As is customary in the patent-race literature this analysis has ruled out the
possibility that the current and previous incumbent might contract to share the
higher monopoly profits that could be earned if the previous incumbent agreed
never to compete. For example, the previous incumbent might sell its patent to
the current one; in the extreme case where the previous incumbent always had
no bargaining power in negotiation with the current one, competition from
previous vintages of the intermediate good would never constrain the monopolist,
and the above analysis of drastic innovations would apply no matter how small
the innovations were.