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Patents, imitation and welfare

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  • Arijit Mukherjee
  • Achintya Ray

Abstract

We consider the effects of product and process patents on profits and welfare. In a duopoly model, we show that if the cost of imitation is not very large, prisoner's dilemma occurs under process patent, thus creating lower profit of each firm under process patent than under product patent. Welfare is higher under process (product) patent for very small (not very small) cost of imitation. Although the possibility of cross-licensing never makes lower welfare under process patent for all costs of imitation, welfare is never lower under product patent under infinitely repeated game.

Suggested Citation

  • Arijit Mukherjee & Achintya Ray, 2007. "Patents, imitation and welfare," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 16(3), pages 227-236.
    • Handle: RePEc:taf:ecinnt:v:16:y:2007:i:3:p:227-236
    DOI: 10.1080/10438590600661855
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    References listed on IDEAS

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    Cited by:

    1. Eberhard Feess & Michael Hoeck & Oliver Lorz, 2009. "International Technology Transfers and Competition," Review of International Economics, Wiley Blackwell, vol. 17(5), pages 1038-1052, November.
    2. Pasquale L. Scandizzo & Marco Ventura, 2016. "Innovation and imitation as an interactive process," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 25(8), pages 821-851, November.
    3. Bhan, Aditya & Kabiraj, Tarun, 2014. "Incentives for product and process innovations: a case for the drug industry," MPRA Paper 61030, University Library of Munich, Germany.
    4. Kabiraj, Tarun & Chattopadhyay, Srobonti, 2014. "Cooperative vs. non-cooperative R&D incentives under incomplete information," MPRA Paper 59259, University Library of Munich, Germany.

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