The Decision to Patent, Cumulative Innovation, and Optimal Policy
42 Pages Posted: 19 Jul 2005
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: Suggested Citation
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