To Merge or to License: Implications for Competition Policy
The optimal merger policy when efficiency gains are not merger specific but can also be achieved through licensing is derived in a differentiated goods Cournot duopoly. We show that whenever both royalties and fees are feasible instruments to license technology, mergers should not be allowed, which fits the prescription of the U.S. Horizontal Merger Guidelines. When only one instrument is feasible, however, the possibility of licensing cannot be used as a definitive argument against mergers.
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"Horizontal Mergers: An Equilibrium Analysis,"
Department of Economics, Working Paper Series
qt0tp305nx, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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- Macho-Stadler, Ines & Martinez-Giralt, Xavier & David Perez-Castrillo, J., 1996.
"The role of information in licensing contract design,"
Elsevier, vol. 25(1), pages 43-57, January.
- Macho, I. & Martinez-Giralt, X. & Perez-Castrillo, D., 1993. "The Role of Information in Licensing Contract Design," UFAE and IAE Working Papers 216.93, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Tarun Khanna & Bharat N. Anand, 1996. "Intellectual Property Rights and Contract Structure," Yale School of Management Working Papers ysm37, Yale School of Management.
- Michael L. Katz & Carl Shapiro, 1986. "How to License Intangible Property," The Quarterly Journal of Economics, Oxford University Press, vol. 101(3), pages 567-589.
- Muto Shigeo, 1993. "On Licensing Policies in Bertrand Competition," Games and Economic Behavior, Elsevier, vol. 5(2), pages 257-267, April.
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