Richard Gilbert | University of California, Berkeley (original) (raw)

Papers by Richard Gilbert

The MIT Press eBooks, 2006

The effect of competition on innovation incentives has been a controversial subject in economics ... more The effect of competition on innovation incentives has been a controversial subject in economics since Joseph Schumpeter advanced the theory that competitive markets are not necessarily the most effective organizations to promote innovation. The incentive to innovate is the difference in profit that a firm can earn if it invests in research and development compared to what it would earn if it did not invest. The concept is straightforward, yet differences in market structure, the characteristics of innovations, and the dynamics of discovery lead to seemingly endless variations in the theoretical relationship between competition and expenditures on research and development or the outputs of research and development (R&D). This paper surveys the economic theory of innovation, focusing on market structure and its relationship to competition, the distinction between product and process innovations, and the role of exclusive and nonexclusive rights to innovation, and draws conclusions from the different models. Exclusive rights generally lead to greater innovation incentives in more competitive markets, while nonexclusive rights generally lead to the opposite conclusion, although there are important exceptions. The paper reviews the large literature on empirical studies of innovation and finds some support for the predictions of the theory.

Based on a database of 326 merger cases scrutinized by the European Commission between 1990 and 2... more Based on a database of 326 merger cases scrutinized by the European Commission between 1990 and 2007, we evaluate the economic impact of the change in European merger legislation in 2004. We first propose a general framework to assess merger policy effectiveness, which is based on standard oligopoly theory and makes use of stock market reactions as an external assessment of the merger and the merger control decisions. We then focus on four different dimensions of effectiveness: 1) legal certainty; 2) frequency and determinants of type I and type II errors; 3) rent-reversion achieved by different merger policy tools; and 4) deterrence of anti-competitive mergers. To infer the economic impact of the merger policy reform, we compare the results of our four tests before and after its introduction. Our results suggest that the policy reform seems to have been only a modest improvement of European merger policy.

We analyze the central economic issues raised by U.S. v Microsoft. Network effects and economies ... more We analyze the central economic issues raised by U.S. v Microsoft. Network effects and economies of scale in applications programs created a barrier to entry for new operating system competitors, which the combination of Netscape Navigator and the Java programming language potentially could have lowered. Microsoft took actions to eliminate this threat to its operating system monopoly, and some of Microsoft's conduct very likely harmed consumers. While we recognize the risks of the government's proposed structural remedy of splitting Microsoft in two, we are pessimistic that a limited conduct remedy would be effective in this case. Early Skirmishes Microsoft's antitrust woes began in 1990 when the Federal Trade Commission (FTC) launched an investigation of the company. After three years, the FTC's legal staff-but not its economics staff-recommended that the Commission bring a case focusing on Microsoft's licensing practices with personal computer manufacturers. The FTC investigation ended in February 1993 when the Commission deadlocked in a 2-2 vote, with one commissioner recused (Lopatka and Page, 1995, p. 324). The U.S. Department of Justice continued the investigation of Microsoft's conduct and, on July 15, 1994, brought a complaint alleging that Microsoft used exclusionary and anticompetitive contracts with personal computer manufacturers unlawfully to maintain its monopoly of personal computer operating systems. Simultaneous with the filing of the complaint, Microsoft and the Department of Justice entered into a consent decree in which Microsoft agreed to abide by certain restrictions on its licensing arrangements (United States v.

Brookings Papers on Economic Activity, 1987

Appropriating t he Returns from Industrial Research and Development To HAVE the incentive to unde... more Appropriating t he Returns from Industrial Research and Development To HAVE the incentive to undertake research and development, a firm must be able to appropriate returns sufficient to make the investment worthwhile. The benefits consumers derive from an innovation, however, are increased if competitors can imitate and improve on the innovation to ensure its availability on favorable terms. Patent law seeks to resolve this tension between incentives for innovation and widespread diffusion of benefits. A patent confers, in theory, perfect appropriability (monopoly of the invention) for a limited time in return for a public We are grateful for the support of the National Science Foundation and especially to Rolf Piekarz of the NSF's Division of Policy Research and Analysis. We also wish to thank the 650 respondents to our survey and the R&D executives who helped us pretest it-especially Ralph Gomory,

This chapter reviews the history of antitrust enforcement for intellectual property and identifie... more This chapter reviews the history of antitrust enforcement for intellectual property and identifies reasons why appropriate antitrust enforcement for intellectual property may differ from antitrust enforcement for ordinary property. The complex interplay between the scope of patent protection and incentives for innovation in different industries make it difficult to craft antitrust rules that take these differences into account. Instead, antitrust policy generally should recognize that innovators need to be compensated for their innovative efforts, and that this sometimes requires practices that may exclude potential competitors. At the same time, one must be careful not to lean too heavily on practices that focus on rewards to innovation, because these practices incur costs in the short run by limiting the use of innovations and possibly in the long run by raising the costs for future innovators who use protected innovations as inputs into their own innovative efforts.

We examine the effects of market structure and the internal organization of firms on equilibrium ... more We examine the effects of market structure and the internal organization of firms on equilibrium R&D projects. We compare a monopolist's choice of R&D portfolio to that of a welfare maximizer. We next show that Sah and Stiglitz's finding that the market portfolio of R&D is independent of the number of firms under Bertrand competition extends to neither Cournot oligopoly nor a cartel. We also show that the ability of firms to preempt R&D by rivals along particular research paths can lead to socially excessive R&D diversification. Lastly, using Sah and Stiglitz's definition of hierarchy, we establish conditions under which larger hierarchies invest in smaller portfolios.

Many products-including microprocessors, telecommunications devices, computer software and on-lin... more Many products-including microprocessors, telecommunications devices, computer software and on-line auction services-make use of multiple technologies, each of which is essential to make or sell the product. The owner of one technology benefits from the existence of complementary technologies. We show that, despite this externality, the structure of payoffs that support efficient R&D investment by duopolists racing to discover a single innovation generalizes to the structure that supports efficient investment for complementary innovations. The paper also examines how alternative intellectual property regimes and legal institutions affect R&D investment in complementary technologies. The results have policy implications for the organization of R&D, the assessment of damages for patent infringement, and allocations of value in patent pools.

The MIT Press eBooks, 2003

Review of industrial organization, Jun 25, 2024

The 2023 Merger Guidelines devote a section to mergers that eliminate potential competition. This... more The 2023 Merger Guidelines devote a section to mergers that eliminate potential competition. This is an important contribution because agency guidelines have not discussed the subject in detail for almost 50 years. The new Guidelines follow the traditional distinction that has been upheld in the courts between a merger's effects on incumbent responses to perceived potential competition and the potential effects of actual entry. Antitrust enforcement should assess both possible aspects of potential competition in an integrated fashion because harm from a merger occurs not infrequently from the elimination of actual potential competition; and when the elimination of perceived potential competition has an effect, it often occurs along with and as a consequence of the elimination of actual potential competition. Economic studies suggest that the benefits of perceived potential competition are less than some courts have assumed and that the benefits of actual potential competition are greater. Rather than focusing solely on the probability of harm from the elimination of a potential entrant, antitrust enforcement should adopt a sliding scale that takes into account the magnitude of the benefits for consumers or suppliers if entry is successful. Mergers with potential and nascent competitors can be harmful even if the probability of actual entry absent the merger is small.

Brookings papers on economic activity, 1997

"KNOWLEDGE ASSETS"-research and development know-how and intellectual property protected by paten... more "KNOWLEDGE ASSETS"-research and development know-how and intellectual property protected by patent, copyright, and trade secrethave become increasingly important as a determinant of U.S. industrial progress.' In 1995 seven knowledge-intensive industries (aerospace, computers, communications equipment, electrical machinery, electronic components, instruments, and drugs) accounted for 27 percent of total manufacturing output in the United States, up from 21 percent in 1982.2 Royalties and fees collected by U.S. firms from international trade in intellectual properties exceeded $20 billion in 1993, nearly double the amount collected just five years earlier.3 Licensing royalties and fees, although considerable, greatly understate the value of intellectual property to the U.S. economy. Technology licensing and related Both authors are professors at the University of California at Berkeley and have served recently as Deputy Assistant Attorney General for Economics in the Antitrust Division, U.S. Department of Justice. Gilbert led a task force that drafted the Antitrust Guidelines for the Licensing of Intellectual Property, which were issued by the Department of Justice and the Federal Trade Commission in April 1995. The views expressed here, both generally and with respect to specific matters reviewed by the Antitrust Division, are those of the authors alone, and do not reflect official positions of the Justice Department. The authors give special thanks to Robert Gertner, Louis Kaplow, and Ilya Segal for valuable comments on an earlier draft. 1. For convenience, in what follows we will often use the term ''patent" to denote intellectual property more generally, including copyright and trade secrets. Of course, there are important differences in the statutory protection that is afforded to each regime. 2. U.S. Bureau of the Census (1996, table 1). 3. National Science Board (1996, table 6-2). 283 10. Of course, in a trivial sense, all licenses are vertical, inasmuch as one firm is selling technology to another, so the two are in a supplier-buyer relationship.

SSRN Electronic Journal

DOI to the publisher's website. • The final author version and the galley proof are versions of t... more DOI to the publisher's website. • The final author version and the galley proof are versions of the publication after peer review. • The final published version features the final layout of the paper including the volume, issue and page numbers. Link to publication General rights Copyright and moral rights for the publications made accessible in the public portal are retained by the authors and/or other copyright owners and it is a condition of accessing publications that users recognise and abide by the legal requirements associated with these rights. • Users may download and print one copy of any publication from the public portal for the purpose of private study or research. • You may not further distribute the material or use it for any profit-making activity or commercial gain • You may freely distribute the URL identifying the publication in the public portal. If the publication is distributed under the terms of Article 25fa of the Dutch Copyright Act, indicated by the "Taverne" license above, please follow below link for the End User Agreement:

Law and Economics Workshop, Aug 1, 2010

The Cambridge Handbook of Technical Standardization Law

133 1. Substitutes and Complements 133 2. Limitation to Essential Patents 135 3. Independent Lice... more 133 1. Substitutes and Complements 133 2. Limitation to Essential Patents 135 3. Independent Licensing as a Safeguard 137 4. Shielding Weak Patents 139 5. "Excessive" Royalties 141 6. Innovation 143 * I am grateful for helpful comments from Robert Merges, Carl Shapiro and Jean Tirole, and to Michael Eixenberger and Alison Gilbert for editorial assistance.

Hastings Law Journal, 2001

Studies in Industrial Organization, 1993

California's transportation energy: Petroleum 1s the source of over 99 % of CahfornJa's transport... more California's transportation energy: Petroleum 1s the source of over 99 % of CahfornJa's transportatlon energy Transportation consumes 74% of the petroleum and 48 % of the total energy ,ned m the state Caltf~rnia produces about 23% of the natzon 's total domestic oil We import half of the oil we use: 43% from Alaska and 4% from foreign sources.

IO: Regulation, 2015

The treatment of innovation within the merger context by U.S. Antitrust Agencies continues to evo... more The treatment of innovation within the merger context by U.S. Antitrust Agencies continues to evolve, with regard to both general statements of enforcement policy and specific enforcement decisions. The respective merger guidelines issued by the Department of Justice and the Federal Trade Commission did not consider potential impacts on innovation or research and development until 1982, and then only in passing. By contrast, their joint 2010 Horizontal Merger Guidelines devote an entire section to innovation issues. This Essay examines both the frequency and manner with which the Antitrust Agencies invoke innovation-based concerns within their respective merger challenges from 2004-2014. It finds that both the DOJ and FTC allege adverse innovation effects in a very large fraction of their respective merger challenges in high-R&D-intensity industries. After exploring possible explanations, the Essay recommends that the Agencies describe their innovation concerns with greater specific...

flrms mat al/apt tojoswr price uncerlainhi' 6, choosing a productiot, ih'chno/og that permits jie... more flrms mat al/apt tojoswr price uncerlainhi' 6, choosing a productiot, ih'chno/og that permits jiexibiliti' in she choice of inputs. This paper shows that under sonic conditions, including rational expectations on i/iC part of ilei'own-makers. adjusi,nen,s in the chou'e of technique mat' neu:ral,:e the eflect of a hut/er stock on the long-run price d,ctnhuiion of a eomn,odrii' used ac a factor of production..onethelesc. a stabilization program could hare desirable IC/fare e..eczs if producers are risk-averse and if the cosi of the stahilizaijon program is not too large.

The Energy Journal, 1986

Recent events in the oil market make it easy to forget the policy problems of dealing with supply... more Recent events in the oil market make it easy to forget the policy problems of dealing with supply interruptions. Realizing that history tends to repeat itself and that crises are not conducive to good decisions, it seems worthwhile, therefore, to examine the problem of efficient pricing in the wake of an oil price shock. A key element is the interdependence between commodity supply (such as oil) and economic activity. The poor performance of western economies during the 1970s appears to be closely linked to experiencing a food shock, two large energy price shocks, and an accompanying increase in nonenergy raw materials prices.' Recent evidence also suggests that oil price increases were an important factor in most of the postwar US. recessions (Hamilton. 1983). The standard tools of macroeconomic policy are among the policy choices available to manage a commodity supply disruption. Monetary or fiscal expansion to maintain full employment could be thought of as first-best policies;' however, the fear of increased inflation may inhibit their use. An obvious alternative to conventional macroeconomic measures is the use of policies that directly affect the supply and demand for the disrupted