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Complementary Patents and Market Structure

Klaus Schmidt ()

Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

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

JEL-codes: L1 L4 (search for similar items in EconPapers)
Date: 2009-09
New Economics Papers: this item is included in nep-com, nep-ind, nep-ino, nep-ipr, nep-pr~ and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

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https://epub.ub.uni-muenchen.de/13279/1/274.pdf (application/pdf)

Related works:
Journal Article: Complementary Patents and Market Structure (2014) Downloads
Working Paper: Complementary Patents and Market Structure (2008) Downloads
Working Paper: Complementary Patents and Market Structure (2008) Downloads
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