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Optimal patent length and patent breadth in an R&D driven market with evolving consumer preferences: An evolutionary multi-agent based modelling approach

  • Cevikarslan, Salih

    ()

    (UNU-MERIT, and SBE, Maastricht University)

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    The aims of this paper are twofold. The first is to analyse the interaction between research and development (R&D) activities of firms and heterogeneous consumer preferences in structuring the evolution of an industry. The second is to explore the effects of patent life and patent breadth on market outcomes. To answer these research questions, an evolutionary, multi-agent based, sector-level cumulative innovation model is designed. The model addresses supply and demand sides of the market simultaneously with the co-evolution of heterogeneous consumer preferences, heterogeneous firm knowledge bases and technology levels at the micro level. In line with the evolutionary modelling tradition, we have a search algorithm-innovation and imitation of products by firms - a selection of algorithm-revealed preferences of the consumers - and a population of objects in which variation is expressed and on which selection operates: namely, firms (Windrum, 2004). Firms compete on quality and price of their products in an oligopolistic market whereas consumers, constrained by their computational limits, act to maximize their utility with their product choices in a boundedly rational way. There is continuous firm entry and exit depending on the competitive performance of the firms.

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    File URL: http://www.merit.unu.edu/publications/wppdf/2013/wp2013-020.pdf
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    Paper provided by United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) in its series MERIT Working Papers with number 020.

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    Date of creation: 2013
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    Handle: RePEc:unm:unumer:2013020
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    1. Grossman, G.M. & Helpman, E., 1989. "Quality Ladders And Product Cycles," Papers 152, Princeton, Woodrow Wilson School - Public and International Affairs.
    2. Gene M. Grossman & Elhanan Helpman, 1989. "Quality Ladders in the Theory of Growth," NBER Working Papers 3099, National Bureau of Economic Research, Inc.
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