"Unilateral" technology licensing from an entrant to incumbent monopolist

Neelanjan Sen

Economics Bulletin, 2014, vol. 34, issue 2, 1028-1037

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.

Keywords: Technology licensing; Oligopoly; Fixed-cost (search for similar items in EconPapers)
JEL-codes: L1 L2 (search for similar items in EconPapers)
Date: 2014-05-11
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Citations: View citations in EconPapers (2)

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