IDEAS home Printed from https://ideas.repec.org/a/bpj/ajlecn/v11y2020i3p13n4.html
   My bibliography  Save this article

Patent Races for COVID-19 Vaccines and Liability Rules

Author

Listed:
  • Kim Jeong-Yoo

    (Department of Economics, Kyung Hee University, 1 Hoegidong, Dongdaemunku, Seoul 130-701, Korea)

Abstract

I analyze a model of patent races for COVID-19 vaccines under alternative liability rules. The first inventor of the vaccine gets the monopoly rent, but must assume full liability from its side effects. In this model, firms choose two kinds of investments, one for inventing a vaccine and the other for its safety. I show that firms have an incentive to overinvest in both activities under strict liability. This is contrasted with the established result established that the injurer takes socially optimal accident-preventing precaution under strict liability. This contrast comes from the competition effect. Overinvestment in inventing vaccines due to competition makes a firm overinvest in safety as well. I also argue that it is undesirable for firms to get full or partial exemption from liability, because it would reduce the incentive to invest in safety. Instead, reducing the monopoly rent by regulating the vaccine price resolves both overinvestment problems.

Suggested Citation

  • Kim Jeong-Yoo, 2020. "Patent Races for COVID-19 Vaccines and Liability Rules," Asian Journal of Law and Economics, De Gruyter, vol. 11(3), pages 1-13, December.
    • Handle: RePEc:bpj:ajlecn:v:11:y:2020:i:3:p:13:n:4
    DOI: 10.1515/ajle-2020-0042
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/ajle-2020-0042
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1515/ajle-2020-0042?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. João Ricardo Faria & Franklin G. Mixon, Jr. & Steven B. Caudill & Samantha J. Wineke, 2014. "Two-Dimensional Effort in Patent-Race Games and Rent-Seeking Contests: The Case of Telephony," Games, MDPI, vol. 5(2), pages 1-11, May.
    2. A. Mitchell Polinsky, 1980. "Strict Liability versus Negligence in a Market Setting," NBER Working Papers 0420, National Bureau of Economic Research, Inc.
    3. Tom Lee & Louis L. Wilde, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(2), pages 429-436.
    4. Jeong-Yoo Kim, 2006. "Strict liability versus negligence when the injurer's activity involves positive externalities," European Journal of Law and Economics, Springer, vol. 22(1), pages 95-104, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Iwasaki Masaki, 2022. "Segmentation of Social Norms and Emergence of Social Conflicts Through COVID-19 Laws," Asian Journal of Law and Economics, De Gruyter, vol. 13(1), pages 1-36, April.
    2. Adachi Kiyoshi, 2023. "The Patentability of Second and Subsequent Medical Uses in Asia’s Patent Legislation," Asian Journal of Law and Economics, De Gruyter, vol. 14(1), pages 59-75, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nuno Garoupa & Thomas S. Ulen, 2013. "The economics of activity levels in tort liability and regulation," Chapters, in: Thomas J. Miceli & Matthew J. Baker (ed.), Research Handbook on Economic Models of Law, chapter 2, pages 33-53, Edward Elgar Publishing.
    2. Atal, Vidya & Bar, Talia & Gordon, Sidartha, 2016. "Project selection: Commitment and competition," Games and Economic Behavior, Elsevier, vol. 96(C), pages 30-48.
    3. Helen Weeds, 2002. "Strategic Delay in a Real Options Model of R&D Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(3), pages 729-747.
    4. Bertrand, Olivier & Zuniga, Pluvia, 2006. "R&D and M&A: Are cross-border M&A different? An investigation on OECD countries," International Journal of Industrial Organization, Elsevier, vol. 24(2), pages 401-423, March.
    5. Gerard Llobet & Javier Suarez, 2010. "Entrepreneurial Innovation, Patent Protection and Industry Dynamics," Working Papers wp2010_1001, CEMFI.
    6. Dosis, Anastasios & Muthoo, Abhinay, 2019. "Experimentation in Dynamic R&D Competition," CRETA Online Discussion Paper Series 52, Centre for Research in Economic Theory and its Applications CRETA.
    7. Nelson, Kelly P. & Parton, Lee C. & Brown, Zachary S., 2022. "Biofuels policy and innovation impacts: Evidence from biofuels and agricultural patent indicators," Energy Policy, Elsevier, vol. 162(C).
    8. Wilfred Amaldoss & Richard Staelin, 2010. "Cross-Function and Same-Function Alliances: How Does Alliance Structure Affect the Behavior of Partnering Firms?," Management Science, INFORMS, vol. 56(2), pages 302-317, February.
    9. Sen, Debapriya & Tauman, Yair, 2007. "General licensing schemes for a cost-reducing innovation," Games and Economic Behavior, Elsevier, vol. 59(1), pages 163-186, April.
    10. Nicholas Bloom & Mark Schankerman & John Van Reenen, 2013. "Identifying Technology Spillovers and Product Market Rivalry," Econometrica, Econometric Society, vol. 81(4), pages 1347-1393, July.
    11. Kovác, Eugen & Vinogradov, Viatcheslav & Zigic, Kresimir, 2010. "Technological leadership and persistence of monopoly under endogenous entry: Static versus dynamic analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 34(8), pages 1421-1441, August.
    12. Clément Bonnet, 2016. "Revisiting the optimal patent policy tradeoff for environmental technologies," EconomiX Working Papers 2016-34, University of Paris Nanterre, EconomiX.
    13. Wei Lim, 1998. "Multistage R&D competition and patent policy," Journal of Economics, Springer, vol. 68(2), pages 153-173, June.
    14. Changying Li & Jianhu Zhang, 2013. "Dynamic Games of R&D Competition in a Differentiated Duopoly," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 169(4), pages 660-679, December.
    15. Gilbert, Richard J. & Katz, Michael L., 2011. "Efficient division of profits from complementary innovations," International Journal of Industrial Organization, Elsevier, vol. 29(4), pages 443-454, July.
    16. Bruce A. Kirchhoff, 1992. "Entrepreneurship's Contribution to Economics," Entrepreneurship Theory and Practice, , vol. 16(2), pages 93-112, January.
    17. Johnson Kakeu & Gérard Gaudet, 2011. "The Quest for Hegemony Among Countries and Global Pollution," Dynamic Games and Applications, Springer, vol. 1(4), pages 498-513, December.
    18. Deck, Cary & Sheremeta, Roman M., 2019. "The tug-of-war in the laboratory," European Journal of Political Economy, Elsevier, vol. 60(C).
    19. Gene M. Grossman & Carl Shapiro, 1986. "Optimal Dynamic R&D Programs," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 581-593, Winter.
    20. Thijssen, J.J.J., 2003. "Investment under uncertainty, market evolution and coalition spillovers in a game theoretic perspective," Other publications TiSEM 672073a6-492e-4621-8d4a-0, Tilburg University, School of Economics and Management.

    More about this item

    Keywords

    COVID-19; liability rules; patent race; product liability; vaccine; K13;
    All these keywords.

    JEL classification:

    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:ajlecn:v:11:y:2020:i:3:p:13:n:4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.