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.
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| Length: | |
| Date of creation: | 2006 |
| Date of revision: | |
| Handle: | RePEc:aal:abbswp:06-29 |
| Contact details of provider: | Web page: http://www.druid.dk/
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References listed on IDEAS
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- 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.
- James Bessen & Eric Maskin, 2006. "Sequential Innovation, Patents, and Innovation," NajEcon Working Paper Reviews 321307000000000021, www.najecon.org.
- 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.
- Jerry R. Green & Suzanne Scotchmer, 1995. "On the Division of Profit in Sequential Innovation," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 20-33, Spring.
- Nancy T. Gallini, 1992. "Patent Policy and Costly Imitation," RAND Journal of Economics, The RAND Corporation, vol. 23(1), pages 52-63, Spring.
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