The Inefficiency of Patents when R&D Projects are Imperfectly Correlated and Imitation Takes Time
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 that can subsidize the firms' 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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Volume (Year): 167 (2011)
Issue (Month): 2 (June)
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- Richard C. Levin & Alvin K. Klevorick & Richard R. Nelson & Sidney G. Winter, 1987. "Appropriating the Returns from Industrial Research and Development," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 783-832.
- Maurer, Stephen M & Scotchmer, Suzanne, 2002.
"The Independent Invention Defence in Intellectual Property,"
London School of Economics and Political Science, vol. 69(276), pages 535-547, November.
- Stephen M Maurer & Suzanne Scotchmer, 2003. "The Independent Invention Defense in Intellectual Property," Levine's Working Paper Archive 618897000000000544, David K. Levine.
- Scotchmer, suzanne, 1998. "The Independent-Invention Defense in Intellectual Property," Berkeley Olin Program in Law & Economics, Working Paper Series qt2s5174q8, Berkeley Olin Program in Law & Economics.
- 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.
- James Bessen & Eric Maskin, 2006.
"Sequential Innovation, Patents, and Imitation,"
Economics Working Papers
0025, Institute for Advanced Study, School of Social Science.
- Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-596, September.
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