Vertical licensing, input pricing, and entry

Elpiniki Bakaouka and Chrysovalantou Milliou

International Journal of Industrial Organization, 2018, vol. 59, issue C, 66-96

Abstract: We explore the incentives of a vertically integrated incumbent to license the production technology of its core input to an external firm, transforming the licensee into its input supplier. We find that the incumbent opts for licensing even when licensing also transforms the licensee into one of its direct competitors in the final products market. In fact, the licensee’s entry into the final products market, although it increases the competition and the cost that the licensor faces, reinforces the licensing incentives. Furthermore, the licensee’s entry augments the positive welfare implications of vertical licensing.

Keywords: Licensing; Vertical relations; Entry; Two-part tariffs; Outsourcing (search for similar items in EconPapers)
JEL-codes: D45 L13 L22 L24 L42 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Working Paper: Vertical Licensing, Input Pricing, and Entry (2017)
Working Paper: Vertical Licensing, Input Pricing, and Entry (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:59:y:2018:i:c:p:66-96

DOI: 10.1016/j.ijindorg.2018.03.007

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