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Subsidy and entry: the role of licensing

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  • Arijit Mukherjee

Abstract

The strategic trade literature has mainly examined the importance of per-unit subsidies or taxes. Unlike the earlier works, a fixed amount of subsidy has been considered in this paper. This paper shows that even if this subsidy policy does not affect the marginal calculations of the firms, this policy can significantly alter other incentives of the firms. A commitment to the subsidy policy can encourage the foreign firm to license its technology to the domestic firm which, in turn, helps to increase the welfare of the domestic country. We find that, in equilibrium, the government of the domestic country does not need to provide the subsidy. We have also analyzed the role of the foreign government. Copyright 2002, Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 54 (2002)
Issue (Month): 1 (January)
Pages: 160-171

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Handle: RePEc:oup:oxecpp:v:54:y:2002:i:1:p:160-171

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Cited by:
  1. Neelanjan Sen, 2014. ""Unilateral" technology licensing from an entrant to incumbent monopolist," Economics Bulletin, AccessEcon, vol. 34(2), pages 1028-1037.
  2. Mukherjee, Arijit & Pennings, Enrico, 2011. "Unionization structure, licensing and innovation," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 29(2), pages 232-241, March.
  3. Mukherjee, Arijit & Mukherjee, Soma, 2013. "Technology licensing and innovation," Economics Letters, Elsevier, Elsevier, vol. 120(3), pages 499-502.
  4. Arijit Mukherjee, 2002. "Licensing in a Vertically Separated Industry," Industrial Organization, EconWPA 0211005, EconWPA.
  5. Arijit Mukherjee & Soma Mukherjee, 2002. "Licensing and the Incentive for Innovation," Keele Economics Research Papers, Centre for Economic Research, Keele University KERP 2002/17, Centre for Economic Research, Keele University.

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