Abstract
1. Amable B. [2003], The Diversity of Modern Capitalism, Oxford, Oxford University Press. Google Scholar
Highlights
Intellectual property rights and market structures play a key role in the development of knowledge sub-systems in a globalised world [Amable, 2003; Kearney, 2009]
We show that patents can enable firms to leave a cartel without the risk of retaliation, but the effect of cartel break can be achieved without patents and the ensuing social cost of a temporary monopoly
Our theoretical analysis shows that patents can break market collusion
Summary
Intellectual property rights and market structures play a key role in the development of knowledge sub-systems in a globalised world [Amable, 2003; Kearney, 2009]. In turn, identify a prisoner’s dilemma in firms’ product R&D under price competition This kind of dilemma makes firms deviate from market collusion. A patent works like a leniency policy, making a former cartel member immune to potential retaliation or punishment [Kultti et al, 2007]. Such a patenting motive – to leave a cartel – belongs to non-standard functions of patents. Using a reference to Gresham’s law [Giffen, 1891], we can say that “the weaker form of deception drives out the stronger form of deception”
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