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Intellectual Property Protection: Prevention in Advance or Punishment Afterward

Qi Duan, Yupeng Shi () and Jingwei Sun
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Qi Duan: Institute for Advanced Studies in Humanities and Social Sciences, Beihang University
Yupeng Shi: School of Economics, Central University of Finance and Economics
Jingwei Sun: School of Economics, Central University of Finance and Economics

Annals of Economics and Finance, 2017, vol. 18, issue 1, 129-171

Abstract: This paper compares two types of Intellectual Property Protection policies, prevention in advance versus punishment afterward, based on a multi-stage duopoly model. We find (i) for advance prevention measures, it is optimal to make only one firm innovate and the other succeed in imitating; (ii) for punishment afterward measures, the optimal policy is to prevent imitation exhaustively; and (iii) prevention in advance is superior to punishment afterward if the latter cannot guarantee an equilibrium in which only one firm innovates; if both measures yield single-firm-innovation, the consequence depends on how imitation affects social welfare.

Keywords: Intellectual property protection; Prevention in advance; Punishment afterward (search for similar items in EconPapers)
JEL-codes: D23 K42 O31 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:cuf:journl:y:2017:v:18:i:1:duan:shi:sun