Welfare-maximizing patent length in a dynamic general equilibrium model.

This article analytically investigates the welfare-maximizing patent length within a dynamic general equilibrium (DGE) framework based on a variety expansion research and development (R&D)-driven growth model. It finds that a higher elasticity of substitution among intermediate goods, which corresponds to a higher price elasticity of demand, leads to a shorter welfare-maximizing patent length due to increased deadweight losses under monopoly and diminished incentives for extended patent protection. The study also numerically examines the joint determination of patent length and patent breadth—the scope of patent protection—and confirms that broader patent breadth similarly shortens the optimal patent length. Additionally, the analysis incorporates dynamic knowledge spillovers in R&D and transition dynamics, showing that these factors influence but do not overturn the main result that greater substitutability among goods favors shorter patent protection periods.