Pricing Patents through Citations
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
|Date of creation:||03 Dec 2006|
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- Hugo Hopenhayn & Gerard Llobet & Matthew Mitchell, 2006.
"Rewarding Sequential Innovators: Prizes, Patents, and Buyouts,"
Journal of Political Economy,
University of Chicago Press, vol. 114(6), pages 1041-1068, December.
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"Search in the formation of large networks: How random are socially generated networks?,"
1216, California Institute of Technology, Division of the Humanities and Social Sciences.
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- Hugo A. Hopenhayn & Matthew F. Mitchell, 1999.
"Innovation Fertility and Patent Design,"
NBER Working Papers
7070, National Bureau of Economic Research, Inc.
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