Econ 483_Lecture 18_Quality ladders_Competition policy

Lecture 18 rd joint ventures econ483 econ of

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Unformatted text preview: ’ 98) Suppose: - the "leading breadth" covers a single increment of progress, ∆ - each new product infringes the previous patent Each innovator must license from the previous patent holder. Lecture 18: R&D joint ventures, Econ483: Econ of Innovation & Technology, Evangelia Chalioti c A ll rights reserved. Q uality ladders Competition policy R&D joint ventures The innovator gets a quality advantage of 2∆ over the next best product that can be marketed. The earnings ‡ow is 2∆ in each time period, which will be divided between the licensor & the licensee. When an innovator’ product is itself supplanted, the innovator s becomes a licensor. Thus, each innovator will be in both positions, licensor & licensee. Lecture 18: R&D joint ventures, Econ483: Econ of Innovation & Technology, Evangelia Chalioti c A ll rights reserved. Q uality ladders Competition policy R&D joint ventures Quality ladders For example, if: ∆: the quality di¤erence (increment of progress) per years. k are the sequential improvements ! The earnings ‡ow is k ∆ (where k ∆ must be c ). Lecture 18: R&D joint ventures, Evangelia Chalioti Econ483: Econ of Innovation & Technology, c A ll rights reserved. Q uality ladders Competition policy R&D joint ventures Quality ladders ) IP should be structured to ensure the consolidation of enough improvements so that costs are covered. Policy instruments: leading breadth: k required inventive step: ∆ Lecture 18: R&D joint ventures, Econ483: Econ of Innovation & Technology, Evangelia Chalioti c A ll rights reserved. Q uality ladders Competition policy R&D joint ventures Basic & applied research - How does IP organize the division of pro…t among sequential innovators? ) If most of the pro…t is due to the basic research & not to the application, much of the pro…t must be passed back to the …rst innovator through licensing. Lecture 18: R&D joint ventures, Econ483: Econ of Innovation & Technology, Evangelia Chalioti c A ll rights reserved. Q uality ladders Competition policy R&D joint ventures Competit...
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This note was uploaded on 03/16/2014 for the course ECON 483 taught by Professor Staff during the Spring '08 term at University of Illinois, Urbana Champaign.

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