This paper derives necessary and sufficient conditions for compulsory licensing to increase consumer surplus and total welfare, taking into account both static (technology transfer) and dynamic (innovation) effects. When the risk-free rate is low, compulsory licensing is shown unambiguously to increase consumer surplus. Compulsory licensing has an ambiguous effect on total welfare, but is more likely to increase total welfare in industries that are naturally less competitive. Finally, compulsory licensing is shown to be an effective policy to protect competition per se. The paper also demonstrates the robustness of these results to alternative settings of R&D competition and discusses their significance for the debate on compulsory licensing in the context of standard-setting organisations and pharmaceutical trade.
This paper studies the interactions between a cartel leniency program and a settlement procedure. The EU settlement procedure gives colluding firms that do not apply for leniency an additional opportunity to cooperate with the competition authority in exchange for a reduced fine once a preliminary case has been established against them. We derive the conditions under which colluding firms apply for leniency, settle, or refuse to cooperate with the authority in equilibrium. Our policy results show that settlements can act as a complement or a substitute to the leniency program. We also study the welfare-optimal policy and highlight a novel interdependence between the fine reductions that should be offered to leniency applicants and settling firms.
JEL classification K21 · L31 · L41
This paper studies firms' data privacy and cybersecurity choices. We emphasise the strategic interdependence between these decisions and demonstrate that security in both the market equilibrium and the social optimum tends to be higher when data is shared. We also identify important market failures in the sense that firms tend to under‐invest in security and over‐share data. Our welfare analysis of a minimum security standard, disclosure and consumer education policies, liability rules and consumer mitigation strategies highlights the need for a co‐ordinated approach to regulation.
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