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  3. 蝌蚪网 Journal: Microeconomics
  4. May 2011
  5. Exclusive Contracts, Innovation, and Welfare

蝌蚪网 Journal:
Microeconomics

ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)

Exclusive Contracts, Innovation, and Welfare

  • Yongmin Chen
  • David E. M. Sappington
蝌蚪网 Journal: Microeconomics
vol. 3, no. 2, May 2011
(pp. 194–220)
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Abstract

We extend Philippe Aghion and Patrick Bolton's (1987) classic model to analyze the equilibrium incidence and impact of exclusive contracts in a setting where research and development (R&D) drives industry performance. An exclusive contract between an incumbent supplier and a buyer arises when patent protection and/or the incumbent's R&D ability are sufficiently pronounced. The exclusive contract generally reduces the entrant's R&D, and can reduce the incumbent's R&D. Exclusive contracts reduce welfare if the incumbent's R&D ability is sufficiently limited, but can increase welfare if patent protection and the incumbent's R&D ability are sufficiently pronounced. (JEL D86, L14, O31)

Citation

Chen, Yongmin, and David E. M. Sappington. 2011. "Exclusive Contracts, Innovation, and Welfare." 蝌蚪网 Journal: Microeconomics 3 (2): 194–220. DOI: 10.1257/mic.3.2.194

JEL Classification

  • D86 Economics of Contract: Theory
  • L14 Transactional Relationships; Contracts and Reputation; Networks
  • O31 Innovation and Invention: Processes and Incentives