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Uncertainty and Licensing in a Vertical Structure

Uncertainty and Licensing in a Vertical Structure. Fang-yueh Chen National Chung Cheng University Tsai-chen Shen Tatung Institute of Commerce and Technology.

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Uncertainty and Licensing in a Vertical Structure

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  1. Uncertainty and Licensing in a Vertical Structure Fang-yueh Chen National Chung Cheng University Tsai-chen Shen Tatung Institute of Commerce and Technology This paper is to be presented in「Corporate Governance, Foreign Entry, and Market Competition」International Conference 2011,held in National University of Kaohsiung, R.O.C.

  2. I. Motivations • Licensing in a vertical structure • Licensing with risk sharing • Endogenizing insider and outsider models • Licensing and vertical externality

  3. II. Purposes • Investigate how an input monopolist shares risks through international licensing and its consequences • Examine the impact of entry in the downstream market

  4. III. Literature reviews • Related to vertical structure: • Mukherjee (2010a), Mukerjee and Ray (2007, MS), Mukherjee and Pennings (2011, IJIO) • Related to threat of entry: • Kabiraj and Marjit (1993, JDE), Saggi (1996, RIE), Pack and Saggi (2001, JDE), Dinda and Mukherjee (2011, JPET) • Related to uncertainty: • Bousquet et al. (1998, IJIO)

  5. Country J Country T Licensing Firm A Firm C input market Firm B Country E Figure 1: The basic model IV. The basic model

  6. V. Sequence of moves and main equations (Cont.) • Stage 1: Licensing game • Stage 2: Input market equilibrium • Stage 3: The uncertainty resolves • Stage 4: Final goods market equilibrium

  7. V. Sequence of moves and main equations

  8. VI. The intuition of licensing and the finding (Cont.)

  9. VI. The intuition of licensing and the finding

  10. VII. Equilibrium with licensing and entry mode of an outsider (cont.)

  11. VII. Equilibrium with licensing and entry mode of an outsider

  12. Country J Country T Licensing Firm A Firm C Input Market, M1 Input Market, M2 Firm B Firm D Country E Figure 4: The extended model VIII. The extended model

  13. IX. Main equations

  14. X. The intuition of licensing and the finding

  15. XI. The equilibrium in the extended model (Cont.)

  16. XI. The equilibrium in the extended model (Cont.)

  17. XI. The equilibrium in the extended model

  18. Thank for your listening and comments are very welcome.

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