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Refusal to Deal, Intellectual Property Rights, and Antitrust

By Yongmin Chen


A vertically integrated firm, having acquired the intellectual property (IP) through innovation to become an input monopolist, can extract surplus by supplying efficient downstream competitors. That the monopolist would refuse to do so is puzzling and has led to numerous debates in antitrust. In this paper, I clarify the economic logic of refusal to deal, and identify conditions under which prohibiting such conduct would raise or lower consumer and social welfare. I further show how IP protection (as determined by IP laws) and restrictions on IP holders' conduct (as determined by antitrust laws) may interact to affect innovation incentive and post-innovation market performance.

Topics: O3 - Technological Change; Research and Development; Intellectual Property Rights, L1 - Market Structure, Firm Strategy, and Market Performance, L4 - Antitrust Issues and Policies
Year: 2011
DOI identifier: 10.1093/jleo/ewt004
OAI identifier:

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