Experimentation, Patents, and Innovation

Daron Acemoglu, Kostas Bimpikis and Asuman Ozdaglar

American Economic Journal: Microeconomics, 2011, vol. 3, issue 1, 37-77

Abstract: This paper studies a simple model of experimentation and innovation. Our analysis suggests that patents improve the allocation of resources by encouraging rapid experimentation and efficient ex post transfer of knowledge. Each firm receives a signal on the success probability of a project and decides when to experiment. Successes can be copied. First, we assume that signal qualities are the same. Symmetric equilibria involve delayed and staggered experimentation, whereas the optimal allocation never involves delays and may involve simultaneous experimentation. Appropriately designed patents implement the optimal allocation. Finally, we discuss the case when signals differ and are private information. (JEL D82, D83, O31, O33, O34)

JEL-codes: D82 D83 O31 O33 O34 (search for similar items in EconPapers)
Date: 2011
Note: DOI: 10.1257/mic.3.1.37
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Citations: View citations in EconPapers (17)

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Related works:
Working Paper: Experimentation, Patents, and Innovation (2009)
Working Paper: Experimentation, Patents, and Innovation (2008)
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