Demonstrate via an economic model “the tragedy of anti-commons” (Spengler, 1950; Tirole 1988). Which empire or...

Demonstrate via an economic model “the tragedy of anti-commons” (Spengler, 1950; Tirole 1988). Which empire or region fits into this model?

Expert Solution

Assume there are two drug manufacturing companies A and B. B has developed a new drug but that requires buying patents from A . IF BOTH FIRMS COOPERATE THEN THE PROFITS ARE 10 MILLION FOR EACH COMPANY. BUT IF A DOES NOT COOPERATE A EARNS 15 MILLION AND B EARNS NOTHING. SINCE A EARNS MORE BY NOT SHARING PATENTS IT WILL NOT ALLOW B TO PRODUCE NEW DRUG THAT USES SOME PATENT TECHNOLOGY OF A. IT COULD HAPPEN THAT ULTIMATELY B EARNS ENOUGH BY NEW DRUG THAT IT CAN COMPENSATE A FOR ITS LOSS OF. 5 MILLION BUT SUCH THING WILL NOT HAPPEN BECAUSE A WILL NOT COOPERATE IN THE FIRST INSTANCE. ANYWAY THE RESULT IS MORE DEATHS AND MORE COSTS TO CONSUMERS WHEREAS THE NEW DRUG REMAINS un UTILISED. IT MAY ALSO HAPPEN THAT B HAS NOT SUFFICIENT MONEY INITIALLY TO PAY FOR USING PATENTS OF A. THE RESULT WILL BE SAME. The developing countries like India and China have some problems in purchasing patents from USA companies. So these areas fit in the model

Rahul Sunny answered 1 year ago

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