Commitment and Excess Capacity with Licensing: An Old Debate with a New Look
The theoretical literature demonstrates that excess capacity is not an equilibrium phenomenon if each firm's marginal revenue decreases with the competitor's output. We show that such a conclusion can be overturned in the presence of technology licensing. We show that in the presence of technology licensing, a firm may hold excess capacity because it increases the benefit from technology licensing.
Aniruddha Bagchi, and Arijit Mukherjee. "Commitment and Excess Capacity with Licensing: An Old Debate with a New Look." Journal of Economics 103.2 (2011): 133-47. Print.