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Intellectual Property Protection: Prevention in Advance or Punishment Afterward

Author

Listed:
  • Qi Duan

    (Institute for Advanced Studies in Humanities and Social Sciences, Beihang University)

  • Yupeng Shi

    (School of Economics, Central University of Finance and Economics)

  • Jingwei Sun

    (School of Economics, Central University of Finance and Economics)

Abstract

This paper compares two types of Intellectual Property Protection policies, prevention in advance versus punishment afterward, based on a multi-stage duopoly model. We find (i) for advance prevention measures, it is optimal to make only one firm innovate and the other succeed in imitating; (ii) for punishment afterward measures, the optimal policy is to prevent imitation exhaustively; and (iii) prevention in advance is superior to punishment afterward if the latter cannot guarantee an equilibrium in which only one firm innovates; if both measures yield single-firm-innovation, the consequence depends on how imitation affects social welfare.

Suggested Citation

  • Qi Duan & Yupeng Shi & Jingwei Sun, 2017. "Intellectual Property Protection: Prevention in Advance or Punishment Afterward," Annals of Economics and Finance, Society for AEF, vol. 18(1), pages 129-171, May.
    • Handle: RePEc:cuf:journl:y:2017:v:18:i:1:duan:shi:sun
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    References listed on IDEAS

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    More about this item

    Keywords

    Intellectual property protection; Prevention in advance; Punishment afterward;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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