No abstract

We study a positive and normative aspect of a particular market setup in which there is initially a dominant firm that possesses technological and market leadership but eventually it ceases to be a leader after it is forced to reveal its patented superior technology to its competitors. Our analysis is motivated by the actual decision of the European Commission to impose a legal duty on a firm with a dominant position (Microsoft) to license its proprietary technology and intellectual property rights to its direct competitors. We show that under plausible assumptions like free entry or repeated market interactions there is a social value of market leadership and its mechanical removal by means of competition policy is likely to be harmful for society.