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Forward Markets to Spur Innovation

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Author Info

  • Linda Cohen

    ()
    (Department of Economics, University of California-Irvine)

  • Amihai Glazer

    ()
    (Department of Economics, University of California-Irvine)

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    Abstract

    This paper presents a mechanism inducing costly research and innovation in the absence of intellectual property rights. The mechanism relies on forward contracting between the provider of the innovation and firms or individuals that benefit from the pecuniary effects of the innovation, rather than from its direct use. Applied to innovation as a non-discrete public good, the mechanism resolves time consistency, agency, and free-riding problems, and provides an incentive for ex post efficient pricing.

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    File URL: http://www.economics.uci.edu/files/economics/docs/workingpapers/2013-14/13-14-05.pdf
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    Bibliographic Info

    Paper provided by University of California-Irvine, Department of Economics in its series Working Papers with number 131405.

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    Length: 22 pages
    Date of creation: Apr 2014
    Date of revision:
    Handle: RePEc:irv:wpaper:131405

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    Web page: http://www.economics.uci.edu/
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    Related research

    Keywords: Innovation; Public goods; Mechanism design; Patents; Forward contracts;

    This paper has been announced in the following NEP Reports:

    References

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    1. Hirshleifer, Jack, 1971. "The Private and Social Value of Information and the Reward to Inventive Activity," American Economic Review, American Economic Association, vol. 61(4), pages 561-74, September.
    2. Laffont, Jean-Jacques & Tirole, Jean, 1996. "Pollution permits and environmental innovation," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 127-140, October.
    3. David Sappington, 1982. "Optimal Regulation of Research and Development under Imperfect Information," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 354-368, Autumn.
    4. Wright, Brian Davern, 1983. "The Economics of Invention Incentives: Patents, Prizes, and Research Contracts," American Economic Review, American Economic Association, vol. 73(4), pages 691-707, September.
    5. Kremer, Michael R., 1998. "Patent Buyouts: A Mechanism for Encouraging Innovation," Scholarly Articles 3693705, Harvard University Department of Economics.
    6. Suzanne Scotchmer, 1999. "On the Optimality of the Patent Renewal System," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 181-196, Summer.
    7. Michael Kremer, 1998. "Patent Buyouts: A Mechanism For Encouraging Innovation," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1137-1167, November.
    8. Allen, Robert C., 1983. "Collective invention," Journal of Economic Behavior & Organization, Elsevier, vol. 4(1), pages 1-24, March.
    9. Heidi L. Williams, 2010. "Intellectual Property Rights and Innovation: Evidence from the Human Genome," NBER Working Papers 16213, National Bureau of Economic Research, Inc.
    10. Scott Barrett, 2006. "Climate Treaties and "Breakthrough" Technologies," American Economic Review, American Economic Association, vol. 96(2), pages 22-25, May.
    11. Barrett, Scott, 2005. "Environment and Statecraft: The Strategy of Environmental Treaty-Making," OUP Catalogue, Oxford University Press, number 9780199286096, Octomber.
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