To 'B' or Not to 'B' : A Welfare Analysis of Breaking Up Monopolies in an Endogenous Growth Model

We study the welfare consequences of a government regulation that forces a patented equipment to be supplied by n independent producers. On the one hand, such a regulation hurts the value of a patent and therefore reduces activities in the R&D sector. On the other hand, the enhanced competition for the equipment improves efficiency in the manufacturing sector. Should we break up monopolies protected by intellectual property rights? The answer is no in a Romer-type growth model but we have sufficient reason to believe that the answer could be yes in a model advocated by Jones (1995)