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The effect of design protection on price and price dispersion: Evidence from automotive spare parts

Benedikt Herz and Malwina Mejer

International Journal of Industrial Organization, 2021, vol. 79, issue C

Abstract: The design right is a widely used but poorly understood intellectual property right that allows the protection of products’ aesthetics and outer appearances. We study the influence of design protection on price by exploiting cross-country differences in the scope of protection in the European automotive spare parts market: In some countries, repair parts are exempted from design protection, while in others they are not. Based on detailed price data, our difference-in-differences estimates imply that design protection increases prices by about 5–8%, with large differences between carmakers. We then link our findings to the literature on deviations from the law of one price. We document large cross-country price deviations for identical spare parts and provide evidence that a part of these price deviations can be explained by the lack of harmonization of design protection in combination with carmakers’ pricing-to-market strategies.

Keywords: Design right; Design patent; Repair clause; Law of one price; Price dispersion; European car market; Automotive aftermarket; Spare parts (search for similar items in EconPapers)
JEL-codes: F15 K21 L11 L62 O34 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.ijindorg.2021.102776

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International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal

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