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on Intellectual Property Rights |
| By: | Galasso, Alberto; Schankerman, Mark |
| Abstract: | Cumulative innovation is central to economic growth. Do patent rights facilitate or impede such follow-on innovation? This paper studies the causal effect of removing patent protection through court invalidation on subsequent research related to the focal patent, as measured by later citations. We exploit random allocation of judges at the U.S. Court of Appeal for the Federal Circuit to control for the endogeneity of patent invalidation. We find that patent invalidation leads to a 50 percent increase in subsequent citations to the focal patent, on average, but the impact is highly heterogeneous. Patent rights appear to block follow-on innovation only in the technology fields of computers, electronics and medical instruments. The effect is entirely driven by invalidation of patents owned by large patentees that triggers more follow-on innovation by small firms. |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:hit:iirwps:13-16&r=ipr |
| By: | Lin, Hwan C. |
| Abstract: | This paper presents more channels through which the optimal patent life is determined in a R&D-based endogenous growth model that permits growth of new varieties of consumer goods over time. Its modeling features include an endogenous hazard rate facing incumbent monopolists, the prevalence of research congestion, and the aggregate welfare importance of product differentiation. As a result, a patent’s effective life is endogenized and less than its legal life. The model is calibrated to a global economy with a set of baseline parameter values. Under the benchmark patent length of 20 years, the calibrated model can deliver along the balanced growth path a plausible innovation rate of 2.84% per year and an economy-wide markup rate of 1.15. The optimal patent length is computed with the algorithm of Golden Search Section, ranging from 17 to 19 years. With the creative-destruction hazard, the world needs a longer patent term to maximize social welfare, but with the prevalence of research congestion, the world needs a shorter patent term. However, if the world’s aggregate welfare appreciates varieties of goods in a way strong enough, the optimal patent term can surprisingly extend beyond even 1,000 years! |
| Keywords: | patent length, innovation, creative destruction, endogenous hazard rate |
| JEL: | O31 O34 |
| Date: | 2013–08–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:49790&r=ipr |
| By: | William Horrace (Center for Policy Research, Maxwell School, Syracuse University, 426 Eggers Hall, Syracuse, NY 13244-1020); Rui Huang (Department of Agricultural & Resrouce Economics, University of Connecticut, Storrs, CT 06269-4021); Jeffrey M. Perloff (Department of Agricultural and Resource Economics, 207 Giannini Hall, MC 3310, University of California, Berkeley, CA 94720) |
| Abstract: | We use order statistics to analytically derive demand functions when consumers choose from among the varieties of two brands—such as Coke and Pepsi—and an outside good. Soft-drinks have no price variability across varieties within a brand, so traditional demand systems (e.g., mixed logit) are not identified. In contrast, our demand system is identified and can be estimated using a nonlinear instrumental variable estimator. Our demand functions are higher-order polynomials, where the polynomial order is increasing in variety. Because these demand curves have convex and concave sections around an inflection point, firms are more likely to respond and make large price adjustments to increases in cost than to comparable decreases in costs. We compare the profit-maximizing number of varieties within a grocery store to the socially optimal number and find that consumer surplus and welfare would increase with more variety. Key Words: Varieties, Product Line, Consumer Surplus, Welfare, Demand, Order Statistics JEL No. L11, L66, D11 |
| URL: | http://d.repec.org/n?u=RePEc:max:cprwps:152&r=ipr |