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Competition, Patent Protection, and Innovation in an Endogenous Market Structure

Keishun Suzuki

MPRA Paper from University Library of Munich, Germany

Abstract: This study revisits the relationship between competition and innovation by incorporating an endogenous market structure (EMS) in a dynamic general equilibrium model. We consider that both innovative and non-innovative followers engage in Cournot competition with free entry. A competition-enhancing policy, which reduces entry cost, can stimulate the entry of innovative followers when the entry cost is high. However, when the entry cost is sufficiently low, the entry of non-innovative followers crowd-out innovative followers from the market. As a result, there is a non-monotonic relationship (inverted-V shape) between competition and innovation. Furthermore, we show that, while strengthening patent protection positively affects innovation when competition is sufficiently intense, the effect may be negative under milder competition. This suggests that a competition policy could complement a patent policy.

Keywords: Competition; Patent Protection; Innovation; Endogenous Market Structure (search for similar items in EconPapers)
JEL-codes: O30 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-cse, nep-dge, nep-ino, nep-ipr, nep-law and nep-mic
Date: 2017-02-25
References: View references in EconPapers View complete reference list from CitEc
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https://mpra.ub.uni-muenchen.de/77133/1/MPRA_paper_77133.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/77458/1/MPRA_paper_77458.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/79381/1/MPRA_paper_79381.pdf revised version (application/pdf)

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