Patents raise the price and reduce consumption of the patented good, but the resulting deadweight loss is thought to be worth bearing when patent protection is required as an incentive to invention. The newly-invented good generates a residual surplus, making people better off than they would be if the good had not been invented. This well-known argument is usually framed in a context where people are identical, everybody's demand curve for the newly-invented good is the same and everybody shares to some extent in the residual surplus. However, when the newly-invented good is indivisible - like a heart transplant or the treatment of AIDS, where, in effect, a person consumes either one full unit of the good or none - the effect of a patent is to concentrate the entire benefit of the patented good upon the rich, leaving the poor no better off than if the good had not been invented.
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Paper provided by Queen's University, Department of Economics in its series Working Papers with number
1018.
Find related papers by JEL classification: D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information K11 - Law and Economics - - Basic Areas of Law - - - Property Law O34 - Economic Development, Technological Change, and Growth - - Technological Change - - - Intellectual Property Rights
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