Optimal Rules for Patent Races

30 Pages Posted: 24 Feb 2012

See all articles by Kenneth L. Judd

Kenneth L. Judd

Stanford University - The Hoover Institution on War, Revolution and Peace; Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP); National Bureau of Economic Research (NBER)

Karl Schmedders

University of Zurich

Şevin Yeltekin

affiliation not provided to SSRN

Date Written: February 2012

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.

Suggested Citation

Judd, Kenneth L. and Schmedders, Karl and Yeltekin, Şevin, Optimal Rules for Patent Races (February 2012). International Economic Review, Vol. 53, Issue 1, pp. 23-52, 2012. Available at SSRN: https://ssrn.com/abstract=2010294 or http://dx.doi.org/10.1111/j.1468-2354.2011.00670.x

Kenneth L. Judd (Contact Author)

Stanford University - The Hoover Institution on War, Revolution and Peace ( email )

Stanford, CA 94305-6010
United States

Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP) ( email )

5735 S. Ellis Street
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Karl Schmedders

University of Zurich ( email )

Moussonstrasse 15
Zürich, CH-8044
Switzerland
+41 (0)44 634 3770 (Phone)

Şevin Yeltekin

affiliation not provided to SSRN

No Address Available

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