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Patent renewals and r&d incentives

By Francesca Cornelli and Mark Schankerman

Abstract

In a model with moral hazard and assymmetric information, we show that it can be welfare-improving to differentiate patent lives when firms have different R&D productivities. A uniform patent life provides excessive R&D incentive to low-productivity firms, and too little to high ones. The optimally differentiated patent scheme can be implemented through a menu of patent lives (or renewals) and associated fees. We characterize the optimal mechanism, and use simulation analysis to compare it with existing patent renewal systems and to illustrate the potential welfare gains from the optimal policy

Topics: HB Economic Theory, HD Industries. Land use. Labor
Publisher: Centre for Economic Policy Research
Year: 1998
OAI identifier: oai:eprints.lse.ac.uk:5090
Provided by: LSE Research Online
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