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RESEARCH PAPER
A Note on Patents and Leniency
1
SGH Warsaw School of Economics, Poland
Submission date: 2019-08-13
Final revision date: 2019-11-01
Acceptance date: 2020-01-15
Publication date: 2020-03-31
GNPJE 2020;301(1):97-108
KEYWORDS
JEL CLASSIFICATION CODES
ABSTRACT
The purpose of this note is to investigate the relationship between patents and market collusion. Specifically, by using game theory tools, it is shown that patents can act as a leniency mechanism, i.e., they can enable firms to leave a cartel without the risk of retaliation. However, the socially beneficial role of patents is limited because the Bertrand competition itself breaks the collusion via the existence of a prisoner’s dilemma between sufficiently myopic market rivals. In the prisoner’s dilemma, two social tensions, fear and greed, make firms deviate from collusion. Patenting breaks the collusion, but at the social cost of a temporary patent monopoly in the product market.
FUNDING
This research is supported by the National Science Center, Poland, UMO-2016/21/B/HS4/03016.
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