TY - JOUR
T1 - Preemption, leapfrogging and competition in patent races
AU - Fudenberg, Drew
AU - Gilbert, Richard
AU - Stiglitz, Joseph
AU - Tirole, Jean
N1 - Funding Information:
*This week was partially supported by National Science Foundation grant SES-8207925.
PY - 1983/6
Y1 - 1983/6
N2 - This paper investigates when patent races will be characterized by vigorous competition and when they will degenerate into a monopoly. Undersome conditions, a firm with an arbitrarily small headstart can preempt its rivals. Such 'ε{lunate}-preemption' is shown to depend on whether a firm that is behind in the patent race, as measured by the expected time remaining until discovery, cant 'leapfrog' the competition and become the new leader. An example of an R&D game with random discovery illustrates how ε{lunate}-preemption can occur when leapfrogging is impossible. A multi-stage R&D process allows leapfrogging and thus permits competition. A similar conclusion emerges in a model of a deterministic patent race with imperfect monitoring of rival firms' R&D investment activities.
AB - This paper investigates when patent races will be characterized by vigorous competition and when they will degenerate into a monopoly. Undersome conditions, a firm with an arbitrarily small headstart can preempt its rivals. Such 'ε{lunate}-preemption' is shown to depend on whether a firm that is behind in the patent race, as measured by the expected time remaining until discovery, cant 'leapfrog' the competition and become the new leader. An example of an R&D game with random discovery illustrates how ε{lunate}-preemption can occur when leapfrogging is impossible. A multi-stage R&D process allows leapfrogging and thus permits competition. A similar conclusion emerges in a model of a deterministic patent race with imperfect monitoring of rival firms' R&D investment activities.
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U2 - 10.1016/0014-2921(83)90087-9
DO - 10.1016/0014-2921(83)90087-9
M3 - Article
AN - SCOPUS:0002474504
VL - 22
SP - 3
EP - 31
JO - European Economic Review
JF - European Economic Review
SN - 0014-2921
IS - 1
ER -