IDEAS home Printed from https://ideas.repec.org/p/bol/bodewp/376.html
   My bibliography  Save this paper

On the Social Desirability of Patents for Sequential Innovations in a Vertically Differentiated Market

Author

Listed:
  • L. Lambertini
  • P. Tedeschi

Abstract

We consider a market for vertically differentiated goods where firms enter over time, after having developed innovations characterized by different quality levels. We show that the adaptation of a patent system limiting the quality range available to later entrants is socially undesirable, in that it builds a barrier to entry to the advantage of the first innovators.

Suggested Citation

  • L. Lambertini & P. Tedeschi, 2000. "On the Social Desirability of Patents for Sequential Innovations in a Vertically Differentiated Market," Working Papers 376, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:376
    as

    Download full text from publisher

    File URL: http://amsacta.unibo.it/4933/1/376.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jerry R. Green & Suzanne Scotchmer, 1995. "On the Division of Profit in Sequential Innovation," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 20-33, Spring.
    2. James Cardon & Dan Sasaki, 1998. "Preemptive Search and R&D Clustering," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 324-338, Summer.
    3. Beath, John & Katsoulacos, Yannis & Ulph, David, 1987. "Sequential Product Innovation and Industry Evolution," Economic Journal, Royal Economic Society, vol. 97(388a), pages 32-43, Supplemen.
    4. Dutta, Prajit K & Lach, Saul & Rustichini, Aldo, 1995. "Better Late Than Early: Vertical Differentiation in the Adoption of a New Technology," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(4), pages 563-589, Winter.
    5. Motta, Massimo, 1993. "Endogenous Quality Choice: Price vs. Quantity Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 113-131, June.
    6. Suzanne Scotchmer & Jerry Green, 1990. "Novelty and Disclosure in Patent Law," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 131-146, Spring.
    7. Ulrich Lehmann-Grube, 1997. "Strategic Choice of Quality When Quality is Costly: The Persistence of the High-Quality Advantage," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 372-384, Summer.
    8. 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.
    9. Nancy T. Gallini, 1992. "Patent Policy and Costly Imitation," RAND Journal of Economics, The RAND Corporation, vol. 23(1), pages 52-63, Spring.
    10. Suzanne Scotchmer, 1996. "Protecting Early Innovators: Should Second-Generation Products Be Patentable?," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 322-331, Summer.
    11. Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(1), pages 3-13.
    12. Richard Gilbert & Carl Shapiro, 1990. "Optimal Patent Length and Breadth," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 106-112, Spring.
    13. Donnenfeld, Shabtai & Weber, Shlomo, 1992. "Vertical product differentiation with entry," International Journal of Industrial Organization, Elsevier, vol. 10(3), pages 449-472, September.
    14. Motta, Massimo, 1992. "Cooperative R&D and vertical product differentiation," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 643-661, December.
    15. Shabtai Donnenfeld & Shlomo Weber, 1995. "Limit Qualities and Entry Deterrence," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 113-130, Spring.
    16. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
    17. Denicolo, Vincenzo, 1996. "Patent Races and Optimal Patent Breadth and Length," Journal of Industrial Economics, Wiley Blackwell, vol. 44(3), pages 249-265, September.
    18. Shaked, Avner & Sutton, John, 1983. "Natural Oligopolies," Econometrica, Econometric Society, vol. 51(5), pages 1469-1483, September.
    19. Lambertini, Luca, 1999. "Endogenous timing and the choice of quality in a vertically differentiated duopoly," Research in Economics, Elsevier, vol. 53(1), pages 101-109, March.
    20. Rosenkranz, Stephanie, 1995. "Innovation and cooperation under vertical product differentiation," International Journal of Industrial Organization, Elsevier, vol. 13(1), pages 1-22, March.
    21. James Bessen & Eric Maskin, 2009. "Sequential innovation, patents, and imitation," RAND Journal of Economics, RAND Corporation, vol. 40(4), pages 611-635, December.
    22. Ted O'Donoghue & Suzanne Scotchmer & Jacques‐François Thisse, 1998. "Patent Breadth, Patent Life, and the Pace of Technological Progress," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(1), pages 1-32, March.
    23. Aoki, Reiko & Prusa, Thomas J., 1997. "Sequential versus simultaneous choice with endogenous quality," International Journal of Industrial Organization, Elsevier, vol. 15(1), pages 103-121, February.
    24. Jaskold Gabszewicz, J. & Thisse, J. -F., 1980. "Entry (and exit) in a differentiated industry," Journal of Economic Theory, Elsevier, vol. 22(2), pages 327-338, April.
    25. 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.
    26. Rosenkranz, Stephanie, 1997. "Quality improvements and the incentive to leapfrog," International Journal of Industrial Organization, Elsevier, vol. 15(2), pages 243-261, April.
    27. Suzanne Scotchmer, 1991. "Standing on the Shoulders of Giants: Cumulative Research and the Patent Law," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 29-41, Winter.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Colombo, Stefano, 2009. "On the effects of selective below-cost pricing in a vertical differentiation model," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-13.
    2. Emanuele Bacchiega & Luca Lambertini & Andrea Mantovaini, 2011. "Process And Product Innovation In A Vertically Differentiated Industry," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 13(02), pages 209-221.
    3. Haejun Jeon, 2016. "Patent litigation and cross licensing with cumulative innovation," Journal of Economics, Springer, vol. 119(3), pages 179-218, November.
    4. Wang, Rong-Kuan & Hu, Die, 2017. "Time-cost substitutability, earlycutting threat, and innovation timing," Economics Letters, Elsevier, vol. 156(C), pages 88-91.
    5. Lambertini, Luca & Tampieri, Alessandro, 2012. "Low-quality leadership in a vertically differentiated duopoly with Cournot competition," Economics Letters, Elsevier, vol. 115(3), pages 396-398.
    6. Yi-Ling Cheng & Shin-Kun Peng, 2014. "Price competition and quality differentiation with multiproduct firms," Journal of Economics, Springer, vol. 112(3), pages 207-223, July.
    7. Schubert, Stefanie & Jost, Peter-J., 2015. "Beat the gun - protection against zero-profit imitation," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113045, Verein für Socialpolitik / German Economic Association.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Luca Lambertini & Piero Tedeschi, 2007. "On the Social Desirability of Patents for Sequential Innovations in a Vertically Differentiated Market," Journal of Economics, Springer, vol. 90(2), pages 193-214, March.
    2. L. Lambertini & P. Tedeschi, 2003. "Sequential Entry in a Vertically Differentiated Duopoly," Working Papers 492, Dipartimento Scienze Economiche, Universita' di Bologna.
    3. Krasteva, Silvana & Sharma, Priyanka & Wang, Chu, 2020. "Patent policy, imitation incentives, and the rate of cumulative innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 178(C), pages 509-533.
    4. Rockett, Katharine, 2010. "Property Rights and Invention," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 1, chapter 0, pages 315-380, Elsevier.
    5. Yong-Hwan Noh & Giancarlo Moschini, 2006. "Vertical Product Differentiation, Entry-Deterrence Strategies, and Entry Qualities," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 29(3), pages 227-252, November.
    6. Tse, Chung Yi, 2001. "Risky quality choice," International Journal of Industrial Organization, Elsevier, vol. 19(1-2), pages 185-212, January.
    7. Yang, Xuebing, 2013. "Horizontal inventive step and international protection of intellectual property," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 338-355.
    8. Grönqvist, Charlotta, 2009. "Empirical studies on the private value of Finnish patents," Bank of Finland Scientific Monographs, Bank of Finland, volume 0, number sm2009_041.
    9. Anja, Breitwieser & Neil, Foster, 2012. "Intellectual property rights, innovation and technology transfer: a survey," MPRA Paper 36094, University Library of Munich, Germany.
    10. Nancy Gallini & Suzanne Scotchmer, 2002. "Intellectual Property: When Is It the Best Incentive System?," NBER Chapters, in: Innovation Policy and the Economy, Volume 2, pages 51-78, National Bureau of Economic Research, Inc.
    11. Grönqvist, Charlotta, 2009. "Empirical studies on the private value of Finnish patents," Scientific Monographs, Bank of Finland, number 2009_041.
    12. Langinier, Corinne & Moschini, GianCarlo, 2002. "Economics of Patents: An Overview, The," Staff General Research Papers Archive 2061, Iowa State University, Department of Economics.
    13. Encaoua, David & Guellec, Dominique & Martinez, Catalina, 2006. "Patent systems for encouraging innovation: Lessons from economic analysis," Research Policy, Elsevier, vol. 35(9), pages 1423-1440, November.
    14. Emanuele Bacchiega & Luca Lambertini & Andrea Mantovaini, 2011. "Process And Product Innovation In A Vertically Differentiated Industry," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 13(02), pages 209-221.
    15. repec:zbw:bofism:2009_041 is not listed on IDEAS
    16. Peter-J. Jost & Stefanie Schubert & Miriam Zschoche, 2015. "Incumbent positioning as a determinant of strategic response to entry," Small Business Economics, Springer, vol. 44(3), pages 577-596, March.
    17. L. Lambertini & P. Tedeschi, 2003. "Sequential Entry in a Vertically Differentiated Duopoly," Working Papers 492, Dipartimento Scienze Economiche, Universita' di Bologna.
    18. Eaton, Derek J.F. & van Tongeren, Frank W., 2005. "Should Europe Further Strengthen Intellectual Property for Plant Breeders? An Analysis of Seed Industry Proposals," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24725, European Association of Agricultural Economists.
    19. Aoki, R. & Spiegel, Y., 1998. "Public Disclosure of Patent Applications, R&D, and Welfare," Papers 30-98, Tel Aviv.
    20. Ngo Van Long & Zhuang Miao, 2020. "Multiple‐quality Cournot oligopoly and the role of market size," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(4), pages 932-952, October.
    21. Peter-J. Jost, 2023. "Price commitment and the strategic launch of a fighter brand," Quantitative Marketing and Economics (QME), Springer, vol. 21(3), pages 381-435, September.

    More about this item

    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
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bol:bodewp:376. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dipartimento Scienze Economiche, Universita' di Bologna (email available below). General contact details of provider: https://edirc.repec.org/data/sebolit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.