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2016•Munich Personal RePEc Archive (Ludwig Maximilian University of Munich)Requires access

License or entry in oligopoly

Masahiko Hattori, Yasuhito Tanaka

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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.

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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.

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Available 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.

Key concepts: License, Oligopoly, Industrial organization, Business, Incentive, Microeconomics, Market size, Cournot competition

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