Complementary Patents and Market Structure

Schmidt, Klaus M. (September 2009): Complementary Patents and Market Structure. SFB/TR 15 Discussion Paper No. 274

Abstract

Many high technology goods are based on standards that require several essential patents owned by different IP holders. This gives rise to a complements and a double mark-up problem. We compare the welfare effects of two different business strategies dealing with these problems. Vertical integration of an IP holder and a downstream producer solves the double mark-up problem between these firms. Nevertheless, it may raise royalty rates and reduce output as compared to non-integration. Horizontal integration of IP holders solves the complements problem but not the double mark-up problem. Vertical integration discourages entry and reduces innovation incentives, while horizontal integration always benefits from entry and innovation

• Dokumententyp: Paper
• Fakultät: Sonderforschungsbereiche > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems ; Sonderforschungsbereiche > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > A4 - Unvollständige Verträge, Marktinteraktion und soziale Vergleichsprozesse ; Volkswirtschaft ; Volkswirtschaft > Lehrstühle > Seminar für Wirtschaftstheorie
• Themengebiete: 300 Sozialwissenschaften > 330 Wirtschaft
• JEL Classification: L1, L4
• Sprache: Englisch