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"Unilateral" technology licensing from an entrant to incumbent monopolist

Author

Listed:
  • Neelanjan Sen

    (University of Calcutta)

Abstract

An incumbent monopolist, tries to deter entry and thus never licenses its technology to any potential entrant. This paper, however shows that the monopolist may license in the technology of the entrant that remains out of the market in the pre-licensing stage. Post-licensing, the entrant actually enters the market, but this reduction in the market share of the incumbent, (paradoxically) increases its post-entry profit. Moreover the entrant can actually subsidize the monopolist to license its technology. Licensing decreases welfare if the monopolist is either a foreign firm (whose profit is totally repatriated) or a domestic firm.

Suggested Citation

  • Neelanjan Sen, 2014. ""Unilateral" technology licensing from an entrant to incumbent monopolist," Economics Bulletin, AccessEcon, vol. 34(2), pages 1028-1037.
    • Handle: RePEc:ebl:ecbull:eb-14-00150
    as

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    References listed on IDEAS

    as
    1. Fauli-Oller, Ramon & Sandonis, Joel, 2002. "Welfare reducing licensing," Games and Economic Behavior, Elsevier, vol. 41(2), pages 192-205, November.
    2. Arora, Ashish & Fosfuri, Andrea, 2003. "Licensing the market for technology," Journal of Economic Behavior & Organization, Elsevier, vol. 52(2), pages 277-295, October.
    3. Wang, X. Henry, 1998. "Fee versus royalty licensing in a Cournot duopoly model," Economics Letters, Elsevier, vol. 60(1), pages 55-62, July.
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    6. Milgrom, Paul & Roberts, John, 1982. "Predation, reputation, and entry deterrence," Journal of Economic Theory, Elsevier, vol. 27(2), pages 280-312, August.
    7. Ottoz Elisabetta & Cugno Franco, 2009. "Hybrid Licensing of Product Innovations," Review of Law & Economics, De Gruyter, vol. 5(1), pages 579-594, October.
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    Cited by:

    1. Neelanjan Sen, 2015. "Technology transfer and its effect on innovation," Economics Bulletin, AccessEcon, vol. 35(4), pages 2523-2534.
    2. Neelanjan Sen, 2015. "Technology Transfer in Oligopoly in Presence of Fixed-Cost in Production," Journal of Industry, Competition and Trade, Springer, vol. 15(4), pages 383-409, December.

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    More about this item

    Keywords

    Technology licensing; Oligopoly; Fixed-cost;
    All these keywords.

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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