Journal
INTERNATIONAL JOURNAL OF INDUSTRIAL ORGANIZATION
Volume 59, Issue -, Pages 66-96Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.ijindorg.2018.03.007
Keywords
Licensing; Vertical relations; Entry; Two-part tarrifs; Outsourcing
Categories
Funding
- European Union (European Social Fund-ESF)
- Greek national funds through the Operational Program Education and Lifelong Learning of the National Strategic Reference Framework (NSRF)-Research Funding Program: Thalis-Athens University of Economics and Business-New Methods in the Analysis of Market
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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. (C) 2018 Elsevier B.V. All rights reserved.
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