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Licensing in a Vertically Separated Industry

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  • Arijit Mukherjee

Abstract

The literature on technology licensing has ignored the importance of market power of the input supplier. In this paper we examine the impact of licensing in the downstream industry when the firms in the upstream industry have market power. We show that licensing in the downstream industry can make the upstream industry more competitive. However, licensing in the downstream industry is profitable if and only if licensing changes the concentration in the upstream industry. We also show that a monopolist in the final goods market has the incentive for licensing if licensing changes the market structure of the upstream industry.

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File URL: http://128.118.178.162/eps/io/papers/0211/0211005.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Industrial Organization with number 0211005.

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Length: 21 pages
Date of creation: 05 Nov 2002
Date of revision:
Handle: RePEc:wpa:wuwpio:0211005

Note: Type of Document - pdf; prepared on pc; pages: 21
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Web page: http://128.118.178.162

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Keywords: Entry; Licensing; Downstream industry; Upstream industry;

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References

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  1. Kabiraj, Tarun & Marjit, Sugata, 1993. "International technology transfer under potential threat of entry : A Cournot-Nash framework," Journal of Development Economics, Elsevier, vol. 42(1), pages 75-88, October.
  2. Nancy T. Gallini & Brian D. Wright, 1990. "Technology Transfer under Asymmetric Information," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 147-160, Spring.
  3. Desquilbet, Marion & Guyomard, Herve, 1999. "Public Policy In Vertically Related Markets: A Cournot Oligopoly-Oligopsony Model," 1999 Annual meeting, August 8-11, Nashville, TN 21561, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  4. Kabiraj, Tarun & Marjit, Sugata, 1992. "Technology and price in a non-cooperative framework," International Review of Economics & Finance, Elsevier, vol. 1(4), pages 371-378.
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  7. Marjit, Sugata, 1990. "On a non-cooperative theory of technology transfer," Economics Letters, Elsevier, vol. 33(3), pages 293-298, July.
  8. Masahiro Abiru & Babu Nahata & Subhashis Raychaudhuri & Michael Waterson, 2003. "Equilibrium structures in vertical oligopoly," General Economics and Teaching 0306010, EconWPA.
  9. Katharine E. Rockett, 1990. "Choosing the Competition and Patent Licensing," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 161-171, Spring.
  10. Arijit Mukherjee, 2002. "Subsidy and entry: the role of licensing," Oxford Economic Papers, Oxford University Press, vol. 54(1), pages 160-171, January.
  11. Schmitz, Patrick W., 2002. "Monopolistic Licensing Strategies under Asymmetric Information," MPRA Paper 12532, University Library of Munich, Germany.
  12. Schmitz, Patrick W., 2002. "On Monopolistic Licensing Strategies under Asymmetric Information," Journal of Economic Theory, Elsevier, vol. 106(1), pages 177-189, September.
  13. Rockett, Katharine, 1990. "The quality of licensed technology," International Journal of Industrial Organization, Elsevier, vol. 8(4), pages 559-574, December.
  14. Kamien, Morton I & Tauman, Yair, 1986. "Fees versus Royalties and the Private Value of a Patent," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 471-91, August.
  15. Reinganum, Jennifer F., 1989. "The timing of innovation: Research, development, and diffusion," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 14, pages 849-908 Elsevier.
  16. Beggs, A. W., 1992. "The licensing of patents under asymmetric information," International Journal of Industrial Organization, Elsevier, vol. 10(2), pages 171-191, June.
  17. Kamien, Morton I. & Oren, Shmuel S. & Tauman, Yair, 1992. "Optimal licensing of cost-reducing innovation," Journal of Mathematical Economics, Elsevier, vol. 21(5), pages 483-508.
  18. Arijit Mukherjee, 2001. "Technology transfer with commitment," Economic Theory, Springer, vol. 17(2), pages 345-369.
  19. Bousquet, Alain & Cremer, Helmuth & Ivaldi, Marc & Wolkowicz, Michel, 1998. "Risk sharing in licensing," International Journal of Industrial Organization, Elsevier, vol. 16(5), pages 535-554, September.
  20. Salinger, Michael A, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, MIT Press, vol. 103(2), pages 345-56, May.
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