Protecting Consumers Through Patent Protection: The Implications of Merger
19 Pages Posted: 5 Dec 2014
Date Written: September 1, 2014
We challenge the common wisdom that patent protection (compared to no or weak patent protection) makes the consumers worse off by reducing product-market competition unless it increases innovation significantly. We show that the absence of patent protection may encourage horizontal merger and affect the consumers adversely by increasing product-market concentration compared to the situation with patent protection. Hence, even if we ignore the innovation inducing role of patent protection, the positive impact of patent protection on the consumers through its effect on the product-market competition provides a new rationale for patent protection, which has been overlooked in the literature.
Keywords: Patent protection; Merger; Consumer surplus
JEL Classification: D43, F21, F23, L13, O34.
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