R&D, Licensing and Patent Protection

Arijit Mukherjee

Industrial Organization from EconWPA

Abstract: This paper investigates the effect of different patent regimes on R&D investment and social welfare in a duopoly market with uncertain R&D process. We find that strong patent protection increases R&D investment of at least one firm but whether both firms’ R&D investment will be more under strong patent protection is ambiguous. While ex-ante welfare is more likely to be higher under strong patent protection, ex-post welfare may be higher under strong patent protection. Whether the possibility of licensing increases both firms' R&D investment is also ambiguous. Licensing with up-front fixed-fee can increase policy dilemma by increasing the possibility of higher ex-ante welfare under strong patent protection but higher ex-post welfare under weak patent protection. However, the results may be different for licensing contract with per- unit output royalty.

Keywords: Knowledge spillover; Licensing; Patent protection; Uncertain R&D (search for similar items in EconPapers)
JEL-codes: D43 L13 O34 (search for similar items in EconPapers)
Date: 2002-11-05
Note: Type of Document - pdf; prepared on pc; pages: 34
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http://129.3.20.41/eps/io/papers/0211/0211011.pdf (application/pdf)

Related works:
Working Paper: R&D, Licensing and Patent Protection (2002)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpio:0211011

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