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Patent protection under endogenous product differentiation

Mukherjee, Arijit



It is generally believed that, if weak patent protection does not affect innovation, it makes consumers and society better off compared to strong patent protection by increasing the intensity of competition. We show that this conclusion may not be valid if the innovator can take other non-production strategies, such as product differentiation, which helps to reduce the intensity of competition. Weak patent protection may reduce consumer surplus and social welfare by inducing product differentiation. We show that the type of product-market competition and the market demand function play important roles in this respect. Hence, there can be an argument for strong patent protection even if it does not affect innovation.

Journal Article Type Article
Publication Date Jan 2, 2014
Journal Asia-Pacific Journal of Accounting & Economics
Print ISSN 1608-1625
Electronic ISSN 2164-2257
Publisher Taylor & Francis (Routledge)
Peer Reviewed Peer Reviewed
Volume 21
Issue 1
Pages 78-93
APA6 Citation Mukherjee, A. (2014). Patent protection under endogenous product differentiation. Asia-Pacific Journal of Accounting and Economics, 21(1), 78-93. doi:10.1080/16081625.2014.858389
Keywords patent protection; product differentiation; welfare
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