Some Simple Economics of Patent Protection for Complex Technologies

42 Pages Posted: 6 Aug 2018

Date Written: July 2018


We analyze patent protection when innovative technologies are "complex" in that they involve sequential and complementary innovations. We argue that complexity affects the classic Nordhaus trade-off between innovation and static monopoly distortions. We parametrize the degree of sequentiality and that of complementarity and show that the optimal level of patent protection increases with both. We also address the issue of the optimal division of profit among different innovators.

Keywords: Complementarity, Division of profit, Elasticity of the supply of inventions, Patent design, Sequential innovation

JEL Classification: O30, O40

Suggested Citation

Denicolo, Vincenzo and Zanchettin, Piercarlo, Some Simple Economics of Patent Protection for Complex Technologies (July 2018). CEPR Discussion Paper No. DP13087, Available at SSRN:

Vincenzo Denicolo (Contact Author)

University of Bologna ( email )

Strada Maggiore 45
Bologna, 40125

Piercarlo Zanchettin

University of Leicester ( email )

Department of Economics
Leicester, LE1 7RH
United Kingdom

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