IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpio/0211006.html
   My bibliography  Save this paper

Advantageous or Disadvantageous Semi-collusion Licensing in a Vertically Separated Industry

Author

Listed:
  • Arijit Mukherjee

    (Keele University, UK)

Abstract

This paper compares profits and consumer surplus under non-cooperation and collusion in the product market when the firms have the option for R&D before production. We show that whether R&D investment would be higher under non-cooperation or product market collusion depends on the R\&D productivity. If the market size is sufficiently small then firms are always better off under product market collusion. If the market size is moderate (relatively large) then the firms are better off under non- cooperation (semi-collusion) for sufficiently lower pre-innovation costs of production. We also show that in case of moderate (relatively large) market size, firms are better off under non-cooperation for relatively lower (higher) R&D productivity. However, we find that consumer welfare is always higher under non-cooperation in product market compared to collusion in product market.

Suggested Citation

  • Arijit Mukherjee, 2002. "Advantageous or Disadvantageous Semi-collusion Licensing in a Vertically Separated Industry," Industrial Organization 0211006, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpio:0211006
    Note: Type of Document - pdf; prepared on pc; pages: 28
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/io/papers/0211/0211006.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(2), pages 185-199.
    2. Akihiko Matsui, 1987. "Consumer-Benefited Cartels Under Strategic Capital Investment Competition," Discussion Papers 798, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    3. Shannon K. Mitchell, 1993. "The Welfare Effects of Rent-Saving and Rent-Seeking," Canadian Journal of Economics, Canadian Economics Association, vol. 26(3), pages 660-669, August.
    4. Brod, Andrew & Shivakumar, Ram, 1999. "Advantageous Semi-collusion," Journal of Industrial Economics, Wiley Blackwell, vol. 47(2), pages 221-230, June.
    5. Choi, Jay Pil, 1993. "Cooperative R&D with product market competition," International Journal of Industrial Organization, Elsevier, vol. 11(4), pages 553-571.
    6. Matusui, Akihiko, 1989. "Consumer-benefited cartels under strategic capital investment competition," International Journal of Industrial Organization, Elsevier, vol. 7(4), pages 451-470, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ghosh, Arghya & Morita, Hodaka, 2012. "Competitor collaboration and product distinctiveness," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 137-152.
    2. Joanna Poyago-Theotoky & Ben Ferrett, "undated". "Horizontal Agreements and R&D Complementarities: Merger versus RJV," CRIEFF Discussion Papers 1201, Centre for Research into Industry, Enterprise, Finance and the Firm.
    3. Tuinstra Jan & in ’t Veld Daan L., 2014. "Market-Induced Rationalization and Welfare-Enhancing Cartels," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(1), pages 189-202, January.
    4. Erkal, Nisvan & Piccinin, Daniel, 2010. "Cooperative R&D under uncertainty with free entry," International Journal of Industrial Organization, Elsevier, vol. 28(1), pages 74-85, January.
    5. Ben Ferrett & Joanna Poyago-Theotoky, 2016. "Horizontal Agreements and R&D Complementarities: Merger versus RJV," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 23(1), pages 87-107, February.
    6. Beladi, Hamid & Mukherjee, Arijit, 2012. "Footloose foreign firm and profitable domestic merger," Journal of Economic Behavior & Organization, Elsevier, vol. 83(2), pages 186-194.
    7. Tarun Kabiraj & Arijit Mukherjee, 2000. "Cooperation in R&D and production: a three-firm analysis," Journal of Economics, Springer, vol. 71(3), pages 281-304, October.
    8. Hinloopen, Jeroen, 2000. "Strategic R&D Co-operatives," Research in Economics, Elsevier, vol. 54(2), pages 153-185, June.
    9. Schinkel, Maarten Pieter & Spiegel, Yossi, 2017. "Can collusion promote sustainable consumption and production?," International Journal of Industrial Organization, Elsevier, vol. 53(C), pages 371-398.
    10. Kai Zhao, 2015. "Product competition and R&D investment under spillovers within full or partial collusion games," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 24(1), pages 1-27, December.
    11. Hongbin Cai & Uday Rajan, 2005. "Incentive Compatible Collusion and Investment," Annals of Economics and Finance, Society for AEF, vol. 6(1), pages 37-52, May.
    12. Roy Chowdhury, Prabal & Roy Chowdhury, Indrani, 2001. "Joint venture instability: a life cycle approach," MPRA Paper 1556, University Library of Munich, Germany, revised Jan 2007.
    13. De Bondt, Raymond, 1997. "Spillovers and innovative activities," International Journal of Industrial Organization, Elsevier, vol. 15(1), pages 1-28, February.
    14. Jovanovic, Dragan & Wey, Christian, 2012. "An equilibrium analysis of efficiency gains from mergers," DICE Discussion Papers 64, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    15. Kaplow, Louis & Shapiro, Carl, 2007. "Antitrust," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 2, chapter 15, pages 1073-1225, Elsevier.
    16. Marc Escrihuela-Villar & Ramon Faulí-Oller, 2008. "Mergers in asymmetric Stackelberg markets," Spanish Economic Review, Springer;Spanish Economic Association, vol. 10(4), pages 279-288, December.
    17. Zemsky, Peter & Adner, Ron, 2003. "Disruptive Technologies and the Emergence of Competition," CEPR Discussion Papers 3994, C.E.P.R. Discussion Papers.
    18. Andrei Medvedev, 2004. "Efficiency Defense and Administrative Fuzziness in Merger Regulation," CERGE-EI Working Papers wp234, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    19. Horn, Henrik & Persson, Lars, 2001. "Endogenous mergers in concentrated markets," International Journal of Industrial Organization, Elsevier, vol. 19(8), pages 1213-1244, September.
    20. Guangliang Ye & Wenbin Wu, 2015. "Privatization and merger in a mixed oligopoly with spatial price discrimination," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 54(2), pages 561-576, March.

    More about this item

    Keywords

    Entry; Consumer surplus; Collusion; Profit; Uncertain R&D;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpio:0211006. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: EconWPA (email available below). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.