DP13087 Some Simple Economics of Patent Protection for Complex Technologies
|Author(s):||Vincenzo Denicolò, Piercarlo Zanchettin|
|Publication Date:||July 2018|
|Keyword(s):||Complementarity, Division of profit, Elasticity of the supply of inventions, Patent design, Sequential innovation|
|Programme Areas:||Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=13087|
We analyze patent protection when innovative technologies are "complex" in that they involve sequential and complementary innovations. We argue that complexity affects the classic Nordhaus trade-off between innovation and static monopoly distortions. We parametrize the degree of sequentiality and that of complementarity and show that the optimal level of patent protection increases with both. We also address the issue of the optimal division of profit among different innovators.