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On the Social Desirability of Patents for Sequential Innovations in a Vertically Differentiated Market

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Abstract

We consider a market for vertically differentiated goods where firms enter over time, after having developed innovations characterised by different quality levels. We show that patent height and length interact to determine the ultimate emergence of duopoly. In general, imposing quality improvements on later entrants entails the persistence of monopoly, while a duopoly equilibrium emerges when the second innovator is allowed to produce a sufficiently inferior quality and the patent protection granted to the first innovator is not too long-lasting.

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Authors and Affiliations

  1. Department of Economics, University of Bologna, Strada Maggiore 45, 40125, Bologna, Italy

    Luca Lambertini

  2. Department of Statistics, University of Milano-Bicocca, Via Bicocca degli Arcimboldi 8, 20126, Milano, Italy

    Piero Tedeschi

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  1. Luca Lambertini
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  2. Piero Tedeschi
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Correspondence to Luca Lambertini.

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Lambertini, L., Tedeschi, P. On the Social Desirability of Patents for Sequential Innovations in a Vertically Differentiated Market. J Econ 90, 193–214 (2007). https://doi.org/10.1007/s00712-006-0231-5

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  • DOI: https://doi.org/10.1007/s00712-006-0231-5

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