Working Paper: NBER ID: w3870
Authors: Richard Jensen; Marie Thursby
Abstract: We examine anticipatory product standards intended to improve the strategic position of firms in an international patent race where firms do R&D to develop products that are close substitutes. The effects of a standard are shown to depend on the way the standard is specified, which firm develops which product, and on the order in which products are discovered. Simple standards are, in general, time inconsistent because of consumer losses that occur when products ruled out by the standard are discovered before the product set as the standard. A state contingent standard is shown to be time consistent when compulsory licensing by the foreign firm is introduced.
Keywords: patent races; product standards; international competition
JEL Codes: O31; F23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| anticipatory product standards (L15) | strategic competitive position of firms (L21) |
| specification of standards (L15) | welfare outcomes (I38) |
| order of product discovery (C69) | welfare outcomes (I38) |
| simple standards (J80) | expected welfare ex ante (D69) |
| state-contingent standards + compulsory licensing (D45) | time consistency (D15) |
| imposition of standards (J80) | firm behavior (D21) |
| imposition of standards (J80) | welfare implications (I30) |
| domestic patent development (O34) | firms racing to develop the same patent (O34) |
| imposition of standards (J80) | optimal scenarios (C61) |
| removal of standards based on competitive outcomes (L49) | lack of credibility (D83) |