Technology Licensing to a Rival
AbstractLicensing 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.
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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12414.
Date of creation: 01 Sep 2005
Date of revision:
Publication status: Published in Economics Bulletin, September 2005, vol. 12, pp. 1-8
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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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Web page: http://www.econ.iastate.edu
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-07-15 (All new papers)
- NEP-BEC-2006-07-15 (Business Economics)
- NEP-COM-2006-07-15 (Industrial Competition)
- NEP-IND-2006-07-15 (Industrial Organization)
- NEP-INO-2006-07-15 (Innovation)
- NEP-MIC-2006-07-15 (Microeconomics)
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