Is There an Anti-commons Tragedy in the Smartphone Industry?

March 2017

An influential literature claims that standard setting in the smartphone industry creates market power. The core of this claim is that there are “too many” owners of the intellectual property rights necessary to make a phone interoperable and compatible, each of whom is able to earn “excessive royalties” from the monopoly power conferred upon them through the process of standards development. The paper “Is There Evidence of an Anti-commons Tragedy in the Smartphone Industry” by Alexander Galetovic, Stephen Haber, and Lew Zaretzki tests the theory of the anti-commons against systematic evidence. Looking at the data, the authors are led to conclude that the smartphone market is an unlikely ecosystem in which to find a tragedy of the anti-commons. They find that in 2015 the cumulative royalty yield in the smartphone value chain was only 3.4% of the average selling price of a smartphone. This suggests that patent holders do not exercise any meaningful monopoly power to increase prices, much less that there is an anti-commons tragedy in the smartphone industry.

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