Bargaining over entry with a compulsory license deadline: Price spillovers and surplus expansion

Eric Bond and Kamal Saggi ()

No 16-00009, Vanderbilt University Department of Economics Working Papers from Vanderbilt University Department of Economics

Abstract: We analyze bargaining between a developing country (South) and a multinational firm over the local price of its patented product. We use an alternating offers bargaining game in which the South can resort to compulsory licensing (CL) if the two parties fail to reach agreement by a certain deadline. The presence of international price spillovers introduces two novel features into the standard bargaining problem: (i) the surplus from entry prior to the CL deadline may be negative and (ii) CL can yield higher surplus than entry. We establish conditions under which equilibrium may exhibit immediate entry, preemptive entry just prior to the CL deadline, or the occurrence of CL. The South necessarily gains from the threat of CL if the joint payoff under entry is higher relative to CL but can lose if it is lower.

Keywords: Patented Goods; Compulsory Licensing; Bargaining; Quality; Welfare. (search for similar items in EconPapers)
JEL-codes: C7 F1 (search for similar items in EconPapers)
Date: 2016-03-13
New Economics Papers: this item is included in nep-com and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.accessecon.com/pubs/VUECON/VUECON-16-00009.pdf (application/pdf)

Related works:
Chapter: Bargaining over Entry with a Compulsory License Deadline: Price Spillovers and Surplus Expansion (2023)
Journal Article: Bargaining over Entry with a Compulsory License Deadline: Price Spillovers and Surplus Expansion (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:van:wpaper:vuecon-sub-16-00008

Access Statistics for this paper

More papers in Vanderbilt University Department of Economics Working Papers from Vanderbilt University Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by John P. Conley ().