Price Discrimination And Patent Policy
AbstractPatent and antitrust policy are often presumed to be in conflict. As an important example, there is ongoing controversy about whether price discrimination by a patent holder is an illegal or socially undesirable exploitation of monopoly power. In this article we show that no conflict exists in many price discrimination cases. Even ignoring the (dynamic) effects on incentives for innovation, third-degree price discrimination by patent holders can raise (static) social welfare. In fact, Pareto improvements may well occur. Welfare gains occur because price discrimination allows patent holders to open new markets and to achieve economies of scale or learning. Further, even in cases where discrimination incurs static welfare losses, it may be efficient relative to other mechanisms, such as length of patent life, for rewarding innovators with profits.
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Bibliographic InfoPaper provided by Michigan - Center for Research on Economic & Social Theory in its series Papers with number 88-13.
Length: 33 pages
Date of creation: 1988
Date of revision:
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Postal: UNIVERSITY OF MICHIGAN, DEPARTMENT OF ECONOMICS CENTER FOR RESEARCH ON ECONOMIC AND SOCIAL THEORY, ANN ARBOR MICHIGAN U.S.A.
discrimination ; prices ; antitrust legislation ; economic analysis;
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