Product innovation and parallel trade

Li, Changying; Robles, Jack

doi:10.1016/j.ijindorg.2006.03.007

Cited by 29 publications

(16 citation statements)

References 8 publications

(3 reference statements)

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Nevertheless, still according to [9], in the case of pharmaceuticals parallel trade may reduce global welfare, as an effect of a more intensive regulation. Moreover, the presence of parallel trade often lowers the incentive of the manufacturer for product innovation [28]. In [14], this has been confirmed empirically (referring to the case of the German market of oral anti-diabetics) through a structural approach, by comparing a counterfactual scenario with the status quo market.…”

Section: Related Literaturementioning

confidence: 80%

“…(vi) For the second modification of the third game with Nash bargaining in the first stage, the price of anarchy under the Bentham global welfare model has the following expression for C F = 0, 1 < γ ≤ 2, and 0 ≤ t < 3γa 14b : N oP T T (N oD) is a constant. Moreover, by using formula (28), one can also see that P oA…”

Section: A Decision Theoretic Model and Five Game-theoretic Models Fmentioning

confidence: 96%

See 1 more Smart Citation

A Comparison of Game-Theoretic Models for Parallel Trade

Gnecco

Tuncay

Pammolli

2018

Int. Game Theory Rev.

View full text Add to dashboard Cite

Within the EU Single Market for medicines, differences in drug prices, regulations, and transaction costs may create, under suitable conditions, arbitrage opportunities well before patent expiration, giving an incentive to the occurrence of parallel trade. When this is permitted, parallel traders may obtain a profit from buying drugs in a country where prices are lower, then re-selling them in a country where prices are higher. This phenomenon may cause inefficiencies from a global welfare perspective, and reduce the manufacturers' incentive to invest in Research and Development (R & D). Given this framework, in this paper, we investigate the efficiency (expressed in terms of the price of anarchy) of the subgame-perfect Nash equilibria associated with five dynamic noncooperative game-theoretic models for the parallel trade of pharmaceuticals. We also compare such models with regard to the manufacturer's incentive to invest in R & D. More specifically, first we find in closed form the optimal value of the global welfare of two countries, which is obtained by solving a suitable quadratic optimization problem modeling the decision-making process of a global planner. Then, we use such a result to evaluate and compare the prices of anarchy of five games modeling the interaction between a manufacturer in the first country and a potential parallel trader in the second country. The first three games refer, respectively, to the cases of no parallel trade threat, parallel trade threat, and parallel trade occurrence at equilibrium. Then, we investigate two modifications of the third game, in which its transfer payment from the potential parallel trader to the manufacturer is, respectively, removed/determined by Nash bargaining. For completeness, we also consider a decision-theoretic model of no parallel trade threat. For what concerns the incentive for the manufacturer to invest in R & D, the results of our numerical comparison show that the decision-theoretic model of no parallel trade threat is always the one with the highest incentive, whereas the two game-theoretic models of parallel trade threat/occurrence that do not include the transfer payment provide typically the smallest incentives. Moreover, the latter two models have the largest prices of anarchy (i.e., their equilibria have the smallest efficiencies). From a policy-making perspective, improvements are obtained if suitable countermeasures are taken to help the manufacturer recover from the costs of R & D, such as the inclusion of a transfer payment in the model. Keywords Economic applications of operations research · global welfare optimization · noncooperative game theory · subgame-perfect Nash equilibrium · numerical comparison of efficiency · incentive to invest in Research and Development

show abstract

Section: Related Literaturementioning

confidence: 80%

Section: A Decision Theoretic Model and Five Game-theoretic Models Fmentioning

confidence: 96%

A Comparison of Game-Theoretic Models for Parallel Trade

Gnecco

Tuncay

Pammolli

2018

Int. Game Theory Rev.

View full text Add to dashboard Cite

show abstract

“…Another strand of the literature on PI shows that its effect on the manufacturer's process innovation depends on the trade cost (Li and Maskus, 2006;Li and Robles, 2007) or the degree of the horizontal product differentiation (Li and Robles, 2007). Nevertheless, empirical evidences have shown that process R&D can only represent a minor part of the reality.…”

Section: Introductionmentioning

confidence: 99%

Parallel imports, product innovation and market structures

Hwang

Peng

Shih

2014

International Review of Economics & Finance

View full text Add to dashboard Cite

“…Their model captures the traditional intuition that the manufacturer's incentive for innovation is lower if parallel trade is permitted relative to when it is not since openness to parallel imports reduces its operating pro…ts. However, their analysis also clari…es that the manufacturer's incentive for R&D depends upon trade costs (of parallel trade) in a non-linear way: this incentive …rst decreases with trade costs, then increases, and eventually is una¤ected by the magnitude of such costs.The framework ofLi and Maskus (2006) is extended byLi and Robles (2007) to…”

mentioning

confidence: 99%

Trade, Intellectual Property Rights, and the World Trade Organization

Saggi

2016

Handbook of Commercial Policy

View full text Add to dashboard Cite

This paper surveys the literature on international trade and the protection of intellectual property rights (IPRs) in the global economy. The discussion is organized around the major questions in the field. How does openness to trade affect national incentives for patent protection? What is the rationale for international coordination over patent policies? Given that countries are highly asymmetric with respect to their technological capabilities, what incentives do lagging countries have for enforcing IPRs and what are the consequences of requiring them to do so? To what extent do empirical studies support the major arguments for and against the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS)? Finally, can the structure of TRIPS-both in terms of the core obligations it imposes on WTO members and the flexibilities that it provides them with respect to exhaustion policies and the use of compulsory licensing-be reconciled with existing models of IPR protection in the global economy? For helpful comments and discussions, I thank

show abstract

Product innovation and parallel trade

Cited by 29 publications

References 8 publications

A Comparison of Game-Theoretic Models for Parallel Trade

A Comparison of Game-Theoretic Models for Parallel Trade

Parallel imports, product innovation and market structures

Trade, Intellectual Property Rights, and the World Trade Organization

Contact Info

Product

Resources

About