American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Experimentation, Patents, and Innovation
American Economic Journal: Microeconomics
vol. 3,
no. 1, February 2011
(pp. 37–77)
Abstract
This paper studies a simple model of experimentation and innovation. Our analysis suggests that patents improve the allocation of resources by encouraging rapid experimentation and efficient ex post transfer of knowledge. Each firm receives a signal on the success probability of a project and decides when to experiment. Successes can be copied. First, we assume that signal qualities are the same. Symmetric equilibria involve delayed and staggered experimentation, whereas the optimal allocation never involves delays and may involve simultaneous experimentation. Appropriately designed patents implement the optimal allocation. Finally, we discuss the case when signals differ and are private information. (JEL D82, D83, O31, O33, O34)Citation
Acemoglu, Daron, Kostas Bimpikis, and Asuman Ozdaglar. 2011. "Experimentation, Patents, and Innovation." American Economic Journal: Microeconomics, 3 (1): 37–77. DOI: 10.1257/mic.3.1.37JEL Classification
- D82 Asymmetric and Private Information
- D83 Search; Learning; Information and Knowledge; Communication; Belief
- O31 Innovation and Invention: Processes and Incentives
- O33 Technological Change: Choices and Consequences; Diffusion Processes
- O34 Intellectual Property Rights
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