Patents, imitation and licensing in an asymmetric dynamic R&D race
R&D is inherently a dynamic process which typically involves different intermediate stages that need to be developed before the completion of the final invention. Firms are not necessarily symmetric in their R&D abilities; some may have an advantage in early stages of the R&D process while others may have advantages in other stages of the process. This paper uses a two-firm asymmetric-ability multistage R&D race model to analyze the effect of patents, imitations and licensing arrangements on the speed of innovation, firm value and consumers' surplus. By using numerical analyses to study the MPE of the R&D race, the paper demonstrates the circumstances under which a weak patent protection regime, that facilitates free imitation of any intermediate technology, may yield a higher consumers' surplus and total surplus than a regime that awards a patent for the final innovation. The advantage of imitation may hold even when we allow for voluntary licensing of intermediate technologies.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- Nancy T. Gallini, 2002. "The Economics of Patents: Lessons from Recent U.S. Patent Reform," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 131-154, Spring.
- Kenneth Judd & Karl Schmedders, 2002.
"Optimal Rules for Patent Races,"
1343, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Reinganum, Jennifer F., 1989. "The timing of innovation: Research, development, and diffusion," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 14, pages 849-908 Elsevier.
- Reinganum, Jennifer F., .
"Dynamic Games of Innovation,"
287, California Institute of Technology, Division of the Humanities and Social Sciences.
- James Bessen & Eric Maskin, 2006.
"Sequential Innovation, Patents, and Imitation,"
Economics Working Papers
0025, Institute for Advanced Study, School of Social Science.
- Richard Gilbert & Carl Shapiro, 1990.
"Optimal Patent Length and Breadth,"
RAND Journal of Economics,
The RAND Corporation, vol. 21(1), pages 106-112, Spring.
- Robert M. Hunt, 2002.
"Patentability, industry structure, and innovation,"
01-13, Federal Reserve Bank of Philadelphia.
- Denicolo, Vincenzo, 1999. "The optimal life of a patent when the timing of innovation is stochastic," International Journal of Industrial Organization, Elsevier, vol. 17(6), pages 827-846, August.
- Ariel Pakes & Paul McGuire, 1994.
"Computing Markov-Perfect Nash Equilibria: Numerical Implications of a Dynamic Differentiated Product Model,"
RAND Journal of Economics,
The RAND Corporation, vol. 25(4), pages 555-589, Winter.
- Ariel Pakes & Paul McGuire, 1992. "Computing Markov perfect Nash equilibria: numerical implications of a dynamic differentiated product model," Discussion Paper / Institute for Empirical Macroeconomics 58, Federal Reserve Bank of Minneapolis.
- Ariel Pakes & Paul McGuire, 1992. "Computing Markov Perfect Nash Equilibria: Numerical Implications of a Dynamic Differentiated Product Model," NBER Technical Working Papers 0119, National Bureau of Economic Research, Inc.
- Steve A. Lippman & Kevin F. McCardle, 1987. "Dropout Behavior in R&D Races with Learning," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 287-295, Summer.
- Klemperer, Paul, 1990.
"How Broad Should the Scope of Patent Protection Be?,"
CEPR Discussion Papers
392, C.E.P.R. Discussion Papers.
- 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.
- Christopher Harris & John Vickers, 1985. "Perfect Equilibrium in a Model of a Race," Review of Economic Studies, Oxford University Press, vol. 52(2), pages 193-209.
- Doraszelski, Ulrich, 2003. " An R&D Race with Knowledge Accumulation," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 20-42, Spring.
- Maskin, Eric & Tirole, Jean, 2001.
"Markov Perfect Equilibrium: I. Observable Actions,"
Journal of Economic Theory,
Elsevier, vol. 100(2), pages 191-219, October.
- Eric Maskin & Jean Tirole, 1997. "Markov Perfect Equilibrium, I: Observable Actions," Harvard Institute of Economic Research Working Papers 1799, Harvard - Institute of Economic Research.
- Fudenberg, Drew & Gilbert, Richard & Stiglitz, Joseph & Tirole, Jean, 1983. "Preemption, leapfrogging and competition in patent races," European Economic Review, Elsevier, vol. 22(1), pages 3-31, June.
- Christopher Harris & John Vickers, 1987. "Racing with Uncertainty," Review of Economic Studies, Oxford University Press, vol. 54(1), pages 1-21.
When requesting a correction, please mention this item's handle: RePEc:eee:indorg:v:28:y:2010:i:2:p:113-126. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.