IDEAS home Printed from https://ideas.repec.org/a/sgh/gosnar/y2020i1p97-108.html
   My bibliography  Save this article

A Note on Patents and Leniency

Author

Listed:
  • Adam Karbowski

Abstract

The purpose of this note is to investigate the relationship between patents and market collusion. Specifically, by using game theory tools, it is shown that patents can act as a leniency mechanism, i.e., they can enable firms to leave a cartel without the risk of retaliation. However, the socially beneficial role of patents is limited because the Bertrand competition itself breaks the collusion via the existence of a prisoner’s dilemma between sufficiently myopic market rivals. In the prisoner’s dilemma, two social tensions, fear and greed, make firms deviate from collusion. Patenting breaks the collusion, but at the social cost of a temporary patent monopoly in the product market.

Suggested Citation

  • Adam Karbowski, 2020. "A Note on Patents and Leniency," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 1, pages 97-108.
    • Handle: RePEc:sgh:gosnar:y:2020:i:1:p:97-108
    as

    Download full text from publisher

    File URL: http://www.journalssystem.com/gna/pdf-116615-48718
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-1137, December.
    2. Oindrila De, 2010. "Analysis of Cartel Duration: Evidence from EC Prosecuted Cartels," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 17(1), pages 33-65.
    3. Cassiman, Bruno, 2000. "Research joint ventures and optimal R&D policy with asymmetric information," International Journal of Industrial Organization, Elsevier, vol. 18(2), pages 283-314, February.
    4. Che, XiaoGang & Yang, Yibai, 2012. "Patent protection with a cooperative R&D option," Economics Letters, Elsevier, vol. 116(3), pages 469-471.
    5. Michael Noel & Mark Schankerman, 2013. "Strategic Patenting and Software Innovation," Journal of Industrial Economics, Wiley Blackwell, vol. 61(3), pages 481-520, September.
    6. Motta, Massimo & Polo, Michele, 2003. "Leniency programs and cartel prosecution," International Journal of Industrial Organization, Elsevier, vol. 21(3), pages 347-379, March.
    7. Corinne Langinier, 2005. "Using patents to mislead rivals," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(2), pages 520-545, May.
    8. Michele Boldrin & David K. Levine, 2013. "The Case against Patents," Journal of Economic Perspectives, American Economic Association, vol. 27(1), pages 3-22, Winter.
    9. Zhou, Jun, 2012. "Cartel Duration and Endogenous Private Monitoring and Communication: An Instrumental Variables Approach," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 369, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    10. Penin, Julien, 2005. "Patents versus ex post rewards: A new look," Research Policy, Elsevier, vol. 34(5), pages 641-656, June.
    11. Kamien, Morton I. & Zang, Israel, 2000. "Meet me halfway: research joint ventures and absorptive capacity," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 995-1012, October.
    12. Amable, Bruno, 2003. "The Diversity of Modern Capitalism," OUP Catalogue, Oxford University Press, number 9780199261147.
    13. Simon P. Anderson & Regis Renault, 1999. "Pricing, Product Diversity, and Search Costs: A Bertrand-Chamberlin-Diamond Model," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 719-735, Winter.
    14. Blind, Knut & Cremers, Katrin & Mueller, Elisabeth, 2009. "The influence of strategic patenting on companies' patent portfolios," Research Policy, Elsevier, vol. 38(2), pages 428-436, March.
    15. Buccirossi, Paolo & Spagnolo, Giancarlo, 2006. "Leniency policies and illegal transactions," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1281-1297, August.
    16. Chowdhury, Prabal Roy, 2005. "Patents and R&D: The tournament effect," Economics Letters, Elsevier, vol. 89(1), pages 120-126, October.
    17. Spagnolo, Giancarlo, 2004. "Divide et Impera: Optimal Leniency Programmes," CEPR Discussion Papers 4840, C.E.P.R. Discussion Papers.
    18. Klaus Kultti & Tuomas Takalo & Juuso Toikka, 2005. "Patents Hinder Collusion," Industrial Organization 0503015, University Library of Munich, Germany.
    19. Rusch, Hannes, 2019. "The evolution of collaboration in symmetric 2×2-games with imperfect recognition of types," Games and Economic Behavior, Elsevier, vol. 114(C), pages 118-127.
    20. Baumol, William J., 1996. "Entrepreneurship: Productive, unproductive, and destructive," Journal of Business Venturing, Elsevier, vol. 11(1), pages 3-22, January.
    21. Rabah Amir & Filomena Garcia & Christine Halmenschlager & Joana Pais, 2011. "R&D As A Prisoner'S Dilemma And R&D‐Avoiding Cartels," Manchester School, University of Manchester, vol. 79(1), pages 81-99, January.
    22. Kaplow, Louis & Shavell, Steven, 1994. "Optimal Law Enforcement with Self-Reporting of Behavior," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 583-606, June.
    23. Prabal Roy Chowdhury, 2005. "Patents and R & D: The tournament effect," Discussion Papers 05-05, Indian Statistical Institute, Delhi.
    24. Srobonti Chattopadhyay & Rittwik Chatterjee, 2019. "Patent Protection and R&D Incentives Under Incomplete Information," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 17(3), pages 699-705, September.
    25. Hellwig, Michael & Hüschelrath, Kai, 2018. "When Do Firms Leave Cartels? Determinants And The Impact On Cartel Survival," International Review of Law and Economics, Elsevier, vol. 54(C), pages 68-84.
    26. Mazzoleni, Roberto & Nelson, Richard R., 1998. "The benefits and costs of strong patent protection: a contribution to the current debate," Research Policy, Elsevier, vol. 27(3), pages 273-284, July.
    27. Ascension Barajas & Elena Huergo & Lourdes Moreno, 2012. "Measuring the economic impact of research joint ventures supported by the EU Framework Programme," The Journal of Technology Transfer, Springer, vol. 37(6), pages 917-942, December.
    28. Che, Xiaogang & Yang, Yibai, 2009. "Patent Protection with Cooperative R&D Option," MPRA Paper 19437, University Library of Munich, Germany.
    29. Marco Marinucci, 2012. "A primer on R&D cooperation among firms," Questioni di Economia e Finanza (Occasional Papers) 130, Bank of Italy, Economic Research and International Relations Area.
    30. Burr, Chrystie & Knauff, Malgorzata & Stepanova, Anna, 2013. "On the prisoner’s dilemma in R&D with input spillovers and incentives for R&D cooperation," Mathematical Social Sciences, Elsevier, vol. 66(3), pages 254-261.
    31. Joseph E. Harrington, 2008. "Optimal Corporate Leniency Programs," Journal of Industrial Economics, Wiley Blackwell, vol. 56(2), pages 215-246, June.
    32. Blind, Knut & Edler, Jakob & Frietsch, Rainer & Schmoch, Ulrich, 2006. "Motives to patent: Empirical evidence from Germany," Research Policy, Elsevier, vol. 35(5), pages 655-672, June.
    33. Karbowski, Adam & Prokop, Jacek, 2012. "Kontrowersje związane z ekonomicznym uzasadnieniem ochrony patentowej [Controversies over the economic justifications for patent protection]," MPRA Paper 73619, University Library of Munich, Germany.
    34. Valerie Y. Suslow, 2005. "Cartel contract duration: empirical evidence from inter-war international cartels," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 14(5), pages 705-744, October.
    35. Pénin, Julien, 2012. "Strategic uses of patents in markets for technology: A story of fabless firms, brokers and trolls," Journal of Economic Behavior & Organization, Elsevier, vol. 84(2), pages 633-641.
    36. Klaus Kultti & Tuomas Takalo & Juuso Toikka, 2006. "Simultaneous Model of Innovation, Secrecy, and Patent Policy," American Economic Review, American Economic Association, vol. 96(2), pages 82-86, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Karbowski Adam & Prokop Jacek, 2020. "The Impact of Patents and R&D Cooperation on R&D Investments in a Differentiated Goods Industry," South East European Journal of Economics and Business, Sciendo, vol. 15(1), pages 122-133, June.
    2. Adam Karbowski, 2021. "Unproductive entrepreneurship and patents," Bank i Kredyt, Narodowy Bank Polski, vol. 52(5), pages 473-494.
    3. Jun Zhou, 2016. "The dynamics of leniency application and the knock-on effect of cartel enforcement," Working Papers 13042, Bruegel.
    4. Karbowski, Adam, 2019. "Greed and fear in downstream R&D games," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 32, pages 63-76.
    5. Sven Heim & Kai Hhschelrath & Ulrich Laitenberger & Yossi Spiegel, 2017. "Minority Share Acquisitions and Collusion: Evidence from the Introduction of National Leniency Programs," Working Papers hal-01952937, HAL.
    6. Jochem, Annabelle & Parrotta, Pierpaolo & Valletta, Giacomo, 2020. "The impact of the 2002 reform of the EU leniency program on cartel outcomes," International Journal of Industrial Organization, Elsevier, vol. 71(C).
    7. Adam Karbowski & Jacek Prokop, 2018. "R&D activities of enterprises, product market leadership, and collusion," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 36(2), pages 735-753.
    8. Buccirossi, Paolo & Spagnolo, Giancarlo, 2006. "Leniency policies and illegal transactions," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1281-1297, August.
    9. Charles Angelucci & Antonio Russo, 2022. "Petty Corruption And Citizen Reports," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(2), pages 831-848, May.
    10. Salvatore Piccolo & Giovanni Immordino, 2012. "Optimal Accomplice-Witnesses Regulation under Asymmetric Information," CSEF Working Papers 304, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    11. Park, Sangwon, 2014. "The effect of leniency programs on endogenous collusion," Economics Letters, Elsevier, vol. 122(2), pages 326-330.
    12. Perrotta Berlin, Maria & Spagnolo, Giancarlo & Qin, Bei, 2015. "Leniency, Asymmetric Punishment and Corruption: Evidence from China," SITE Working Paper Series 34, Stockholm School of Economics, Stockholm Institute of Transition Economics, revised 25 May 2017.
    13. Chen, Zhiqi & Ghosh, Subhadip & Ross, Thomas W., 2015. "Denying leniency to cartel instigators: Costs and benefits," International Journal of Industrial Organization, Elsevier, vol. 41(C), pages 19-29.
    14. Walsh, John P. & Lee, You-Na & Jung, Taehyun, 2016. "Win, lose or draw? The fate of patented inventions," Research Policy, Elsevier, vol. 45(7), pages 1362-1373.
    15. Marvao, Catarina & Spagnolo, Giancarlo & Buccirossi, Paolo, 2015. "Leniency and Damages," SITE Working Paper Series 32, Stockholm School of Economics, Stockholm Institute of Transition Economics, revised 13 Jan 2016.
    16. Jun Zhou, 2016. "The Rise and Fall of Cartels with Multi-market Colluders," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 48(4), pages 381-403, June.
    17. Julien Sauvagnat, 2015. "Prosecution and Leniency Programs: The Role of Bluffing in Opening Investigations," Journal of Industrial Economics, Wiley Blackwell, vol. 63(2), pages 313-338, June.
    18. Catarina Marvão & Giancarlo Spagnolo, 2018. "Cartels and leniency: Taking stock of what we learnt," Chapters, in: Luis C. Corchón & Marco A. Marini (ed.), Handbook of Game Theory and Industrial Organization, Volume II, chapter 4, pages 57-90, Edward Elgar Publishing.
    19. Forsbacka, Tove & Le Coq, Chloé & Marvão, Catarina, 2023. "Cartel birth and death dynamics: Empirical evidence," International Journal of Industrial Organization, Elsevier, vol. 89(C).
    20. Peter T. Dijkstra & Jonathan Frisch, 2018. "Sanctions and Leniency to Individuals, and its Impact on Cartel Discoveries: Evidence from the Netherlands," De Economist, Springer, vol. 166(1), pages 111-134, March.

    More about this item

    Keywords

    patents; leniency; collusion; prisoner's dilemma;
    All these keywords.

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • P14 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Property Rights

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sgh:gosnar:y:2020:i:1:p:97-108. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Grzegorz Konat (email available below). General contact details of provider: https://edirc.repec.org/data/sgwawpl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.