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Optimal rules for patent races


Judd, Kenneth L; Schmedders, Karl; Yeltekin, Sevin (2012). Optimal rules for patent races. International Economic Review, 53(1):23-52.

Abstract

There are two important rules to patent races: minimal accomplishment necessary to receive the patent and the allocation of the innovation benefits. We study the optimal combination of these rules. A planner, who cannot distinguish between competing firms in a multistage innovation race, chooses the patent rules by maximizing either consumer or social surplus. We show that efficiency cost of prizes is a key consideration. Races are undesirable only when efficiency costs are low, firms are similar, and social surplus is maximized. Otherwise, the optimal policy involves a race of nontrivial duration to spur innovation and filter out inferior innovators.

Abstract

There are two important rules to patent races: minimal accomplishment necessary to receive the patent and the allocation of the innovation benefits. We study the optimal combination of these rules. A planner, who cannot distinguish between competing firms in a multistage innovation race, chooses the patent rules by maximizing either consumer or social surplus. We show that efficiency cost of prizes is a key consideration. Races are undesirable only when efficiency costs are low, firms are similar, and social surplus is maximized. Otherwise, the optimal policy involves a race of nontrivial duration to spur innovation and filter out inferior innovators.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Language:English
Date:2012
Deposited On:10 Apr 2012 08:40
Last Modified:08 Sep 2017 06:29
Publisher:Wiley-Blackwell
ISSN:0020-6598
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.1111/j.1468-2354.2011.00670.x
Other Identification Number:merlin-id:6825

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