Business, Management and Accounting
4 years ago

Strategic licensing by firms reduces entrants' payoffs, study finds.

Optimal Licensing Policy for an Incumbent Firm with Fixed Cost Advantage
Huo Pei

Paper Summary

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The article corrects mistakes in a previous study and shows that strategic licensing by a dominant firm reduces potential entrants' payoffs. It also clarifies that industry profit in a certain market is a concave function of the number of firms, not convex as previously thought. The study then determines conditions under which the dominant firm will choose different licensing strategies for entrants.