Journal of Economics

, Volume 103, Issue 2, pp 133–147 | Cite as

Commitment and excess capacity with licensing: an old debate with a new look

Article

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 

JEL Classification

L13 D43 O33 

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Copyright information

© Springer-Verlag 2011

Authors and Affiliations

  1. 1.Coles College of BusinessKennesaw State UniversityKennesawUSA
  2. 2.School of Economics and The Leverhulme Centre for Research in Globalisation and Economic PolicyUniversity of NottinghamNottinghamUK

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