Imitation, Patent Protection and Welfare

School of Economics Discussion Paper No. 03/02

42 Pages Posted: 26 Jun 2003

See all articles by Arijit Mukherjee

Arijit Mukherjee

University of Nottingham - School of Economics

Enrico Pennings

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Tinbergen Institute; Erasmus Research Institute of Management (ERIM)

Date Written: March 2003

Abstract

Once a new technology has been invented, there is a credible threat of imitation when patents are long and imitation cost is low. When imitation is credible, the innovator has an incentive to postpone technology adoption for relatively high cost of imitation. The possibility of licensing eliminates or at least reduces the incentive for delayed technology adoption and may increase or decrease social welfare. Further, this paper explains the advantages of two types of licensing contracts, viz. a forward contract on licensing and a simple licensing contract. We show the implications of the availability of the licensing contracts on social welfare and optimal patent protection.

Keywords: Imitation, Innovation, Licensing, Patent protection, Welfare

JEL Classification: D45, L12, O33

Suggested Citation

Mukherjee, Arijit and Pennings, Enrico, Imitation, Patent Protection and Welfare (March 2003). School of Economics Discussion Paper No. 03/02, Available at SSRN: https://ssrn.com/abstract=401520 or http://dx.doi.org/10.2139/ssrn.401520

Arijit Mukherjee (Contact Author)

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
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+44 115 9514733 (Phone)
+44 115 9514159 (Fax)

Enrico Pennings

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

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