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Does an incumbent monopolist have an incentive to invite new entry through granting a free patent license?

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  • Toshimitsu, Tsuyoshi

Abstract

We examine whether an incumbent monopolist has an incentive to invite a new entry. In particular, we demonstrate the condition of a profit-raising entry effect in the presence of network externalities. Here the incumbent monopolist grants a free patent license for a perfectly compatible product for a new firm when it can choose the level of compatibility.

Suggested Citation

  • Toshimitsu, Tsuyoshi, 2020. "Does an incumbent monopolist have an incentive to invite new entry through granting a free patent license?," Research in Economics, Elsevier, vol. 74(4), pages 349-353.
    • Handle: RePEc:eee:reecon:v:74:y:2020:i:4:p:349-353
    DOI: 10.1016/j.rie.2020.10.005
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    References listed on IDEAS

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    1. Sjaak Hurkens & Ángel L. López, 2014. "Mobile Termination, Network Externalities and Consumer Expectations," Economic Journal, Royal Economic Society, vol. 124(579), pages 1005-1039, September.
    2. Ryoma Kitamura & Tsuyoshi Toshimitsu, 2020. "On a Stackelberg leader's incentive to invite entry into horizontally differentiated oligopolies with network externalities: A reexamination," Discussion Paper Series 203, School of Economics, Kwansei Gakuin University.
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    4. Luciano Fanti & Domenico Buccella, 2017. "Profit raising entry effects in network industries with Corporate Social Responsibility," Economics and Business Letters, Oviedo University Press, vol. 6(3), pages 59-68.
    5. Economides, Nicholas, 1996. "Network externalities, complementarities, and invitations to enter," European Journal of Political Economy, Elsevier, vol. 12(2), pages 211-233, September.
    6. Rosenthal, Robert W, 1980. "A Model in Which an Increase in the Number of Sellers Leads to a Higher Price," Econometrica, Econometric Society, vol. 48(6), pages 1575-1579, September.
    7. Kim, Jaehong, 2001. "Incumbent's Incentive under Network Externalities," Discussion Paper Series a404, Institute of Economic Research, Hitotsubashi University.
    8. Kim, Jaehong, 2002. "Product differentiation and network externality: a comment on Economides: "Network externalities, complementarities, and invitations to enter" [Eur. J. Political Economy 12 (1996) 211-233]," European Journal of Political Economy, Elsevier, vol. 18(2), pages 397-399, June.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Profit-raising entry; Fulfilled expectation; Horizontally differentiated duopoly; Monopoly; Network externality; Compatibility;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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