Journal
JOURNAL OF ECONOMIC BEHAVIOR & ORGANIZATION
Volume 52, Issue 2, Pages 277-295Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/S0167-2681(03)00002-7
Keywords
licensing; market structure; product differentiation
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In technology-based industries, incumbent firms often license their technology to potential competitors. Such a strategy is difficult to explain within traditional models of licensing. This paper extends the literature on licensing by relaxing the assumption of a monopolist technology holder. Competition in the market for technology induces licensing of innovations and incumbent firms may find it privately profitable to license although their joint profits may well be higher in the absence of any licensing. A strong testable implication of our model is that the number of licenses per patent holder decreases with the degree of product differentiation. (C) 2003 Elsevier Science B.V. All rights reserved.
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