Complementary research strategies, first-mover advantage and the inefficiency of patents

Luigi Bonatti ()

No 717, Department of Economics Working Papers from Department of Economics, University of Trento, Italia

Abstract: In a realistic framework where the potential innovators� research lines are imperfectly correlated and imitation takes some time, this paper studies an industry regulated by an authority which can tax (subsidize) the firms� pure profits (R&D expenditures). By comparing the market equilibrium emerging when there is patent protection with the market equilibrium emerging without patents, the paper finds that social welfare is higher in the absence of patents. This result is driven by the fact that�without patents--more than one successful inventor may implement its discovery and enter the market, thus reducing the deadweight loss due to imperfect competition.

Keywords: Innovation; temporary monopoly; lead time; market regulation; patents. (search for similar items in EconPapers)
JEL-codes: H21 H25 L10 L51 O31 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-com, nep-cse, nep-ino, nep-ipr, nep-pr~, nep-mic and nep-reg
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