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Patents and Supra-competitive Prices: Evidence from Consumer Products

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Listed:
  • Gaétan de Rassenfosse

    (Ecole polytechnique federale de Lausanne)

  • Ling Zhou

    (Ecole polytechnique federale de Lausanne)

Abstract

A patent system is a central tool in innovation policy. The prospect of monopolistic pricing supposedly encourages firms to innovate. However, there is scant empirical evidence supporting the existence of higher markups for patent-protected products. Using an original dataset that links consumer products to the patents that protect them, we study the impact of patent protection on product prices. Exploiting exogenous variations in patent status, we find that a loss of patent protection leads to an 8–10 percent drop in product prices. The price drop is larger for more important patents and is more pronounced in more competitive product markets.

Suggested Citation

  • Gaétan de Rassenfosse & Ling Zhou, 2025. "Patents and Supra-competitive Prices: Evidence from Consumer Products," Working Papers 29, Chair of Science, Technology, and Innovation Policy.
    • Handle: RePEc:iip:wpaper:29
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    Keywords

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    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
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law

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