Weak IPR and Imitation in the South and International Exhaustion of Patent Rights in the North for Innovated Drugs: A Policy Game
AbstractWe consider a policy game between a high-income country hosting a drug innovator and a low-income country hosting a drug imitator. The low-income country chooses whether to enforce an International Patent Regime (strict IPR) or not (weak IPR) and the high-income country chooses whether to allow parallel imports (PI) of on-patent drugs or market based discrimination (MBD). We show that, for a moderately high imitation cost, both (Strict IPR, Parallel Imports) and (Weak IPR, MBD) emerge as the Subgame Perfect Nash Equilibrium (SPNE) policy choices. For relatively smaller imitation costs, (Weak IPR, MBD) is the unique SPNE policy choice. The welfare properties reveal that although innovation may be higher at the (Strict IPR, PI), the market coverage and national welfare of the low-income country, and the total welfare are all lower. This opens up the efficiency issue of implementing TRIPS and at the same time allowing international exhaustion of patent rights.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics, University of Kent in its series Studies in Economics with number 0919.
Date of creation: Oct 2009
Date of revision:
Contact details of provider:
Postal: Department of Economics, University of Kent at Canterbury, Canterbury, Kent, CT2 7NP
Phone: +44 (0)1227 764000
Fax: +44 (0)1227 827850
Web page: http://www.ukc.ac.uk/economics/
Find related papers by JEL classification:
- D4 - Microeconomics - - Market Structure and Pricing
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- I1 - Health, Education, and Welfare - - Health
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-24 (All new papers)
- NEP-INO-2009-10-24 (Innovation)
- NEP-IPR-2009-10-24 (Intellectual Property Rights)
- NEP-MIC-2009-10-24 (Microeconomics)
- NEP-REG-2009-10-24 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Shubham Chaudhuri & Pinelopi K. Goldberg & Panle Jia, 2003.
"Estimating the Effects of Global Patent Protection in Pharmaceuticals: A Case Study of Quinolones in India,"
NBER Working Papers
10159, National Bureau of Economic Research, Inc.
- Panle Gia & Pinelopi K. Goldberg & Shubham Chaudhuri, 2006. "Estimating the Effects of Global Patent Protection in Pharmaceuticals: A Case Study of Quinolones in India," American Economic Review, American Economic Association, vol. 96(5), pages 1477-1514, December.
- Shubham Chaudhuri & Pinelopi K. Goldberg & Panle Jia, 2006. "Estimating the Effects of Global Patent Protection in Pharmaceuticals: A Case Study of Quinolones in India," Working Papers id:772, eSocialSciences.
- Sanjaya Lall and Manuel Albaladejo, .
"Indicators of the Relative Importance of IPRs In Developing Countries,"
QEH Working Papers
qehwps85, Queen Elizabeth House, University of Oxford.
- Lall, Sanjaya, 2003. "Indicators of the relative importance of IPRs in developing countries," Research Policy, Elsevier, vol. 32(9), pages 1657-1680, October.
- Lutz, Stefan, 1996.
"Vertical Product Differentiation and Entry Deterrence,"
CEPR Discussion Papers
1455, C.E.P.R. Discussion Papers.
- Stefan Lutz, 1997. "Vertical product differentiation and entry deterrence," Journal of Economics, Springer, vol. 65(1), pages 79-102, February.
- Richardson, Martin, 2002. "An elementary proposition concerning parallel imports," Journal of International Economics, Elsevier, vol. 56(1), pages 233-245, January.
- Valletti, Tommaso M., 2006. "Differential pricing, parallel trade, and the incentive to invest," Journal of International Economics, Elsevier, vol. 70(1), pages 314-324, September.
- Rajat Acharyya & María D.C. García-Alonso, 2008. "Parallel Imports, Innovations And National Welfare: The Role Of The Sizes Of Income Classes And National Markets For Health Care," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 53(01), pages 57-79.
- Malueg, D.A. & Schwartz, M., 1993.
"Parallel Imports, Demand Dispersion and International Price Discrimination,"
93-6, U.S. Department of Justice - Antitrust Division.
- Malueg, David A. & Schwartz, Marius, 1994. "Parallel imports, demand dispersion, and international price discrimination," Journal of International Economics, Elsevier, vol. 37(3-4), pages 167-195, November.
- Eugen Kovac & Kresimir Zigic, 2007. "International Competition in Vertically Differentiated Markets with Innovation and Imitation: Trade Policy versus Free Trade," CERGE-EI Working Papers wp336, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
- Patricia M. Danzon, 1998. "The Economics of Parallel Trade," PharmacoEconomics, Springer Healthcare | Adis, vol. 13(3), pages 293-304.
- Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Wiley Blackwell, vol. 49(1), pages 3-13, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Emma Robinson).
If references are entirely missing, you can add them using this form.