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Innovator Protection and the Rate of Technical Progress
Journal of Economic Behavior and Organisation
This paper develops two simple models to study the relationship between innovator protection and the rate of technical progress. The first model shows that with an inelastic supply of R&D resources an increase in patent protection may lead to a reduction in the speed of technical progress. This is due to the fact that it now becomes relatively more profitable to invest resources into imitational R&D. The second model shows that with an R&D monopolist the rate of technical progress may be a first increasing and then decreasing function of the time it takes imitators to appear on the market. This is due to the fact that the innovator has little incentive to introduce a second cost reducing innovation, before the first one has been imitated.
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