A Patent Race for a Drastic Innovation with Large Set-Up Cost
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We analyze a situation in which a monopolist incumbent and a potential entrant compete for the patent of a new technology, the owner of which can monopolize the market. If the set-up cost for the new technology is so large that the incumbent would let the patent sleep, the incumbent’s preemptive incentive is greater while its stand-alone incentive is smaller than the entrant’s. We find that for a drastic innovation, the incumbent invests more in R&D than the entrant if the market is highly profitable under the current technology and the new technology incurs large set-up cost.
Abstract
We analyze a situation in which a monopolist incumbent and a potential entrant compete for the patent of a new technology, the owner of which can monopolize the market. If the set-up cost for the new technology is so large that the incumbent would let the patent sleep, the incumbent’s preemptive incentive is greater while its stand-alone incentive is smaller than the entrant’s. We find that for a drastic innovation, the incumbent invests more in R&D than the entrant if the market is highly profitable under the current technology and the new technology incurs large set-up cost.
참고문헌 (8)
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