Journal of Economic Theory and Econometrics: Journal of the Korean Econometric Society
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Journal of Economic Theory and Econometrics
JETEM/계량경제학보/計量經濟學報/JKES
Journal of the Korean Econometric Society

A Patent Race for a Drastic Innovation with Large Set-Up Cost

Vol.23, No.3, September , 253–260



  •   (Dongguk University)

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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.


Keywords
   Patent race, Drastic innovation, Set-up cost

JEL classification codes
   D21, O31, O32
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