Capacity Commitment and Licensing

Keele Economics Research Papers KERP 2002/05

18 Pages Posted: 19 Jul 2002

See all articles by Arijit Mukherjee

Arijit Mukherjee

University of Nottingham - School of Economics

Date Written: May 2002

Abstract

The theoretical literature on industrial organization has been argued that firms hold excess capacity to deter entry. However, empirical analysis did not provide much support to this hypothesis. In this paper we show that the dominant firms may hold excess capacity not for entry deterrence but for getting higher benefit from other business strategy such as licensing. We show that co-existence of licensing and excess capacity can be found if the marginal costs of the firms are small enough.

Keywords: Capacity commitment, Entry, Excess capacity, Incumbent, Licensing

JEL Classification: L13

Suggested Citation

Mukherjee, Arijit, Capacity Commitment and Licensing (May 2002). Keele Economics Research Papers KERP 2002/05, Available at SSRN: https://ssrn.com/abstract=316688 or http://dx.doi.org/10.2139/ssrn.316688

Arijit Mukherjee (Contact Author)

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom
+44 115 9514733 (Phone)
+44 115 9514159 (Fax)

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