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Law and Economics of Patent Settlements in the Pharmaceutical Industry
The tradeoff between competition and innovation is a much-discussed problem in economic policy. The central question is how efficient markets can be ensured by setting an institutional framework which guarantees efficient prices and innovation from a consumer welfare perspective. Competition poli...
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| Format: | Doctoral Thesis |
| Language: | English |
| Published: |
Philipps-Universität Marburg
2017
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| Subjects: | |
| Online Access: | PDF Full Text |
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| Summary: | The tradeoff between competition and innovation is a much-discussed problem in economic
policy. The central question is how efficient markets can be ensured by setting an institutional
framework which guarantees efficient prices and innovation from a consumer welfare
perspective. Competition policy, in particular, has the task to set a framework for agreements
between firms regarding these goals. The subject matter of this dissertation is to study
agreements between firms which relate to patents and at the same time raise competition
concerns regarding consumer welfare. For this reason, these agreements are an essential part
of the tradeoff between competition and innovation.
Generally, consumer welfare is influenced by existing products and their prices and quantities
on one hand, and by the emergence of new products and services on the other hand. These
two sides are not independent from each other. From an economic policy perspective, it is well
understood that market power results in negative price effects for consumers. At the same time
market power and resulting profits ensure an essential incentive mechanism to enable
innovation. Since the innovation process goes along with costs, for instance for research and
development, firms face the critical problem of the approbiability of resulting rents from
innovation processes. In case this approbiability of the innovator is not sufficiently ensured, for
instance through imitation of innovation by competitors, the market failure problem exists that
there are not sufficient investments in innovation. A patent is an economic policy solution for this
market failure problem and grants to the innovator a monopoly right which is temporally, locally
and objectively limited for the marketing of an invention. In this regard the patent itself is an
inherent tradeoff, because it must find a balance between innovation incentives on one hand
and the problem of negative price effects because of the granted monopoly position on the other
hand. The economic literature has extensively discussed the question of the optimal design of
patent rights, for example their optimal length and breadth. |
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| Physical Description: | 146 Pages |
| DOI: | 10.17192/z2017.0079 |