License or entry in oligopoly

Hattori, Masahiko and Tanaka, Yasuhito (2016): License or entry in oligopoly.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: license, entry, oligopoly, innovating firm
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets

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