R&D competition, adoption of technology, and optimal patent policy

Innchan Lee, University of Pennsylvania

Abstract

The first paper introduces a system of multiple patents (MP) in a timeless model as a way of reducing the social costs caused by single patent (SP) system. The welfare comparison study shows that the disadvantage of SP regime in deadweight loss and higher R&D cost outweighs its advantage in R&D incentives. This illustrative static model infers that the disadvantage of SP regime lies in the absence of policy variables to balance between R&D incentives and the dissemination of an innovation. The paper in Chapter II introduces a system of multiple patents in a dynamic setup. This paper designs a scheme to select multiple winners in a patent race. The government manipulates the probability density function of the number of winners in patent races. The longer the pendency period, the larger the expected number of winners. The larger the number of patentees, the less deadweight loss. The spirit of MP regime is similar to that of Gilbert and Shapiro (1990) in which the optimal policy mix calls for infinitely-lived patent duration and lowest flow profit. However, the welfare analysis shows that the optimal policy mix in MP regime calls for zero pendency period, which chooses only a single winner in a patent race. This study shows that the compensation scheme of longer patent duration may not work without increasing deadweight loss due to the fact that firms' R&D efforts are sensitive to the flow profit (i.e. pendency period) and insensitive to patent duration. The last paper in Chapter III attempts to combine two basic approaches on the speed of R&D; stochastic patent race games and a deterministic auction theory. This paper sets up a model where firms are allowed to have a choice between adopting a similar new technology to skip a part of multi-stage R&D program and advance its rival and doing the entire R&D program for a particular new technology. This paper studies the timing of adoption, the identity of adopting firms, and the effects of the outside option of adopting a similar advanced technology on the speed of R&D for a particular new technology in a multi-state R&D competition.

Subject Area

Economic theory

Recommended Citation

Lee, Innchan, "R&D competition, adoption of technology, and optimal patent policy" (1996). Dissertations available from ProQuest. AAI9627954.
https://repository.upenn.edu/dissertations/AAI9627954

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