Cumulative Innovation, Experimentation and the Hold-Up Problem
AbstractExtending 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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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0817.
Date of creation: Apr 2008
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Cumulative Innovation; Hold-Up; Experimentation; Intellectual Property.;
Find related papers by JEL classification:
- K3 - Law and Economics - - Other Substantive Areas of Law
- L5 - Industrial Organization - - Regulation and Industrial Policy
- O3 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-06-21 (All new papers)
- NEP-INO-2008-06-21 (Innovation)
- NEP-IPR-2008-06-21 (Intellectual Property Rights)
- NEP-KNM-2008-06-21 (Knowledge Management & Knowledge Economy)
- NEP-LAW-2008-06-21 (Law & Economics)
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