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Excess-Entry Theorem: The Implications Of Licensing

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Author Info
ARIJIT MUKHERJEE
SOMA MUKHERJEE

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Abstract

We show that, in the presence of technology licensing, entry in an industry with Cournot competition may lead to a socially insufficient, number of firms. Insufficient entry occurs if the own marginal cost of the entrant is sufficiently high. Hence, the justification for anticompetitive entry regulation due to the standard excess-entry result may not be justified in the presence of licensing. However, if the own marginal cost of the entrant is very low, licensing may create excessive entry for those entry costs where entry does not occur without licensing; thus licensing reduces social welfare though it increases competition. Copyright © 2008 The Authors. Journal compilation © 2008 Blackwell Publishing Ltd and The University of Manchester.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9957.2008.01088.x
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Publisher Info
Article provided by University of Manchester in its journal Manchester School.

Volume (Year): 76 (2008)
Issue (Month): 6 (December)
Pages: 675-689
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Handle: RePEc:bla:manchs:v:76:y:2008:i:6:p:675-689

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  1. Arijit Mukherjee & Udo Broll & Soma Mukherjee, . "The welfare effects of entry: the role of the input market," Discussion Papers 08/12, University of Nottingham, School of Economics. [Downloadable!]
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This page was last updated on 2009-12-19.

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