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License or entry in oligopoly

Author

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  • Hattori, Masahiko
  • Tanaka, Yasuhito
Abstract
We consider an incentive of a choice of options for an outside innovating firm to license its new cost reducing technology to incumbent firms, or to enter into the market with or without license in an oligopoly with three firms. We will show that under linear demand and cost functions the results depend on the size of the market. When the market size is large, license to two incumbent firms without entry strategy is the optimum strategy for the innovating firm. However, when the market size is not large, license to one incumbent firm with or without entry strategy may be optimum.

Suggested Citation

  • Hattori, Masahiko & Tanaka, Yasuhito, 2016. "License or entry in oligopoly," MPRA Paper 73547, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:73547
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    References listed on IDEAS

    as
    1. X. Henry Wang & Bill Z. Yang, 2004. "On Technology Licensing In A Stackelberg Duopoly," Australian Economic Papers, Wiley Blackwell, vol. 43(4), pages 448-458, December.
    2. La Manna, Manfredi M A, 1993. "Asymmetric Oligopoly and Technology Transfers," Economic Journal, Royal Economic Society, vol. 103(417), pages 436-443, March.
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    4. Sen, Debapriya & Tauman, Yair, 2007. "General licensing schemes for a cost-reducing innovation," Games and Economic Behavior, Elsevier, vol. 59(1), pages 163-186, April.
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    12. Tarun Kabiraj, 2004. "Patent Licensing in a Leadership Structure," Manchester School, University of Manchester, vol. 72(2), pages 188-205, March.
    13. Matsumura, Toshihiro & Matsushima, Noriaki & Cato, Susumu, 2013. "Competitiveness and R&D competition revisited," Economic Modelling, Elsevier, vol. 31(C), pages 541-547.
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    15. Tarun Kabiraj, 2005. "Technology Transfer In A Stackelberg Structure: Licensing Contracts And Welfare," Manchester School, University of Manchester, vol. 73(1), pages 1-28, January.
    16. Masahiko Hattori & Yasuhito Tanaka, 2015. "Subsidy or tax policy for new technology adoption in duopoly with quadratic and linear cost functions," Economics Bulletin, AccessEcon, vol. 35(2), pages 1423-1433.
    17. Morton I. Kamien & Yair Tauman, 1986. "Fees Versus Royalties and the Private Value of a Patent," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(3), pages 471-491.
    18. Masahiko Hattori & Yasuhito Tanaka, 2016. "License or entry with vertical differentiation in duopoly," Economics and Business Letters, Oviedo University Press, vol. 5(1), pages 17-29.
    19. Boone, Jan, 2001. "Intensity of competition and the incentive to innovate," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 705-726, April.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    license; entry; oligopoly; innovating firm;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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