Patents and R&D cartels

The objective of this paper is to compare the impact of R&D competition (i) under patent protection and (ii) under no patent protection on enterprise innovation and performance with the impact of R&D cooperation in the form of R&D cartel on enterprise innovation and performance. For simplicity we focus on the case of duopoly. In particular, the impact of R&D competition and R&D cooperation on enterprise research investments, output, market price, company profits, consumer surplus and total social welfare was investigated. The analysis revealed that when competition is Cournot, for any level of research spillovers, the R&D investments under patent protection are smaller than in the case of no patent protection. When firms create a research cartel then, for any level of spillovers, the R&D investments will be higher than those under patent protection with Cournot competition. However, they will be higher than the R&D investments when Cournot competition takes place in the case of no patent protection only for relatively high levels of spillovers. When the level of spillovers is relatively low, the R&D investments in the case of Cournot competition with no patents are higher than in the case of research cartel formed by the duopolists.