OPTIMAL RULES FOR PATENT RACES* |
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Authors: | By Kenneth L. Judd Karl Schmedders Şevin Yeltekin |
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Affiliation: | 1. Hoover Institution, USA;2. University of Zurich and Swiss Finance Institute, Switzerland;3. Carnegie Mellon University, USA |
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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. |
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