Optimal rules for patent races

By Kenneth L. Judd, Karl Schmedders*, Şevin Yeltekin

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

8 Scopus citations

Abstract

There are two important rules to patent races: minimal accomplishment necessary to receive the patent and the allocation of the innovation benefits. We study the optimal combination of these rules. A planner, who cannot distinguish between competing firms in a multistage innovation race, chooses the patent rules by maximizing either consumer or social surplus. We show that efficiency cost of prizes is a key consideration. Races are undesirable only when efficiency costs are low, firms are similar, and social surplus is maximized. Otherwise, the optimal policy involves a race of nontrivial duration to spur innovation and filter out inferior innovators.

Original languageEnglish (US)
Pages (from-to)23-52
Number of pages30
JournalInternational Economic Review
Volume53
Issue number1
DOIs
StatePublished - Feb 1 2012

ASJC Scopus subject areas

  • Economics and Econometrics

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