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Market Power of the Input Supplier, Technology Transfer and Consumer Welfare

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  • Jiyun Cao
  • Arijit Mukherjee

Abstract

It is believed that market power of the input supplier, charging a linear price, is detrimental for the consumers since it creates the double marginalisation problem. We show that this view may not be true if the final goods producers can adopt strategies to reduce rent extraction by the input supplier. Market power of the input supplier may encourage a final goods producer either to license its technology to a competitor or to adopt a less distortionary technology licensing contract. Both these effects may create higher consumer welfare under market power of the input supplier compared to a competitive input market.
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Suggested Citation

  • Jiyun Cao & Arijit Mukherjee, 2017. "Market Power of the Input Supplier, Technology Transfer and Consumer Welfare," Manchester School, University of Manchester, vol. 85(4), pages 430-449, July.
    • Handle: RePEc:bla:manchs:v:85:y:2017:i:4:p:430-449
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    Cited by:

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    3. Takauchi Kazuhiro & Mizuno Tomomichi, 2024. "Consumer-Benefiting Transport Costs: The Role of Product Innovation in a Vertical Structure," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 24(2), pages 661-690.
    4. Pei-Cyuan Shih & Tsung-Han Chou & Hong Hwang & Yan-Shu Lin, 2024. "Technology Licensing under Successive Monopoly," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 64(3), pages 327-340, May.
    5. Ku-Chu Tsao & Jin-Li Hu & Hong Hwang & Yan-Shu Lin, 2023. "More licensed technologies may make it worse: a welfare analysis of licensing vertically two-tier foreign technologies," Journal of Economics, Springer, vol. 139(1), pages 71-88, June.
    6. Jiyun Cao & Arijit Mukherjee & Uday Bhanu Sinha, 2020. "The implications of labour unions in the presence of a merger," Manchester School, University of Manchester, vol. 88(4), pages 575-583, July.

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    More about this item

    JEL classification:

    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

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