A dynamic model of patent portfolio races

Vincenzo Denicolo' () and Piercarlo Zanchettin

Economics Letters, 2012, vol. 117, issue 3, 924-927

Abstract: We propose a dynamic model of a patent portfolio race in an industry in which innovation is incremental. Two firms compete in prices and in research. We study the Markov perfect (closed-loop) equilibrium of the resulting differential game, identifying a steady state in which firms compete neck and neck. In this equilibrium, innovation rates are inefficiently high from the firms’ viewpoint. The firms are caught in a prisoners’ dilemma and so have an incentive not to enforce their patents aggressively in order to coordinate on a more “cooperative” equilibrium.

Keywords: Patent portfolios; Incremental innovation; Cross-licensing; Differential game (search for similar items in EconPapers)
JEL-codes: L1 O3 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:117:y:2012:i:3:p:924-927

DOI: 10.1016/j.econlet.2012.07.015

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