Policy Area Seminar

Speaker: Joshua Gans
University of Melbourne

Topic: Negotiating for the Market

Date/Place/Time: Friday, May 14, 2010 at 1:30PM-2:59PM
LOCATION D313 Anderson School

In a dynamic environment where underlying competition is ‘for the market,’
this paper examines what happens when entrants and incumbents can negotiate
for the market. For instance, this might arise when an entrant innovator can
choose to license to or be acquired by an incumbent firm; i.e., engage in
cooperative commercialization. It is demonstrated that, depending upon firms’
dynamic capabilities, there may or may not be gains to trade between incumbents
and entrants in a cumulative innovation environment; that is, entrants may not be
adequately compensated for losses in future innovative potential. This stands in
contrast to static analyses that overwhelmingly identify positive gains to trade
from such cooperation. It is also demonstrated that, in this environment, firms
may have incentives to license or not precisely adverse to the welfare benefits of
such actions and that acquisition is always socially undesirable.

Link to paper and abstract: Click Here