The Decision to Patent, Cumulative Innovation, and Optimal Policy

42 Pages Posted: 19 Jul 2005

See all articles by Nisvan Erkal

Nisvan Erkal

University of Melbourne - Faculty of Business and Economics

Abstract

This paper analyzes optimal policy in the context of cumulative innovation in a model that endogenizes patenting decisions of early innovators. Secrecy can significantly decrease investment in the second innovation. We show that as the effectiveness of secrecy as a protection mechanism increases, which may be the case if the government has a strong trade secret policy or innovators can monitor the flow of their technological information, it becomes optimal to have broad patent protection over a larger parameter space. In cases when patent policy is ineffective in achieving disclosure, it is socially desirable to have a lenient antitrust policy and allow collusive agreements.

Keywords: Cumulative innovation, patenting decision, patent policy, antitrust policy

JEL Classification: O31, O38, L40

Suggested Citation

Erkal, Nisvan, The Decision to Patent, Cumulative Innovation, and Optimal Policy. Available at SSRN: https://ssrn.com/abstract=714421

Nisvan Erkal (Contact Author)

University of Melbourne - Faculty of Business and Economics ( email )

Victoria, 3010
Australia
+61 3 8344 3307 (Phone)
+61 3 8344 6899 (Fax)

HOME PAGE: http://www.nisvanerkal.net

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