FINALIST

The optimal patent duration, T, is such that the ratio of the (discounted) deadweight loss on each market to the (discounted) consumer surplus is equal to the elasticity of the supply of innovation. [...] The optimal level of ̃ is such that the elasticity of (after tax) profit of the innovator with respect to ̃ is equal to the elasticity of the deadweight loss on each market (with respect to ̃). [...] The optimal choice of ̃ is decreasing in the elasticity of the supply of innovation (𝜖𝑆), in the semi-elasticity of producer profit to ̃, and in the total size of consumer surplus generated by each new market. [...] when (8) is satisfied), the corresponding optimal level of the ̃-tax is such that the elasticity of private profit to a compensated increase in ̃ is equal to the elasticity of the deadweight loss with respect to ̃. [...] There are three characteristics of the demand function that determine the optimal policy mix: the 𝑑𝑙𝑜𝑔(Π(̃,𝜏)) elasticity of producer profit to the compensated ̃-tax ( | 𝐺=0 ), the elasticity of the 𝑑𝑙𝑜𝑔(̃) 𝑑𝐷𝑊𝐿′(̃) deadweight loss to the compensated ̃-tax ( ), and the ratio of deadweight loss to 𝐷𝑊𝐿(̃) 𝑅(𝑇)𝐷𝑊𝐿(̃) consumer surplus ( ∗).