Article
Commitment and Excess Capacity with Licensing: An Old Debate With a New Look
Journal of Economics
(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.
Keywords
- Capacity commitment,
- Entry,
- Excess capacity,
- Incumbent,
- Licensing
Disciplines
Publication Date
2011
Citation Information
Bagchi, A. and A. Mukherjee. 2011. Commitment and excess capacity with licensing: An old debate with a new look. Journal of Economics 103(2): 133-147.