: Internal vs. External Patentee," DFAEII Working Papers 1134-8984, University of the Basque Country - Department of Foundations of Economic Analysis II.
    • Handle: RePEc:ehu:dfaeii:5719
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    References listed on IDEAS

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    1. X. H. Wang & Bill Z. Yang, 1999. "On Licensing Under Bertrand Competition," Australian Economic Papers, Wiley Blackwell, vol. 38(2), pages 106-119, June.
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    7. Morton I. Kamien & Yair Tauman, 2002. "Patent Licensing: The Inside Story," Manchester School, University of Manchester, vol. 70(1), pages 7-15, January.
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    More about this item

    Keywords

    patent licensing; two-part tariff contracts; external vs. internal patentee;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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