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Compulsory licensing, price controls, and access to patented foreign products

Listed author(s):
  • Bond, Eric W.
  • Saggi, Kamal

We analyze how a price control and the threat of compulsory licensing (CL) affect consumer access in a developing country (South) to a patented foreign product. In the model, the Southern government sets the level of the price control on a Northern patent-holder who chooses between entry and voluntary licensing (VL). While entry incurs a higher fixed cost, licensed production is of lower quality. If the patent-holder does not work its patent locally, the South is free to use CL. The threat of CL: ensures that consumers have access to (a lower quality version of) the patented good when the patent-holder chooses not to work its patent locally; improves the terms at which VL occurs; can cause the patent-holder to switch from VL to entry; and can delay consumer access when CL replaces VL or entry. We also show that a price control and CL are mutually reinforcing instruments.

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File URL: http://www.sciencedirect.com/science/article/pii/S0304387814000431
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Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 109 (2014)
Issue (Month): C ()
Pages: 217-228

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Handle: RePEc:eee:deveco:v:109:y:2014:i:c:p:217-228
DOI: 10.1016/j.jdeveco.2014.04.001
Contact details of provider: Web page: http://www.elsevier.com/locate/devec

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