co-author: Mark Schankerman, (London School of Economics).
status: RAND Journal of Economics, 30, 197-213.
Abstract: In a model with moral hazard and asymmetric 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 characterise 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. RAND Version: Download a PDF file of this paper.
Extra Version: (this version contains an extra appendix which is missing from the published version) Download a 600DPI postscript file and a PDF file of this paper.