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Competition, Patent Protection, and Innovation in an Endogenous Market Structure

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  • Suzuki, Keishun

Abstract

This study revisits the relationship between competition and innovation by incorporating an endogenous market structure (EMS) in a dynamic general equilibrium model. We consider that both innovative and non-innovative followers engage in Cournot competition with free entry. A competition-enhancing policy, which reduces entry cost, can stimulate the entry of innovative followers when the entry cost is high. However, when the entry cost is sufficiently low, the entry of non-innovative followers crowd-out innovative followers from the market. As a result, there is a non-monotonic relationship (inverted-V shape) between competition and innovation. Furthermore, we show that, while strengthening patent protection positively affects innovation when competition is sufficiently intense, the effect may be negative under milder competition. This suggests that a competition policy could complement a patent policy.

Suggested Citation

  • Suzuki, Keishun, 2017. "Competition, Patent Protection, and Innovation in an Endogenous Market Structure," MPRA Paper 77133, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:77133
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    References listed on IDEAS

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    5. Aamir Rafique Hashmi, 2013. "Competition and Innovation: The Inverted-U Relationship Revisited," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1653-1668, December.
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    Cited by:

    1. Suzuki, Keishun, 2017. "Patent Protection, Optimal Licensing, and Innovation with Endogenous Entry," MPRA Paper 82712, University Library of Munich, Germany.

    More about this item

    Keywords

    Competition; Patent Protection; Innovation; Endogenous Market Structure;

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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