Competitive disadvantage through non–existing software patents

In a model of sequential patent races, it is examined whether or not introducing a patent law in the home country is beneficial to the firms and the society as a whole given the foreign country already offers patent protection. Before the first patent race starts, the firms and the foreign country share interests. For a given total number of firms, the welfare effect depends on the relative competition profit. For medium values of the latter, the foreign country as well as the firms gain and the home country loses by introducing the patent law. In a Cournot and a Bertand model with a homogeneous product, the home country will never benefit from the introduction of patent protection. JEL–Classification: O34, L52