ONLINE APPENDIX FOR “INTELLECTUAL PROPERTY RIGHTS POLICY, COMPETITION AND INNOVATION”

In these appendices, we provide additional results and the proofs of all the results stated in the text. All cross-references that are not to material in these appendices refer to the main text. Appendix A: Robustness Checks Tables A.1-A.4 show results analogous to those shown in Table 1 as we vary and (we change to 1.2 or 1.01, and to 0.6 or 0.1). As mentioned in the text, the results are very similar to our baseline results. Appendix B: Compulsory Versus Bargained License Fees The analysis in the text characterized the steady-state equilibrium for a given sequence of license fees , implicitly assumed to be determined by IPR policy—i.e., these fees correspond to compulsory licensing fees for intellectual property that has been patented. This corresponds to a world in which once a company patents an innovation, the knowledge embedded in this innovation can be used by its competitors as long as they pay a prespecied license fee. One may also wish to consider an alternative world in which license fees are determined by bilateral bargaining. To characterize the equilibrium in such a world, one must rst conduct exactly the same analysis as we have done in this subsection. In other words, one must characterize the equilibrium for a given sequence of license fees, and then taking the license fees agreed by other rms as given, one can consider the bargaining problem between a leader and a follower. In general, there may or may not exist feasible voluntary license fees that the follower and the leader can bargain to (such voluntary agreements may be infeasible even if compulsory licensing is benecial, since consumers also benet from licensing). Figure B.1 plots the value of licensing to a follower in an industry with an n-step gap, v0 vnC1, and absolute value of the loss to the leader in the same industry