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Compulsory Licensing, Innovation and Welfare

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  • Seifert, Jacob

Abstract

This paper develops a three-stage model of innovation, fixed-fee licensing and production to evaluate the welfare effects of compulsory licensing, taking into account both static (information sharing) and dynamic (innovation incentive) effects. Compulsory licensing is shown to have an unambiguously positive impact on consumer surplus. Compulsory licensing has an ambiguous effect on total welfare, but it is more likely to increase total welfare in industries which are naturally less competitive. Furthermore, compulsory licensing can be an effective policy to safeguard the competitive process per se. These welfare results hold independently of whether R&D incentives in the absence of licensing favour the leading firm ('persistent dominance') or predict that the follower will overtake the incumbent ('action-reaction').

Suggested Citation

  • Seifert, Jacob, 2013. "Compulsory Licensing, Innovation and Welfare," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79778, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc13:79778
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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