Incumbency Advantage Sample Clauses

Incumbency Advantage. In the FSC system above, the second challenger, were it to enter successfully in period one, does not have an advantage over other generics in post patent period who do not enter in the first period. For instance, in our payoff specification above, if the j- th generic wins the litigation and the brand launches AG (say via the first challenger), then the winning generic earns δ(ΠT0/(J − 1)) in the post patent period, which is the same as what other non-entering generics earn in the second period (and the AG earns δΠT0). An alternative is that the winning generic earns more than other generics who do not enter, and in an extreme case captures 19In our model in case no generic firm challenges in period one, the order of entry among the J generics in the post patent period is randomly decided. In an alternative version of the model where we assign entry order in period two to be non-random and arbitrarily given to the first challenger, this new region never arises. the entire generic residual market. This may be an important factor for some drugs.20 Thus, we consider the other extreme where the incumbency advantage is at its maximum and the winning j-th generic earns all of the δΠT0 in the post-patent period if it enters in period one, while other generics earn zero profits. This requires that the payoffs in ΓjG are adjusted accordingly, which are shown in Appendix C. With this change in payoffs, note that the outcomes depicted for the first three panels in Figure 6 do not change (because δ = 0 in these cases). However, the payments Xj increase slightly. For instance, Xj for j ≥ 2 changes from X2 = πΠT1 − c2 as given in (9) to X2 = πΠT1 − c2 + πδ(ΠT0 − ΠT0) if κ ≥ κ∗ (11) but are the same for κ < κ∗ (and similar changes in X1 for the two subcases when θ ≤ θ∗∗). Thus, the second (or j-th challenger) must be paid an additional amount equal to the discounted expected value of incumbency, πδ(ΠT0 − ΠT0) with similar small increase in the X1 payment for relevant subcase. Compared to the no incumbency advantage case, this change increases the parameter space over which P4D deals are not possible (area marked as ‘IV - No Deal’ increases) since the threshold moves to the right. But more importantly, parameter space over which P4D deals with one challenger (region ‘III- P2D Pay Only First’) does not shrink as J increases as was the case when there was no incumbency advantage (and as in the previous case, region II shrinks and IV increases with J). Thus P4D deals are st...