TO MERGE OR TO LICENSE: IMPLICATIONS FOR COMPETITION POLICY

Ramón Faulí-Oller () and Joel Sandonís ()
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Ramón Faulí-Oller: Universidad de Alicante
Joel Sandonís: Universidad de Alicante

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

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.

Pages: 31 pages
Date: 2001-03
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http://www.ivie.es/downloads/docs/wpasad/wpasad-2001-05.pdf Fisrt version / Primera version, 2001 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2001-05

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