In product markets, there exists substantial dispersion in prices for transactions of physically identical goods, and incumbent sellers sell at higher prices than entrants. This study develops a theory of dynamic pricing that explains these facts as results from the same fundamental friction:...

According to Nordhaus, the optimal life of a patent T* trades off the ``embarrassment" of monopoly with motivating innovation, given that imitators would otherwise copy inventions and, in competing with innovators, reduce their profit hence incentive to innovate. To test this argument, we...