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Cumulative Innovation, Sampling and the Hold-Up Problem

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  • Pollock, Rufus

Abstract

With cumulative innovation and imperfect information about the value of innovations, intellectual property rights can result in hold-up and therefore it may be better not to have them. Extending the basic cumulative innovation model to include `sampling' by second-stage firms, we find that the lower the cost of sampling, or the larger the differential between high and low value second-stage innovations, the more likely it is that a regime without intellectual property rights will be preferable. Thus, technological change which reduces the cost of encountering and trialling new `ideas' implies a reduction in the socially optimal level of rights such as patent and copyright.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 5022.

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Date of creation: 24 Jan 2006
Date of revision: 10 Aug 2007
Handle: RePEc:pra:mprapa:5022

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Keywords: Cumulative Innovation; Hold-Up; Sampling; Intellectual Property;

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  1. Nancy T. Gallini, 1992. "Patent Policy and Costly Imitation," RAND Journal of Economics, The RAND Corporation, vol. 23(1), pages 52-63, Spring.
  2. Green, J.R. & Scotchmer, S., 1993. "On the Division of Profit in Sequential Innovation," Harvard Institute of Economic Research Working Papers 1638, Harvard - Institute of Economic Research.
  3. James Bessen & Eric Maskin, 2006. "Sequential Innovation, Patents, and Innovation," NajEcon Working Paper Reviews 321307000000000021, www.najecon.org.
  4. 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.
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Cited by:
  1. Pollock, Rufus, 2006. "Innovation and Imitation with and without Intellectual Property Rights," MPRA Paper 5025, University Library of Munich, Germany, revised 17 Jul 2007.

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