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Cover of: Entry-Deterrent Licensing Revisited
Shuai Niu

Entry-Deterrent Licensing Revisited

Section: Articles
Volume 180 (2024) / Issue 3, pp. 511-528 (18)
Published 31.07.2024
DOI 10.1628/jite-2024-0021
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  • 10.1628/jite-2024-0021
Summary
Consider a market with an incumbent and a potential entrant. The potential entrant owns an innovation so that it can produce more efficiently than the incumbent if it enters the market by starting a new firm. The potential entrant can license the innovation to the incumbent. The gain from licensing is higher if the potential entrant does not enter the market. It is possible that the potential entrant enters without licensing and does not enter with licensing. Licensing may reduce social welfare if it induces the potential entrant not to enter the market.