Working Paper: CEPR ID: DP392
Authors: Paul Klemperer
Abstract: We explore the trade-off between a patent's length (its lifetime) and its width (its scope of coverage). A wider patent generally reduces the distortion of consumers' choices between the patented brand of the product and unpatented, lower-priced varieties sold by competitors, it also permits higher prices, and so increases (relative to profits) the deadweight losses from consumers switching consumption out of the product class. We establish conditions under which infinitely-lived but very narrowly-focused patents are the socially efficient way to reward innovation, and also show when very short-lived but very broad patents are optimal.
Keywords: patents; research and development
JEL Codes: O22; O31; O34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Patent width (O34) | Consumer choice distortion (D11) |
| Patent width (O34) | Deadweight loss (H21) |
| Narrow patents (O34) | Social efficiency (D61) |
| Broad patents (O34) | Optimal patent design (D45) |
| Wider patents (O34) | Higher prices (D49) |
| Higher prices (D49) | Consumer choice distortion (D11) |
| Higher prices (D49) | Deadweight loss (H21) |