Strategic Trading Partner Selection for an Upstream Licenser

Yamada, Mai (2016): Strategic Trading Partner Selection for an Upstream Licenser.

Abstract

This paper examines the determinant of trading partner selection for a licenser. The licenser negotiates with either a downstream incumbent which has its own production facility (the outside option) or a downstream entrant, and determines a two-part tariff for licensing. If the licenser trades with the entrant (the incumbent), the downstream market becomes a duopoly (monopoly). We find that the licenser’s bargaining power over the incumbent does not influence the licenser’s decision on its trading partner although that over the entrant, its marginal costs of licensing to the entrant and the incumbent, and the incumbent’s outside value matter for its decision.

• Item Type: MPRA Paper
• Language: English
• Keywords: Trading partner; Nash bargaining game; Outside option
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C78 - Bargaining Theory ; Matching Theory; D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior: Theory; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L14 - Transactional Relationships ; Contracts and Reputation ; Networks

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