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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

Suggested Citation

  • Fernando Leiva B., 2006. "Pricing Patents through Citations," 2006 Meeting Papers 834, Society for Economic Dynamics.
  • Handle: RePEc:red:sed006:834

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    References listed on IDEAS

    1. Manuel Trajtenberg, 1990. "A Penny for Your Quotes: Patent Citations and the Value of Innovations," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 172-187, Spring.
    2. Dietmar Harhoff & Frederic M. Scherer & Katrin Vopel, 1997. "Exploring the Tail of Patented Invention Value Distributions," CIG Working Papers FS IV 97-27, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    3. 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.
    4. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    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.
    6. Matthew Mitchell, 2000. "Rewarding Sequential Innovators: Patents Prizes and Buyouts," Econometric Society World Congress 2000 Contributed Papers 1650, Econometric Society.
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    Cited by:

    1. Jaimovich, Nir & Rebelo, Sérgio, 2012. "Non-linear Effects of Taxation on Growth," CEPR Discussion Papers 9261, C.E.P.R. Discussion Papers.
    2. Christian Ghiglino, 2005. "Balanced Growth with a Network of Ideas," Working Papers 546, Queen Mary University of London, School of Economics and Finance.
    3. Nir Jaimovich & Sergio Rebelo, 2017. "Nonlinear Effects of Taxation on Growth," Journal of Political Economy, University of Chicago Press, vol. 125(1), pages 265-291.

    More about this item


    Patents; Innovation; R&D; Networks;

    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
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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