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Anticommons and Optimal Patent Policy in a Model of Sequential Innovation

Author

Listed:
  • Gastón Llanes

    (Harvard Business School, Entrepreneurial Management Unit)

  • Stefano Trento

    (Universitat Autonoma de Barcelona)

Abstract

We present a model of sequential innovation in which an innovator uses several research inputs to invent a new good. These inputs, in turn, must be invented before they can be used by the final innovator. As a consequence, the degree of patent protection affects the revenues and cost of the innovator, but also determines the incentives to invent the research inputs in the first place. We study the effects of increases in the number of required inputs on innovation activity and optimal patent policy. We find that the probability of introducing the final innovation decreases (increases) as the number of inputs increases when inputs are complements (substitutes). We also find that the optimal strength of patents on research inputs is increasing in the degree of substitution between the inputs, but decreasing in the number of inputs for any degree of substitution.

Suggested Citation

  • Gastón Llanes & Stefano Trento, 2009. "Anticommons and Optimal Patent Policy in a Model of Sequential Innovation," Harvard Business School Working Papers 09-148, Harvard Business School.
    • Handle: RePEc:hbs:wpaper:09-148
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    Cited by:

    1. Galasso, Alberto, 2020. "Rewards versus intellectual property rights when commitment is limited," Journal of Economic Behavior & Organization, Elsevier, vol. 169(C), pages 397-411.
    2. Gastón Llanes & Stefano Trento, 2012. "Patent policy, patent pools, and the accumulation of claims in sequential innovation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 50(3), pages 703-725, August.
    3. Aydogmus, Ozgur, 2022. "Increasing returns and path dependence in knowledge creation and their effects on the dynamics of patent pools," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 467-477.

    More about this item

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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