We propose a dynamic model of a patent portfolio race in an industry in which innovation is incremental. Two firms compete in prices and in research. We study the Markov perfect (closed-loop) equilibrium of the resulting differential game, identifying a steady state in which firms compete neck and neck. In this equilibrium, innovation rates are inefficiently high from the firms’ viewpoint. The firms are caught in a prisoners’ dilemma and so have an incentive not to enforce their patents aggressively in order to coordinate on a more ‘‘cooperative’’ equilibrium.
V. Denicolo, P. Zanchettin (2012). A dynamic model of patent portfolio races. ECONOMICS LETTERS, 117, 924-927 [10.1016/j.econlet.2012.07.015].
A dynamic model of patent portfolio races
DENICOLO', VINCENZO;ZANCHETTIN, PIERCARLO
2012
Abstract
We propose a dynamic model of a patent portfolio race in an industry in which innovation is incremental. Two firms compete in prices and in research. We study the Markov perfect (closed-loop) equilibrium of the resulting differential game, identifying a steady state in which firms compete neck and neck. In this equilibrium, innovation rates are inefficiently high from the firms’ viewpoint. The firms are caught in a prisoners’ dilemma and so have an incentive not to enforce their patents aggressively in order to coordinate on a more ‘‘cooperative’’ equilibrium.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
