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Complementary research strategies, first-mover advantage and the inefficiency of patents

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Author Info
Luigi Bonatti ()
Abstract

In 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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Publisher Info
Paper provided by Department of Economics, University of Trento, Italia in its series Department of Economics Working Papers with number 0717.

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Date of creation: 2007
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Handle: RePEc:trn:utwpde:0717

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Related research
Keywords: 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 - - - Innovation and Invention: Processes and Incentives

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