Technology Licensing to a Rival

Corinne Langinier and Caroline Boivin ()
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Caroline Boivin: University of Sherbrooke

Economics Bulletin, 2005, vol. 12, issue 15, 1-8

Abstract: Licensing 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.

Keywords: innovation. (search for similar items in EconPapers)
JEL-codes: D2 L1 (search for similar items in EconPapers)
Date: 2005-09-19
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Citations: View citations in EconPapers (1)

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Working Paper: Technology Licensing to a Rival (2005)
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