Working Paper : 1605


Authors Bakaouka, E. and Milliou, C.
Title Vertical Licensing, Input Pricing, and Entry
Abstract We explore the incentives of a vertically integrated incumbent firm to license the production technology of its core input to an external firm. We find that it opts for licensing even when licensing induces the entry of the licensee in the final goods market. In fact, although the entry of the licensee reduces the licensor's efficiency and the competition that it faces, it reinforces, instead of weakens, the licensing incentives. Vertical licensing is always welfare-enhancing and it is even more welfare-enhancing when it triggers entry.
Creation Date 2016-12-22
Keywords licensing, vertical relations, entry, two-part tariffs, outsourcing
Classification JEL L22, L24, L13, L42,
File Vertical.Licensing.Input.Pricing.and.Entry.pdf (570040 bytes)
File-Function First version

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