Patent Renewals and R&D Incentives

Posted: 11 Aug 1997

See all articles by Francesca Cornelli

Francesca Cornelli

London Business School; Centre for Economic Policy Research (CEPR)

Mark A. Schankerman

London School of Economics and Political Science; Centre for Economic Policy Research (CEPR)

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Date Written: September 1998

Abstract

In a model with moral hazard and assymmetric information, we show that it can be welfare-improving to differentiate patent lives when firms have different R&D productivities. A uniform patent life provides excessive R&D incentive to low-productivity firms, and too little to high ones. The optimally differentiated patent scheme can be implemented through a menu of patent lives (or renewals) and associated fees. We characterize the optimal mechanism, and use simulation analysis to compare it with existing patent renewal systems and to illustrate the potential welfare gains from the optimal policy.

Suggested Citation

Cornelli, Francesca and Schankerman, Mark A., Patent Renewals and R&D Incentives (September 1998). Available at SSRN: https://ssrn.com/abstract=11493

Francesca Cornelli

London Business School ( email )

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Centre for Economic Policy Research (CEPR)

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United Kingdom

Mark A. Schankerman (Contact Author)

London School of Economics and Political Science ( email )

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London WC2A 2AE
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Centre for Economic Policy Research (CEPR) ( email )

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United Kingdom

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