A patent race is a competition between two or more inventors, typically firms, to discover an invention first, thereby securing a patent which protects the invention from imitation. The date at which a firm discovers the invention is stochastic, but can be reduced in expectation by increased investment in research and development. Competition to win the patent leads firms to over-invest, compared with the outcome where they invest cooperatively and share the patent equally. However, the expected discovery date is later than socially optimal, so innovation is delayed, on average, compared with the social optimum.
KeywordsPatents Research and development Exponential distribution Schumpeterian hypothesis Hazard function Nash equilibrium Feedback strategies Subgame perfect equilibrium
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