Commitment and Excess Capacity with Licensing: An Old Debate With a New Look
Document Type
Article
Publication Date
January 2011
Abstract
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.
Journal Title
Journal of Economics
Volume
103
Issue
2
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