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Intellectual property rights policy against imitations of product innovations under vertical product differentiation

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  • Takeshi Ikeda

    (Daito Bunka University)

Abstract

This study examines how governments should protect product innovation when innovative and imitative firms compete under vertical product differentiation. Assuming that the innovator implements product innovations by incurring costs and the imitator imitates the innovation for free, we find that the government allows imitations to some extent even when an innovator is a domestic firm and imitative products are imported. Moreover, the government regulates imitations even when an imitator is a domestic firm and innovative products are imported. We also find that tightening protection for innovation could enhance the profits of an imitator, and more developed countries tend to protect innovation. These findings theoretically support the results of empirical studies on this topic.

Suggested Citation

  • Takeshi Ikeda, 2023. "Intellectual property rights policy against imitations of product innovations under vertical product differentiation," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 50(4), pages 933-942, December.
    • Handle: RePEc:spr:epolin:v:50:y:2023:i:4:d:10.1007_s40812-023-00261-5
    DOI: 10.1007/s40812-023-00261-5
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    References listed on IDEAS

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    1. Wauthy, Xavier, 1996. "Quality Choice in Models of Vertical Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 44(3), pages 345-353, September.
    2. Lei, Zhen & Wright, Brian D., 2017. "Why weak patents? Testing the examiner ignorance hypothesis," Journal of Public Economics, Elsevier, vol. 148(C), pages 43-56.
    3. Ginarte, Juan C. & Park, Walter G., 1997. "Determinants of patent rights: A cross-national study," Research Policy, Elsevier, vol. 26(3), pages 283-301, October.
    4. Geng, Difei & Saggi, Kamal, 2022. "Tariff barriers and the protection of intellectual property in the global economy," European Economic Review, Elsevier, vol. 144(C).
    5. Ikeda, Takeshi & Tanno, Tadanobu & Yasaki, Yoshihito, 2021. "Optimal intellectual property rights policy by an importing country," Economics Letters, Elsevier, vol. 209(C).
    6. Choi, Chong Ju & Shin, Hyun Song, 1992. "A Comment on a Model of Vertical Product Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 229-231, June.
    7. Lynn Peppal, 1997. "Imitative Competition and Product Innovation in a Duopoly Model," Economica, London School of Economics and Political Science, vol. 64(254), pages 265-279, May.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Intellectual property right; Vertical product differentiation; R&D investment; Product innovation; Imitation;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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