Patent Protection and R&D with Endogenous Market Structure |
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| Authors: | Arijit Mukherjee |
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| Affiliation: | School of Economics, University of Nottingham, University Park, Nottingham, U.K. and The Leverhulme Centre for Research in Globalisation and Economic Policy, U.K. |
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| Abstract: | In a model with endogenous number of innovating firms, we show that whether patent protection increases R&D investment is ambiguous, and depends on the market demand function and the cost of R&D. If the market size increases with number of firms, patent protection reduces R&D investment if the cost of R&D is sufficiently high, and higher product differentiation increases the possibility of lower R&D investment under patent protection. If the market size does not increase with number of firms, patent protection never reduces R&D investment. We find that welfare is lower under patent protection than under no patent protection. |
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