arrow checkmark code cross email facebook magnifier pdf phone plus twitter user youtube

Seminarios académicos y conferencias

Jorge Lemus, Illinois-UC

"Product Hopping and Innovation Incentives"

Coautoreado con Olgu Ozkul

8 Enero 2019 - 17:00

Sala 209, Facultad de Ciencias Económicas y Administrativas UC

Abstract:  We explore how innovation incentives are affected by “product hopping,” whereby a brand firm patents a minor modification of an original drug with scant benefit for consumers (e.g., changing the delivery method or the dosage). Our theoretical framework incorporates the interplay between marketing and innovation. We show that product hopping has ambiguous welfare effects, depending on the difficulty of follow-on innovation: product hopping may increase the ex ante rate of innovation by increasing the value of incumbency, but it reduces ex post welfare by decreasing consumer surplus and by promoting wasteful marketing spending. Also, competition for a second (uncertain) innovation may increase the incumbent’s incentive to engage in product hopping and increase even further the ex ante rate of innovation. Our results shed light on the current debate of product hopping, welfare, and antitrust.