Sequential Innovation and Optimal Patent Design
AbstractWe study optimal patent design in a setting with sequential innovation. Firms innovate by undertaking "research" activities to generate new ideas and by undertaking "development" activities to transform these ideas into viable products. Both innovation incentives and the welfare costs of patent monopoly are multidimensional. We characterize optimal patent policy, and in particular, the tradeoff between patent length and patent breadth in this setting. The optimal size of the patent reward is smaller for patents associated with a higher deadweight loss. For a given reward size, a better patent that generates higher social surplus is shorter but broader. The optimal patent length may be finite or infinite.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-447.
Length: Unknown pages
Date of creation: 08 Mar 2012
Date of revision:
Contact details of provider:
Postal: 150 St. George Street, Toronto, Ontario
Phone: (416) 978-5283
sequential innovation; patent length; patent breadth; incentives; mechanism design;
Find related papers by JEL classification:
- O34 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Intellectual Property Rights
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- K00 - Law and Economics - - General - - - General (including Data Sources and Description)
- L00 - Industrial Organization - - General - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-21 (All new papers)
- NEP-INO-2012-03-21 (Innovation)
- NEP-IPR-2012-03-21 (Intellectual Property Rights)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ted O'Donoghue, 1997.
"A Patentability Requirement For Sequential Innovation,"
1185, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Ted O'Donoghue, 1998. "A Patentability Requirement for Sequential Innovation," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 654-679, Winter.
- Nicholas Bloom & Christos Genakos & Raffaella Sadun & John Van Reenen, 2012.
"Management Practices Across Firms and Countries,"
NBER Working Papers
17850, National Bureau of Economic Research, Inc.
- Richard Gilbert and Carl Shapiro., 1989.
"Optimal Patent Length and Breadth,"
Economics Working Papers
89-102, University of California at Berkeley.
- Kremer, Michael R., 1998. "Patent Buyouts: A Mechanism for Encouraging Innovation," Scholarly Articles 3693705, Harvard University Department of Economics.
- Nisvan Erkal & Suzanne Scotchmer, 2009.
"Scarcity of Ideas and R&D Options: Use it, Lose it or Bank it,"
NBER Working Papers
14940, National Bureau of Economic Research, Inc.
- Scotchmer, Suzanne & Erkal, Nisvan, 2009. "Scarcity of Ideas and R&D Options: Use it, Lose it or Bank it," Department of Economics, Working Paper Series qt1295k6gg, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Erkal, Nisvan & Scotchmer, Suzanne, 2009. "Scarcity of Ideas and R&D Options: Use it, Lose it, or Bank it," Berkeley Olin Program in Law & Economics, Working Paper Series qt74c709qr, Berkeley Olin Program in Law & Economics.
- Scotchmer, S. & Green, J., 1988.
"Novelty And Disclosure In Patent Law,"
e-89-2, Hoover Institution, Stanford University.
- Howard F. Chang, 1995. "Patent Scope, Antitrust Policy, and Cumulative Innovation," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 34-57, Spring.
- Yuliy Sannikov, 2008. "A Continuous-Time Version of the Principal-Agent Problem," Review of Economic Studies, Oxford University Press, vol. 75(3), pages 957-984.
- Paul Klemperer, 1990.
"How Broad Should the Scope of Patent Protection Be?,"
RAND Journal of Economics,
The RAND Corporation, vol. 21(1), pages 113-130, Spring.
- Klemperer, Paul, 1990. "How Broad Should the Scope of Patent Protection Be?," CEPR Discussion Papers 392, C.E.P.R. Discussion Papers.
- Albert Banal-Estañol & Inés Macho-Stadler, 2010. "Scientific and Commercial Incentives in R&D: Research versus Development?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(1), pages 185-221, 03.
- Gerard Llobet & Hugo Hopenhayn & Matthew F. Mitchell, 2000.
"Rewarding sequential innovators: prizes, patents and buyouts,"
273, Federal Reserve Bank of Minneapolis.
- Hugo Hopenhayn & Gerard Llobet & Matthew Mitchell, 2006. "Rewarding Sequential Innovators: Prizes, Patents, and Buyouts," Journal of Political Economy, University of Chicago Press, vol. 114(6), pages 1041-1068, December.
- Gerard Llobet & Hugo Hopenhayn & Matthew Mitchell, 2003. "Rewarding Sequential Innovators: Prizes, Patents and Buyouts," Levine's Working Paper Archive 618897000000000682, David K. Levine.
- Llobet, G. & Hopenhayn, H. & Mitchell, M., 2000. "Rewarding Sequential Innovators: Prizes, Patents and Buyouts," Papers 0012, Centro de Estudios Monetarios Y Financieros-.
- Tandon, Pankaj, 1982. "Optimal Patents with Compulsory Licensing," Journal of Political Economy, University of Chicago Press, vol. 90(3), pages 470-86, June.
- Hugo Hopenhayn & Matthew Mitchell, 2010. "OptimalPatent Policy with Recurrent Innovators," 2010 Meeting Papers 1313, Society for Economic Dynamics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (RePEc Maintainer).
If references are entirely missing, you can add them using this form.