Agreement outcomes with many challengers Sample Clauses

Agreement outcomes with many challengers. The outcomes from the general case where profits are adjusted over the two periods and number of potential challengers are 2, 10 and 20 are shown in the first three panels of Figure (7) or λ = 1 (the last panel is for when λ = 3). The litigation costs for all firms are set equal to 5% of the monopoly profits. In the first panel, where there are only two challengers, if the patent is strong (π ≈ 0) and litigation costs are high, the challengers choose to stay out (marked by red shading and labelled ‘Unchallenged Monopoly’). If the patent is weak (π ≈ 1), the branded firm prefers to pay off the challengers and is able to do so rather than take its chances in a court (marked by blue shading and labelled ‘P2D – Pay All’ Figure 7. Type of Agreements or green shading and marked by ‘P2D – Pay Only First’). Further, if κ < κ∗, it pays off both the firms while if κ ≥ κ∗, it may need to pay off only the first challenger and the second one stays out – where the boundary is marked by a trade off between the strength of the patent, and the relative first mover advantage. Further, if κ < κ∗, the branded firm pays the two challengers the same amount which increases in π and κ. If however κ ≥ κ∗, larger payments are made to the first challenger and smaller to the second challenger (see equation (17) above). At this point both firms can be paid-off (i.e., for a high enough value of π and κ > κ∗). As π decreases or κ increases, (and for κ ≥ κ∗) smaller payments are necessary to maintain the monopoly position until the necessary payments to the second challenger become negative (and hence it does not challenge), while those to the first stay positive (marked by green shading and labelled ‘P2D – Pay Only First’). When there are many potential challengers (J > 2), the payments necessary to maintain the monopoly retain the form given above. Specifically, every challenger from the second one onwards must be paid-off expected profits in D0 or T1 minus their litigation cost and hence Xj = X2 for j = 3, . . . , X. However doing so to a large number of challengers may not be possible for the branded firm as J increases. The net surplus with P2D deals with J challengers changes to J NS(Γ) = π(V (M0) − V (D0)) + c1 − X1 − Σ Xs (19) s=2 and for large enough J, becomes negative. In this case, rather than paying off all the challengers, litigation ensues and the ‘Pay All’ (blue) region become ‘No Deal (yellow)’ zone as shown in the next two panels in Figure (7). Note however that this in...