Complementary research strategies, first-mover advantage and the inefficiency of patents
AbstractIn a realistic framework where the potential innovators’ research lines are imperfectly correlated and imitation takes some time, this paper studies an industry regulated by an authority which can tax (subsidize) the firms’ pure profits (R&D expenditures). By comparing the market equilibrium emerging when there is patent protection with the market equilibrium emerging without patents, the paper finds that social welfare is higher in the absence of patents. This result is driven by the fact that—without patents--more than one successful inventor may implement its discovery and enter the market, thus reducing the deadweight loss due to imperfect competition.
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Bibliographic InfoPaper provided by Department of Economics, University of Trento, Italia in its series Department of Economics Working Papers with number 0717.
Date of creation: 2007
Date of revision:
Innovation; temporary monopoly; lead time; market regulation; patents.;
Find related papers by JEL classification:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-08-08 (All new papers)
- NEP-COM-2007-08-08 (Industrial Competition)
- NEP-CSE-2007-08-08 (Economics of Strategic Management)
- NEP-INO-2007-08-08 (Innovation)
- NEP-IPR-2007-08-08 (Intellectual Property Rights)
- NEP-MIC-2007-08-08 (Microeconomics)
- NEP-REG-2007-08-08 (Regulation)
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