Innovation and Competition with Imperfect Patent Protection

Marek Dietl, Łukasz Skrok and Bartłomiej Wiśnicki

No 2025-112, KAE Working Papers from Warsaw School of Economics, Collegium of Economic Analysis

Abstract: We employ a duopoly model with horizontal differentiation of a product to analyse impact of imperfect patent rights in the form of a patent thicket on market entry and outcomes in a market when a single unit of a good is to be provided, reflecting a competition of two potential suppliers within a tender procedure of a complex product. We show that even under price competition, a treat of litigation coming from the overlap in the patent protection leads to pricing decisions above marginal costs level. Such a situation, on the one hand, is socially costly due to costs linked to fixed costs of market entry of both competitors, but on the other hand, it is not necessarily the most beneficial from the point of view of a buyer. The paper resolves Bertrand paradox in a novel way.

Keywords: patent thickets; horizontal differentiation; Bertrand paradox (search for similar items in EconPapers)
JEL-codes: D23 K11 L13 O34 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2025-05
New Economics Papers: this item is included in nep-com, nep-gth and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:sgh:kaewps:2025112

DOI: 10.33119/kaewps2025112

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