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Econ 483_Lecture 12_Optimal IP protection

# Intro length breadth optimal policy exercise lecture

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Unformatted text preview: design of IP, Econ483: Econ of Innovation & Technology, Evangelia Chalioti c A ll rights reserved. Intro Length Breadth Optimal policy Exercise Lecture 12: Optimal design of IP, Econ483: Econ of Innovation & Technology, Evangelia Chalioti c A ll rights reserved. Intro Length Breadth Optimal policy Suppose: Demand: P = 100 Q Marginal cost = 0 Patent protection for: T = 15 years Discount rate: r = 0.04 Per-period pro…t: π = (100 Q) Q ∂π ∂Q = 0 , Q = 50 Price: P = 100 50 = 50 Total pro…t: π = P Q T = 50 50 Optimal output: Lecture 12: Optimal design of IP, 15 = 37, 500 Econ483: Econ of Innovation & Technology, Evangelia Chalioti c A ll rights reserved. Intro Length Breadth Optimal policy The CS with the policy (T , P ) = (15, 50) is T CS (P ) + 1 r T CS (0) = 1 (50) 50+ 2 = 68, 750 = 15 Ratio test: λ= Lecture 12: Optimal design of IP, 1 0.04 15 1 (100) 100 2 50 50 ,λ=2 (50) 50 1 2 Econ483: Econ of Innovation & Technology, Evangelia Chalioti c A ll rights reserved. Intro Length Breadth Optimal policy Suppose: e Patent protection for: T = 20 years (more than T = 15) e & the patent holder has to set the price P = 25 (less than P = 50) e Then, output: Q = 75 eee e Total pro…t: π = P Q T = 25 Lecture 12: Optimal design of IP, 75 20 = 37, 500...
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