The costs of uncoordinated regulation

Patents encourage firms to undertake research and development by protecting innovator revenues from competition. Controls on pollution of the environment are intended to close the gap between the private and social costs of natural resource use. This paper examines the incentives that are created by the interaction of these two separate pieces of regulation. A model is developed that shows how an incumbent, patent-holding firm can take advantage of environmental regulation to exclude rivals from her market. (C) 2002 Elsevier Science B.V. All rights reserved.