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Patents Hinder Collusion

Author

Listed:
  • Klaus Kultti

    (University of Helsinki)

  • Tuomas Takalo

    (University of Toulouse & Bank of Finland)

  • Juuso Toikka

    (Helsinki School of Economics)

Abstract

We argue that a patent system makes collusion among innovators more difficult. Our simple argument is based on two properties of the patent system. First, a patent not only protects against infringement but also against retaliation by former collusion members. Second, a deviator has an equal chance with former collusion members to get a patent on new innovations. We show that if a patent system reduces spillovers, it renders collusion impossible. Moreover, it is possible to design a patent system that simultaneously increases knowledge spillovers and eliminates collusion

Suggested Citation

  • Klaus Kultti & Tuomas Takalo & Juuso Toikka, 2005. "Patents Hinder Collusion," Industrial Organization 0503015, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpio:0503015
    Note: Type of Document - pdf; pages: 27
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/io/papers/0503/0503015.pdf
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    References listed on IDEAS

    as
    1. Dam, Kenneth W, 1994. "The Economic Underpinnings of Patent Law," The Journal of Legal Studies, University of Chicago Press, vol. 23(1), pages 247-271, January.
    2. Josh Lerner & Jean Tirole, 2004. "Efficient Patent Pools," American Economic Review, American Economic Association, vol. 94(3), pages 691-711, June.
    3. Carl Shapiro, 2001. "Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard Setting," NBER Chapters,in: Innovation Policy and the Economy, Volume 1, pages 119-150 National Bureau of Economic Research, Inc.
    4. Klaus Kultti & Tuomas Takalo & Juuso Toikka, 2007. "Secrecy versus patenting," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 22-42, March.
    5. Ted O'Donoghue & Suzanne Scotchmer & Jacques-François Thisse, 1998. "Patent Breadth, Patent Life, and the Pace of Technological Progress," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(1), pages 1-32, March.
    6. Dennis W. Carlton & Robert H. Gertner, 2003. "Intellectual Property, Antitrust, and Strategic Behavior," NBER Chapters,in: Innovation Policy and the Economy, Volume 3, pages 29-60 National Bureau of Economic Research, Inc.
    7. Howard F. Chang, 1995. "Patent Scope, Antitrust Policy, and Cumulative Innovation," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 34-57, Spring.
    8. Kortum, Samuel & Lerner, Josh, 1999. "What is behind the recent surge in patenting?1," Research Policy, Elsevier, vol. 28(1), pages 1-22, January.
    9. Lu, Xiaohua & McAfee, R. Preston, 1996. "The Evolutionary Stability of Auctions over Bargaining," Games and Economic Behavior, Elsevier, vol. 15(2), pages 228-254, August.
    10. B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
    11. repec:rus:hseeco:72148 is not listed on IDEAS
    12. Asher Wolinsky, 1988. "Dynamic Markets with Competitive Bidding," Review of Economic Studies, Oxford University Press, vol. 55(1), pages 71-84.
    13. Vincenzo Denicolo & Luigi Alberto Franzoni, 2004. "Patents, Secrets, and the First-Inventor Defense," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(3), pages 517-538, September.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Klaus Kultti & Tuomas Takalo & Juuso Toikka, 2006. "Simultaneous Model of Innovation, Secrecy, and Patent Policy," American Economic Review, American Economic Association, vol. 96(2), pages 82-86, May.

    More about this item

    Keywords

    Patens; Collusion; Secrecy; Innovation;

    JEL classification:

    • L - Industrial Organization

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