Licensing technology and foreclosure
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Date
2007-10Metadata
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- Discussion papers (SAM) [666]
Abstract
We consider an industry where one firm with a superior technology competes
for market shares with several rivals. The owner of the superior technology
(the dominant firm) can license or transfer the source of its dominance
to a subset of rivals. Allowing the non-license takers to remain active in the
market is a drain on the profit of the insiders, and we demonstrate that the
dominant firm will only make a transfer of the superior technology if it can be
used to foreclose some rival firms. Foreclosure of a subset of firms may thus
be the outcome even without restrictions on the licensing schemes. Moreover,
we show that when licensing is profitable, the dominant firm will prefer a
complete transfer even if a partial transfer can be made.
Publisher
Norwegian School of Economics and Business Administration. Department of EconomicsSeries
Discussion paper2007:29