Technology Diffusion with Learning Spillovers: Patent versus Free Access

The paper analyzes the interplay between technology diffusion and patent law. We develop a dynamic model where initial adoptions generate learning spillovers that reduce the cost of subsequent adoptions. In this setting, we contrast technology diffusion paths under competitive supply, subsidized adoption and patent protection. Competitive supply entails various coordination failures that cannot be fully …fixed through a public subsidy. We show that a patent holder can internalize externalities more efficiently, insofar as patent protection is fully effective. By contrast, fully competitive supply may be more efficient when patent enforcement is imperfect.