Market power of the input supplier, technology transfer and consumer welfare

Cao, Jiyun; Mukherjee, Arijit

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 with a cost advantage 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.

Citation

Cao, J., & Mukherjee, A. (2017). Market power of the input supplier, technology transfer and consumer welfare. Manchester School, 85(4), 430-449. https://doi.org/10.1111/manc.12152

• Journal Article Type: Article
• Acceptance Date: Feb 16, 2016
• Online Publication Date: May 3, 2016
• Publication Date: Jul 1, 2017
• Deposit Date: Dec 8, 2018
• Publicly Available Date: Jan 17, 2019
• Journal: The Manchester School
• Print ISSN: 1463-6786
• Electronic ISSN: 1467-9957
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 85
• Issue: 4
• Pages: 430-449
• DOI: https://doi.org/10.1111/manc.12152
• Public URL: https://nottingham-repository.worktribe.com/output/1394253
• Publisher URL: https://onlinelibrary.wiley.com/doi/full/10.1111/manc.12152