Property Rights and Invention

We present a selective survey of the economic theory of intellectual property rights. After a brief description of the institutional framework, we discuss policy objectives and some basic welfare tradeoffs in intellectual property design. We consider the extent to which social objectives can be attained without intellectual property protection before passing on to intellectual property right design. We derive conclusions in the simplest, one-time innovation, case then investigate how these conclusions change when innovations build on each other or fit together as complements. Modifications of existing protection and optimal procurement of innovation are considered. Finally, we sketch enforcement and competition policy issues.