1) Patents and Trade Secrets A firm can invent a new product. That firm is the only entity in that world that can invent the product. Doing so leads to a research cost of r, to be paid once in the first period. The monopoly price for this new product is 6$ per unit and the firm can produce this good, if research have peen done, at a cost of where q is the quantity of good produced. Time is discrete and the irm faces the same price and cost function every period. Without a patent, other firms enter the market and those firms can produce the product more efficiently, therefore without a patent che firm makes 0 profit. a) What is the value for the firm of a patent of infinite duration? Assume a discount factor B = 0.9. b) Suppose that there is no possibility for the firm of keeping a trade secret. The research cost for that good is 30$. The government can create a patent for the good before the firm has to make a research decision. The terms of the patent cannot be changed after its

1) Patents and Trade Secrets A firm can invent a new product. That firm is the only entity in that world that can invent the product. Doing so leads to a research cost of r, to be paid once in the first period. The monopoly price for this new product is 6$ per unit and the firm can produce this good, if research have peen done, at a cost of where q is the quantity of good produced. Time is discrete and the irm faces the same price and cost function every period. Without a patent, other firms enter the market and those firms can produce the product more efficiently, therefore without a patent che firm makes 0 profit. a) What is the value for the firm of a patent of infinite duration? Assume a discount factor B = 0.9. b) Suppose that there is no possibility for the firm of keeping a trade secret. The research cost for that good is 30$. The government can create a patent for the good before the firm has to make a research decision. The terms of the patent cannot be changed after its

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.2P

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Similar questions

How can a monopolist identify the profit-maximizing level of output if it knows its total revenue and total cost curves?
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