Market shares, R&D agreements, and the EU block exemption

Richard Ruble and Bruno Versaevel

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Abstract: Regulation (EC) No 1217/2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of R&D agreements exempts horizontal R&D agreements from antitrust concerns when the combined market share of participants is low enough. We examine the theoretical basis for this criterion by extending existing models so that a subset of firms innovates and participates in an R&D cooperation agreement. We show that the incentive to increase innovation depends on a complex set of effects. We identify one, the outsider effect, that can lead firms to increase R&D under cooperation precisely when their combined market share is high. In a general model in which all firms innovate, we also find that R&D agreements can be more beneficial at higher market shares. We argue that existing theory therefore does not support limiting the exemption to low market shares.

Date: 2014-03-01
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Published in International Review of Law and Economics, 2014, 37, pp.15-25 P

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Journal Article: Market shares, R&D agreements, and the EU block exemption (2014)
Working Paper: Market shares, R&D agreements, and the EU block exemption (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02313022

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