Cumulative Innovation, Sampling and the Hold-Up Problem
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 patents and copyright.
|Date of creation:||2006|
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