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Pricing Patents through Citations

  • Fernando Leiva B.


    (Economics University of Iowa)

This paper provides formal treatment to the idea of patenting as a form of market stealing between R&D firms. It extends the creative destruction literature by allowing innovations to build off each other forming a network of ideas. Patent citations keep track of this network. The theory maps the distribution of productivities in the development of new ideas onto the distribution of patent values through patent citations. If productivities are drawn from a Pareto-Levy distribution then the distribution of patent values also falls within this class. The theory is then applied to data on US patent citations. Model-based valuations support the assumption of Pareto-distributed productivities. As an added feature, model-based valuations outperform citation counts (the traditional measure) as a proxy for patent values

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Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 834.

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Date of creation: 03 Dec 2006
Date of revision:
Handle: RePEc:red:sed006:834
Contact details of provider: Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA
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  1. Hugo A. Hopenhayn & Matthew F. Mitchell, 1999. "Innovation Fertility and Patent Design," NBER Working Papers 7070, National Bureau of Economic Research, Inc.
  2. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  3. Jackson, Matthew O. & Rogers, Brian W., 2005. "Search in the formation of large networks: How random are socially generated networks?," Working Papers 1216, California Institute of Technology, Division of the Humanities and Social Sciences.
  4. Llobet, G. & Hopenhayn, H. & Mitchell, M., 2000. "Rewarding Sequential Innovators: Prizes, Patents and Buyouts," Papers 0012, Centro de Estudios Monetarios Y Financieros-.
  5. Jean O. Lanjouw & Mark Schankerman, 1999. "The Quality of Ideas: Measuring Innovation with Multiple Indicators," NBER Working Papers 7345, National Bureau of Economic Research, Inc.
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