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Patent protection under endogenous product differentiation

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  • Arijit Mukherjee

Abstract

It is generally believed that, if weak patent protection does not affect innovation, it makes consumers and society better off compared to strong patent protection by increasing the intensity of competition. We show that this conclusion may not be valid if the innovator can take other non-production strategies, such as product differentiation, which helps to reduce the intensity of competition. Weak patent protection may reduce consumer surplus and social welfare by inducing product differentiation. We show that the type of product-market competition and the market demand function play important roles in this respect. Hence, there can be an argument for strong patent protection even if it does not affect innovation.

Suggested Citation

  • Arijit Mukherjee, 2014. "Patent protection under endogenous product differentiation," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 21(1), pages 78-93, March.
    • Handle: RePEc:taf:raaexx:v:21:y:2014:i:1:p:78-93
    DOI: 10.1080/16081625.2014.858389
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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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