Articles

Optimal Patent Protection in a Two-Sector Economy

A.-T. GOH, J. OLIVIER

International Economic Review

novembre 2002, vol. 43, n°4, pp.1191-1214

Départements : Economie et Sciences de la décision, GREGHEC (CNRS), Finance

http://ssrn.com/abstract=342752


This article addresses the issue of optimal patent protection in an economy with a downstream and an upstream sector. The key insight is that higher patent protection in the downstream sector raises the incentives of agents to do R&D in that sector but discourages innovation in the upstream sector because of a market size effect. Hence, higher patent protection in the upstream sector accelerates growth whereas higher patent protection in the downstream sector slows it down. If some innovation is socially desirable, optimal patent protection is necessarily higher in the upstream than in the downstream sector


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