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Patent Buyouts: A Mechanism for Encouraging Innovation

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  • Kremer, Michael R.
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    Abstract

    In 1839 the French government purchased the Daguerreotype patent and placed it in the public domain. Such patent buyouts could potentially eliminate the monopoly price distortions and incentives for rent-stealing duplicative research created by patents, while increasing incentives for original research. Governments could offer to purchase patents at their estimated private value, as determined in an auction, times a markup equal to the typical ratio of inventions' social and private value. Most patents purchased would be placed in the public domain, but to induce bidders to reveal their valuations, a few would be sold to the highest bidder.

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    File URL: http://dash.harvard.edu/bitstream/handle/1/3693705/Kremer_PatentBuyouts.pdf
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    Bibliographic Info

    Paper provided by Harvard University Department of Economics in its series Scholarly Articles with number 3693705.

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    Date of creation: 1998
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    Publication status: Published in Quarterly Journal of Economics -Cambridge Massachusetts-
    Handle: RePEc:hrv:faseco:3693705

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    1. Enrique Schroth & Dezsö Szalay, 2010. "Cash Breeds Success: The Role of Financing Constraints in Patent Races," Review of Finance, European Finance Association, European Finance Association, vol. 14(1), pages 73-118.
    2. Mark Johnston & Richard Zeckhauser, 1991. "The Australian Pharmaceutical Subsidy Gambit: Transmuting Deadweight Loss and Oligopoly Rents to Consumer Surplus," NBER Working Papers 3783, National Bureau of Economic Research, Inc.
    3. Cockburn, Iain & Henderson, Rebecca, 1994. "Racing to Invest? The Dynamics of Competition in Ethical Drug Discovery," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 3(3), pages 481-519, Fall.
    4. M. Ishaq Nadiri, 1993. "Innovations and Technological Spillovers," NBER Working Papers 4423, National Bureau of Economic Research, Inc.
    5. Bernstein, Jeffrey I. & Nadiri, M. Ishaq, 1990. "Product Demand, Cost Of Production, Spillovers And The Social Rate Or Return To R&D," Working Papers, C.V. Starr Center for Applied Economics, New York University 90-53, C.V. Starr Center for Applied Economics, New York University.
    6. Henderson, Rebecca. & Cockburn, Iain., 1993. "Racing or spilling? : the determinants of research productivity in ethical drug discovery," Working papers, Massachusetts Institute of Technology (MIT), Sloan School of Management 3642-93., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    7. Taylor, Curtis R, 1995. "Digging for Golden Carrots: An Analysis of Research Tournaments," American Economic Review, American Economic Association, American Economic Association, vol. 85(4), pages 872-90, September.
    8. Frank R. Lichtenberg, 1992. "R&D Investment and International Productivity Differences," NBER Working Papers 4161, National Bureau of Economic Research, Inc.
    9. Ugo Pagano & Maria Alessandra Rossi, 2009. "The crash of the knowledge economy," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 33(4), pages 665-683, July.
    10. Bernstein, Jeffrey I. & Nadiri, M. Ishaq, 1988. "Interindustry R&D, Rates of Return and Production in High-Tech Industries," Working Papers, C.V. Starr Center for Applied Economics, New York University 88-04, C.V. Starr Center for Applied Economics, New York University.
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