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Incentives for Product and Process Innovations: A Case for the Drug Industry

Aditya Bhan and Tarun Kabiraj
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Aditya Bhan: Economic Research Unit, Indian Statistical Institute, Kolkata, India
Tarun Kabiraj: Economic Research Unit, Indian Statistical Institute, Kolkata, India

Indian Economic Review, 2014, vol. 49, issue 2, 193-204

Abstract: We consider an interaction of competing firms in an integrated world market and study their R&D incentives under each of product patent and process patent regimes. We follow a framework generally observed in the drug industry. We show that product patent regime leads to a larger R&D investment. Consumers may also benefit from product patenting. However, if the number of goods is large enough, the choice of patent regime loses significance with respect to R&D incentives.

Keywords: Innovation; Process Patenting; Product Patenting; Drug Industry (search for similar items in EconPapers)
JEL-codes: F23 L13 O34 (search for similar items in EconPapers)
Date: 2014
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