Premium
Runner‐up Patents: Is Monopoly Inevitable?
Author(s) -
Henry Emeric
Publication year - 2010
Publication title -
scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/j.1467-9442.2010.01603.x
Subject(s) - monopoly , incentive , competition (biology) , product (mathematics) , industrial organization , business , duopoly , sorting , welfare , economics , microeconomics , commerce , market economy , computer science , ecology , geometry , mathematics , programming language , biology
Exclusive patents sacrifice product competition to provide firms incentives to innovate. We characterize an alternative mechanism whereby later inventors are allowed to share the patent if they discover within a certain time period of the first inventor. These runner‐up patents increase social welfare under very general conditions. Furthermore, we show that the time window during which later inventors can share the patent should become a new policy tool at the disposal of the designer. This instrument will be used in a socially optimal mix with the breadth and length of the patent and could allow sorting between more or less efficient firms.