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On the Social Desirability of Patents for Sequential Innovations in a Vertically Differentiated Market

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  • Luca Lambertini
  • Piero Tedeschi

Abstract

We consider a market for vertically differentiated goods where firms enter over time, after having developed innovations characterized by different quality levels. We show that the adaptation of a patent system limiting the quality range available to later entrants is socially undesirable, in that it builds a barrier to entry to the advantage of the first innovators.
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  • Luca Lambertini & Piero Tedeschi, 2007. "On the Social Desirability of Patents for Sequential Innovations in a Vertically Differentiated Market," Journal of Economics, Springer, vol. 90(2), pages 193-214, March.
    • Handle: RePEc:kap:jeczfn:v:90:y:2007:i:2:p:193-214
    DOI: 10.1007/s00712-006-0231-5
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    Cited by:

    1. Colombo, Stefano, 2009. "On the effects of selective below-cost pricing in a vertical differentiation model," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-13.
    2. Emanuele Bacchiega & Luca Lambertini & Andrea Mantovaini, 2011. "Process And Product Innovation In A Vertically Differentiated Industry," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 13(02), pages 209-221.
    3. Haejun Jeon, 2016. "Patent litigation and cross licensing with cumulative innovation," Journal of Economics, Springer, vol. 119(3), pages 179-218, November.
    4. Wang, Rong-Kuan & Hu, Die, 2017. "Time-cost substitutability, earlycutting threat, and innovation timing," Economics Letters, Elsevier, vol. 156(C), pages 88-91.
    5. Lambertini, Luca & Tampieri, Alessandro, 2012. "Low-quality leadership in a vertically differentiated duopoly with Cournot competition," Economics Letters, Elsevier, vol. 115(3), pages 396-398.
    6. Yi-Ling Cheng & Shin-Kun Peng, 2014. "Price competition and quality differentiation with multiproduct firms," Journal of Economics, Springer, vol. 112(3), pages 207-223, July.
    7. Schubert, Stefanie & Jost, Peter-J., 2015. "Beat the gun - protection against zero-profit imitation," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113045, Verein für Socialpolitik / German Economic Association.

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    More about this item

    Keywords

    innovation; patent height; product quality; L12; L13; O31;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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