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Technology Licensing to a Rival

Author

Listed:
  • Corinne Langinier

    (Iowa State University)

  • Caroline Boivin

    (University of Sherbrooke)

Abstract

Licensing a new technology implies introducing competition into the market. This has a negative effect on the profit of the incumbent if the demand remains unchanged. However, because of the novel content of an innovation, consumers may have different perceptions of the value of a good depending on the market structure. Thus, the introduction of a competitor into the market may enhance demand, and consequently have a positive effect on the profit of the incumbent. In a simple setting, we show that the incumbent may decide to license her technology even in the absence of a royalty when the positive effect outweighs the negative one.

Suggested Citation

  • Corinne Langinier & Caroline Boivin, 2005. "Technology Licensing to a Rival," Economics Bulletin, AccessEcon, vol. 12(15), pages 1-8.
    • Handle: RePEc:ebl:ecbull:eb-05l10021
    as

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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    innovation.;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • D2 - Microeconomics - - Production and Organizations

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