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Cumulative Innovation, Experimentation and the Hold-Up Problem

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  • Pollock, R.

Abstract

Extending the basic model of two-stage cumulative innovation with asymmetric information to include `experimentation' by second-stage rms, we nd that the costs of a strong (versus weak) intellectual property (IP) regime may be substantially increased. In addition, these costs increase as experimentation becomes cheaper and as the differential between high and low value second-stage innovations grows, with the result that a weak IP regime is more likely to be optimal. Thus, technological change which reduces the cost of encountering and trialling new `ideas' implies a reduction in the socially optimal level of IP rights such as patent and copyright.

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File URL: http://www.econ.cam.ac.uk/research/repec/cam/pdf/cwpe0817.pdf
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Bibliographic Info

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0817.

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Length: 24
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:cam:camdae:0817

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Web page: http://www.econ.cam.ac.uk/index.htm

Related research

Keywords: Cumulative Innovation; Hold-Up; Experimentation; Intellectual Property.;

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  1. Jerry R. Green & Suzanne Scotchmer, 1995. "On the Division of Profit in Sequential Innovation," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 20-33, Spring.
  2. Carmen Matutes & Pierre Regibeau & Katharine Rockett, 1996. "Optimal Patent Design and the Diffusion of Innovations," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 60-83, Spring.
  3. James Bessen & Eric Maskin, 2006. "Sequential Innovation, Patents, and Innovation," NajEcon Working Paper Reviews 321307000000000021, www.najecon.org.
  4. Nancy T. Gallini, 1992. "Patent Policy and Costly Imitation," RAND Journal of Economics, The RAND Corporation, vol. 23(1), pages 52-63, Spring.
  5. Bessen, James, 2004. "Holdup and licensing of cumulative innovations with private information," Economics Letters, Elsevier, vol. 82(3), pages 321-326, March.
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Cited by:
  1. Pollock, R., 2009. "The Economics of Public Sector Information," Cambridge Working Papers in Economics 0920, Faculty of Economics, University of Cambridge.

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