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Endogenous Network Formation in Patent Contests And Its Role as A Barrier to Entry
Author(s) -
Marinucci Marco,
Vergote Wouter
Publication year - 2011
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/j.1467-6451.2011.00466.x
Subject(s) - contest , competition (biology) , pairwise comparison , network formation , industrial organization , microeconomics , business , barriers to entry , market structure , economics , computer science , ecology , artificial intelligence , world wide web , political science , law , biology
In a setting of R & D competition, we study how collaboration affects strategic decisions during a patent contest, and how the latter influences the collaboration network structures the firms can form. We use an all pay auction approach to endogenize both network formation and R & D intensities, and to take heterogeneous and private valuations for patents into account. We find that the complete network is not always the only pairwise stable one. The other stable networks have the realistic property that some firms drop out of the contest. Thus, ‘weak’ cooperation can serve as a barrier to entry on the market for innovation.