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Imitation, patent protection and welfare

  • Arijit Mukherjee


    (Department of Economics, Keele University, Keele,)

  • Enrico Pennings

    (Universitat Pompeu Fabra, Spain)

Once a new technology has been invented, there is a credible threat of imitation when patent protection is strong and imitation cost is low. Within the area of credible imitation, the innovator has an incentive to postpone technology adoption when the cost of imitation is relatively high. The possibility of licensing, however, eliminates or at least reduces the incentive for delayed technology adoption and may increase or decrease social welfare. Further, this paper explains the possibility of a forward contract on licensing.

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Paper provided by Department of Economics, Keele University in its series Keele Department of Economics Discussion Papers (1995-2001) with number 2001/03.

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Length: 25 pages
Date of creation: Jun 2001
Date of revision:
Publication status: Published in Volume 56, Number 4, October 2004, pp. 715-733. [ doi:10.1093/oep/gpf062 ]
Handle: RePEc:kee:keeldp:2001/03
Note: This is a revised and improved version of the working paper of the authors in ECIS under the same title. We would like to thank the participants of E.A.R.I.E. conference, 2000, and particularly, Vincenzo Denicolo for helpful comments and suggestions. Arijit Mukherjee also thanks Robin Bladen-Hovell, Paul de Hek, Roger Hartley and Tim Worrall for helpful discussions and acknowledges the financial support from the Netherlands Technology Foundation (STW).
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