This paper compares reward systems to intellectual property rights (patents and copyrights). Under a reward system, innovators are paid for innovations directly by government (possibly on the basis of sales), and innovations pass immediately into the public domain. Thus, reward systems engender incentives to innovate without creating the monopoly power of intellectual property rights, but a principal difficulty with rewards is the information required for their determination. We conclude in our model that intellectual property rights do not possess a fundamental social advantage over reward systems, and that an optional reward system under which innovators choose between rewards and intellectual property rights is superior to intellectual property rights.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
6956.
Length: Date of creation: Feb 1999 Date of revision: Handle: RePEc:nbr:nberwo:6956
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Find related papers by JEL classification: D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights K11 - Law and Economics - - Basic Areas of Law - - - Property Law
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