COORDINATION INCENTIVES UNDER COMPLEMENTARY COST-REDUCING TECHNOLOGIES *

This paper focuses on the optimal regulation regarding technology transfer and mergers in a duopoly model where two complementary technologies can be developed. On the one hand, we show that there are cases where a prohibitive policy regarding (cross) licensing agreements can be socially desirable. On the other hand, our analysis stresses that, in many cases, there are important coordination problems that cannot be overcome by means of cross-licensing agreements and merger is the optimal policy. Copyright 2008 The Author. Journal compilation 2008 Blackwell Publishing Ltd/University of Adelaide and Flinders University.