Heterogeneity of Innovations as an Argument for Limited Patent Duration: Case of Multi-Product Monopolies

36 Pages Posted: 25 Apr 2012 Last revised: 23 Jan 2015

Date Written: January 23, 2015

Abstract

This paper studies the question why patents for multi-product monopolies should be finite. The monopolist is developing new versions of the basic product continuously and simultaneously invests into the improvement of all the existing and newly created products, thus optimally managing both horizontal and vertical innovations. It turns out that finite duration of the patent for each new product stimulates the speed of introduction of new products over the development of existing ones, thus fostering structural change in a given industry, while decreasing overall intensity of innovations in comparison to infinitely long patents. The crucial role in this is played by the relative complexity of newly introduced products and corresponding patent holding costs.

Keywords: heterogeneous innovations, economic dynamics, multi-product monopoly, product life-cycle, structural change

JEL Classification: C02, L0, O31

Suggested Citation

Bondarev, Anton A., Heterogeneity of Innovations as an Argument for Limited Patent Duration: Case of Multi-Product Monopolies (January 23, 2015). Available at SSRN: https://ssrn.com/abstract=2044582 or http://dx.doi.org/10.2139/ssrn.2044582

Anton A. Bondarev (Contact Author)

WWZ Universit├Ąt Basel ( email )

Basel, 4051
Switzerland

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