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Abstract

In a model with two basic innovations that are fundamental to the development of an application, we investigate whether a patent pool can rectify the lack of incentives for developers to invest in applications when basic innovators themselves cannot develop follow-up applications. Furthermore, following Green and Scotchmer (1995), we investigate whether broad basic patents are necessary in order to provide enough incentives for basic innovators. We show that patent pools are more likely to be formed with patents of very different breadth, or with patents of similarly wide breadth. However, even though patent pools rectify the problem of developers' incentives, they may reduce the incentive for doing basic research.In a model with two basic innovations that are fundamental to the development of an application, we investigate whether a patent pool can rectify the lack of incentives for developers to invest in applications when basic innovators themselves cannot develop follow-up applications. Furthermore, following Green and Scotchmer (1995), we investigate whether broad basic patents are necessary in order to provide enough incentives for basic innovators. We show that patent pools are more likely to be formed with patents of very different breadth, or with patents of similarly wide breadth. However, even though patent pools rectify the problem of developers' incentives, they may reduce the incentive for doing basic research.

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