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To Merge Or To License: Implications For Competition Policy

Author

Listed:
  • Ramón Faulí-Oller

    (Universidad de Alicante)

  • Joel Sandonís

    (Universidad de Alicante)

Abstract

The optimal competition policy when licensing is an alternative to a merger to transfer a superior technology is derived in a differentiated goods duopoly, for the cases of Cournot and Bertrand competition. We show that whenever both royalties and fixed fees are feasible, mergers should not be allowed, which fits the prescription of the U.S. Horizontal Merger Guidelines. By contrast, when only one instrument is feasible, be it fixed fees or royalties, the possibility of licensing cannot be used as a definitive argument against mergers.

Suggested Citation

  • Ramón Faulí-Oller & Joel Sandonís, 2001. "To Merge Or To License: Implications For Competition Policy," Working Papers. Serie AD 2001-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2001-05
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    References listed on IDEAS

    as
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