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Game-theoretic analysis demonstrates that patent pools alter upstream investment incentives across asymmetric markets, highlighting that royalty-sharing rules significantly impact economic welfare.
We analyze how patent pools (PPs) affect upstream intellectual property (IP) R&D incentives and welfare, focusing on royalty-sharing rules in a two-stage model with symmetric and asymmetric R&D environments. PPs generally strengthen R&D incentives, but pooling can induce overinvestment in substitute technologies and underinvestment in complementary technologies in asymmetric markets. Holding market structure fixed, unequal sharing weakly dominates equal sharing in welfare. With endogenous entry, however, welfare can diverge from fixed-structure rankings and may decline when low R&D costs and/or high success probabilities induce excessive investment, especially under equal sharing.
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Aoki et al. (2026) studied this question.
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