Patent Races, Product Standards, and International Competition
The authors examine anticipatory product standards intended to improve the strategic position of firms in an international patent race where firms do R&D to develop products that are close substitutes. The effects of a standard depend on the way the standard is specified, which firm develops which product, and the order of discovery. Simple standards can be time inconsistent because of consumer losses that occur when products ruled out by the standard are discovered first. A state-contingent standard is shown to be time consistent when compulsory licensing by the foreign firm is introduced. Copyright 1996 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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