21 Apr 2020
Seminars, 12:30 - 13:30, WTI, Hallerstrasse 6, Bern, Switzerland
Brown Bag Seminar: The effect of patents on prices
By Ling Zhou, PhD candidate at the Chair of Innovation and IP Policy, École polytechnique fédérale de Lausanne
The intellectual property rights play a pivotal role in safeguarding innovative activities. However, the debate over incentivization versus inefficiency of the patent system is not yet settled, and more research is needed on the costs and benefits of the patent system. In this paper, we aim to quantify the extent to which prices respond after products losing patent protection by exploiting exogenous variations in patent status. We then investigate the mechanisms that may explain such dynamics. We draw a sample of broadly defined consumer products from a novel database that links individual products to corresponding patents upon which they are built and make use of Amazon price history of those products.
Our findings show that, on average, patent expiry leads to a nearly 6% drop in product prices and that utility patents and valuable patents play a more prominent role in affecting prices. Our empirical evidence also suggests that the declines in monopolistic prices granted by patents are driven mainly by substitutable products on market and by competing firms providing such products.