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Price controls versus compulsory licensing: effects on patent-holders and consumers

Author

Listed:
  • Eric W Bond

    () (Vanderbilt University)

  • Kamal Saggi

    () (Vanderbilt University)

Abstract

We extend the model of Bond and Saggi (2014) in which a patent-holder chooses between direct entry and the voluntary licensing of its technology to a local firm in a developing country. We compare two scenarios: one where the country imposes a price control on the patent-holder and another where it issues a compulsory license to the local firm if the patent-holder decides to neither enter nor license its technology voluntarily. A price control makes entry less attractive to the patent-holder relative to voluntary licensing whereas the threat of compulsory licensing has the opposite effect. While a price control always makes the patent-holder worse off, the option of compulsory licensing can sometimes be to its advantage.

Suggested Citation

  • Eric W Bond & Kamal Saggi, 2017. "Price controls versus compulsory licensing: effects on patent-holders and consumers," Vanderbilt University Department of Economics Working Papers 17-00013, Vanderbilt University Department of Economics.
  • Handle: RePEc:van:wpaper:vuecon-sub-17-00013
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    File URL: http://www.accessecon.com/pubs/VUECON/VUECON-17-00013.pdf
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    References listed on IDEAS

    as
    1. Bond, Eric W. & Saggi, Kamal, 2014. "Compulsory licensing, price controls, and access to patented foreign products," Journal of Development Economics, Elsevier, vol. 109(C), pages 217-228.
    2. Jean O. Lanjouw, 2005. "Patents, Price Controls and Access to New Drugs: How Policy Affects Global Market Entry," Working Papers 61, Center for Global Development.
    3. Antara Dutta, 2011. "From Free Entry to Patent Protection: Welfare Implications for the Indian Pharmaceutical Industry," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 160-178, February.
    4. Margaret K. Kyle, 2007. "Pharmaceutical Price Controls and Entry Strategies," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 88-99, February.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Patented Goods; Compulsory Licensing; Voluntary Licensing; Price Controls; Quality; Welfare;

    JEL classification:

    • F1 - International Economics - - Trade

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