NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Gabor Virag

Joseph L. Rotman
School of Management
University of Toronto
105 St. George St.
Toronto , ON M5S 3E6
Canada

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NBER Working Papers and Publications

June 2014Market Outcomes and Dynamic Patent Buyouts
with Alberto Galasso, Matthew Mitchell: w20197
Patents are a useful but imperfect reward for innovation. In sectors like pharmaceuticals, where monopoly distortions seem particularly severe, there is growing international political pressure to identify alternatives to patents that could lower prices. Innovation prizes and other non-patent rewards are becoming more prevalent in government's innovation policy, and are also widely implemented by private philanthropists. In this paper we develop a model in which a patent buyout is effective, using information from market outcomes as a guide to the payment amount. We allow for the fact that sales may be manipulable by the innovator in search of the buyout payment, and show that in a wide variety of cases the optimal policy in our model still involves some form of patent buyout. The buyout u...

Published: Galasso, Alberto & Mitchell, Matthew & Virag, Gabor, 2016. "Market outcomes and dynamic patent buyouts," International Journal of Industrial Organization, Elsevier, vol. 48(C), pages 207-243. citation courtesy of

 
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