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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.

Suggested Citation

  • Arijit Mukherjee, 2002. "Subsidy and entry: the role of licensing," Oxford Economic Papers, Oxford University Press, vol. 54(1), pages 160-171, January.
  • Handle: RePEc:oup:oxecpp:v:54:y:2002:i:1:p:160-171
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    Citations

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    Cited by:

    1. Arijit Mukherjee, 2002. "Licensing in a Vertically Separated Industry," Keele Economics Research Papers KERP 2002/09, Centre for Economic Research, Keele University.
    2. Ghosh, Arghya & Saha, Souresh, 2015. "Price competition, technology licensing and strategic trade policy," Economic Modelling, Elsevier, vol. 46(C), pages 91-99.
    3. Arijit Mukherjee & Soma Mukherjee, 2002. "Licensing and the Incentive for Innovation," Industrial Organization 0211008, EconWPA.
    4. Mukherjee, Arijit & Mukherjee, Soma, 2013. "Technology licensing and innovation," Economics Letters, Elsevier, vol. 120(3), pages 499-502.
    5. Siddhartha Bandyopadhyay & Arijit Mukherjee, 2014. "R&D Cooperation with Entry," Manchester School, University of Manchester, vol. 82(1), pages 52-70, January.
    6. Mukherjee, Arijit & Pennings, Enrico, 2011. "Unionization structure, licensing and innovation," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 232-241, March.
    7. Arijit Mukherjee & Soma Mukherjee, 2008. "Excess-Entry Theorem: The Implications Of Licensing," Manchester School, University of Manchester, vol. 76(6), pages 675-689, December.
    8. Debapriya Sen & Giorgos Stamatopoulos, 2009. "Technology Transfer Under Returns To Scale," Manchester School, University of Manchester, vol. 77(3), pages 337-365, June.
    9. Neelanjan Sen, 2014. ""Unilateral" technology licensing from an entrant to incumbent monopolist," Economics Bulletin, AccessEcon, vol. 34(2), pages 1028-1037.
    10. Arijit Mukherjee & Achintya Ray, 2014. "Entry, Profit and Welfare under Asymmetric R&D Costs," Manchester School, University of Manchester, vol. 82(3), pages 284-295, June.

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