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Welfare effects of compulsory licensing

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  • Jacob Seifert

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Abstract

This paper derives necessary and sufficient conditions for compulsory licensing to increase consumer surplus and total welfare, taking into account both static (technology transfer) and dynamic (innovation) effects. When the risk-free rate is low, compulsory licensing is shown unambiguously to increase consumer surplus. Compulsory licensing has an ambiguous effect on total welfare, but is more likely to increase total welfare in industries that are naturally less competitive. Finally, compulsory licensing is shown to be an effective policy to protect competition per se. The paper also demonstrates the robustness of these results to alternative settings of R&D competition and discusses their significance for the debate on compulsory licensing in the context of standard-setting organisations and pharmaceutical trade. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Jacob Seifert, 2015. "Welfare effects of compulsory licensing," Journal of Regulatory Economics, Springer, vol. 48(3), pages 317-350, December.
  • Handle: RePEc:kap:regeco:v:48:y:2015:i:3:p:317-350
    DOI: 10.1007/s11149-015-9288-9
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Competition policy; Compulsory licensing; Innovation; Welfare; D43; L13; L41; L51; O31;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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