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Valuing Intellectual Property Rights in an Imperfectly Competitive Market: A Biopharming Application

Author

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  • Kostandini, Genti
  • Mills, Bradford F.

Abstract

Small research firms developing biotechnology applications often focus on establishing intellectual property rights (IPRs), which can then be sold to more established firms with existing market channels. This paper presents a method for valuing the IPRs for an innovation that lowers product production costs below those associated with the patented process of a monopolist. The application to Glucocerebrosidase enzyme from transgenic tobacco suggests an IPRs value of about $1.75 billion. Despite the innovator’s market power, significant surplus gains also accrue to consumers. Further, U.S. antitrust laws that prohibit IPRs acquisition by the current monopolist increase consumer welfare by almost 50%.

Suggested Citation

  • Kostandini, Genti & Mills, Bradford F., 2009. "Valuing Intellectual Property Rights in an Imperfectly Competitive Market: A Biopharming Application," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 41(3), pages 1-13, December.
    • Handle: RePEc:ags:joaaec:56641
    DOI: 10.22004/ag.econ.56641
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    Keywords

    Agribusiness; Demand and Price Analysis; Financial Economics; Marketing;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D60 - Microeconomics - - Welfare Economics - - - General

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