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Capacity Commitment and Licensing

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  • Arijit Mukherjee

    (Keele University, Department of Economics)

Abstract

The theoretical literature on industrial organization has been argued that firms hold excess capacity to deter entry. However, empirical analysis did not provide much support to this hypothesis. In this paper we show that the dominant firms may hold excess capacity not for entry deterrence but for getting higher benefit from other business strategy such as licensing.We show that co-existence of licensing and excess capacity can be found if the marginal costs of the firms are small enough.

Suggested Citation

  • Arijit Mukherjee, 2002. "Capacity Commitment and Licensing," Keele Economics Research Papers KERP 2002/05, Centre for Economic Research, Keele University.
    • Handle: RePEc:kee:kerpuk:2002/05
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    References listed on IDEAS

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    More about this item

    Keywords

    Capacity commitment; Entry; Excess capacity; Incumbent; Licensing;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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