Business, Management and Accounting
8 years ago

Monopolist profits soar as entrants subsidize technology licensing.

Economics bulletin
Unilateral technology licensing from an entrant to incumbent monopolist
Neelanjan Sen

Paper Summary

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The study shows that a monopolist may license technology to a potential entrant who is not yet in the market. Surprisingly, this can actually increase the monopolist's profit after the entrant enters the market. The entrant can even pay the monopolist to license its technology. However, if the monopolist is a foreign firm or a domestic firm, licensing may reduce overall welfare.