Compulsory Licensing, Innovation and Welfare

Jacob Seifert

VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

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').

JEL-codes: L13 O31 O34 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-com, nep-ino, nep-ipr, nep-pr~ and nep-knm
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc13:79778

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