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Eric W Bond and Kamal Saggi
''Price controls versus compulsory licensing: effects on patent-holders and consumers''
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.
Keywords: Patented Goods, Compulsory Licensing, Voluntary Licensing, Price Controls, Quality, Welfare
JEL: F1 - Trade: General
Manuscript Received : Oct 20 2017 Manuscript Accepted : Oct 21 2017

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