An extensive empirical literature indicates that returns from innovation are appropriated primarily via mechanisms other than formal intellectual property rights -- and that `imitation' is itself a costly activity. However most theory assumes the pure nonrivalry of `ideas' with its implication that, in the absence of intellectual property, innovation (and welfare) is zero. This paper introduces a formal model of innovation based on imperfect competition in which imitation is costly and an innovator has a first-mover advantage. Without intellectual property, a significant amount of innovation still occurs and welfare may actually be higher than with intellectual property.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
5025.
Find related papers by JEL classification: L5 - Industrial Organization - - Regulation and Industrial Policy O3 - Economic Development, Technological Change, and Growth - - Technological Change K3 - Law and Economics - - Other Substantive Areas of Law
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