Patent protection may decrease R&D incentives due to the tournament effect. In this paper, we show that patent protection in the presence of a cooperative R&D option always increases the R&D incentive. In addition, this option dominates imitation to increase the R&D incentive under patent...

We model an Internet auction with a temporary buyout option. Our main result shows that under certain parameter values, there exist two types of equilibria where offering a temporary buyout option with an appropriate reserve price enables the seller to increase expected revenue.