Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/94027 
Year of Publication: 
2009
Series/Report no.: 
SFB/TR 15 Discussion Paper No. 274
Publisher: 
Sonderforschungsbereich/Transregio 15 - Governance and the Efficiency of Economic Systems (GESY), München
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: 
L1
L4
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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