Yields an improvement that has commercial value

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Recall our example of an investment of $100,000 in research that yields a pioneering invention that has no commercial value, and a subsequent investment of $50,000 in development that yields an improvement that has commercial value of $1 million. Assume that Firm A is uniquely situated to do the pioneering research, and Firm B is uniquely situated to develop the application. Predict the difference in investment resulting from a broad patent law and a narrow patent law. In making your prediction, distinguish between a situation in which transaction costs prevent Firm A and Firm B from bargaining with each other and a situation in which transaction costs of bargaining are zero.

Reference no: EM13742251

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