Download This PaperOn the Winner-Take-All Principle in Innovation Races
37 Pages Posted: 11 Dec 2007 Last revised: 9 Jun 2014
Date Written: March 23, 2009
Abstract
What is the optimal allocation of prizes in an innovation race? Should the winner take all, or is it preferable that the original inventor shares the market with subsequent independent duplicators? Some recent papers in law and economics have argued that the latter, more permissive solution is socially preferable under mild conditions. We re-examine that issue, arguing that a permissive regime may turn the innovation race into a waiting game, reducing the power of incentives, and may invite socially wasteful duplicative R&D expenditures. In a model that accounts for these effects, the winner-take-all system turns out to be preferable in a broad set of circumstances, especially in highly innovative industries.
Keywords: patent race, patent law, winner-take-all
JEL Classification: K11, L10
Suggested Citation: Suggested Citation
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