Optimal patent length and patent breadth in an R&D driven market with evolving consumer preferences: An evolutionary multi-agent based modelling approach
Salih Cevikarslan
#2013-020
The aims of this paper are twofold. The first is to analyse the
interaction between research and development (R&D) activities of firms
and heterogeneous consumer preferences in structuring the evolution of
an industry. The second is to explore the effects of patent life and
patent breadth on market outcomes. To answer these research questions,
an evolutionary, multi-agent based, sector-level cumulative innovation
model is designed. The model addresses supply and demand sides of the
market simultaneously with the co-evolution of heterogeneous consumer
preferences, heterogeneous firm knowledge bases and technology levels at
the micro level. In line with the evolutionary modelling tradition, we
have a search algorithm-innovation and imitation of products by firms -
a selection of algorithm-revealed preferences of the consumers - and a
population of objects in which variation is expressed and on which
selection operates: namely, firms (Windrum, 2004). Firms compete on
quality and price of their products in an oligopolistic market whereas
consumers, constrained by their computational limits, act to maximize
their utility with their product choices in a boundedly rational way.
There is continuous firm entry and exit depending on the competitive
performance of the firms.
Keywords: Patent; industrial dynamics; evolutionary economics;
agent-based modelling
JEL Classification: B52, L11, O34