Rewarding sequential innovators: prizes, patents and buyouts
This paper presents a model of cumulative innovation where firms are heterogeneous in their research ability. We study the optimal reward policy when the quality of the ideas and their subsequent development effort are private information. The optimal assignment of property rights must counterbalance the incentives of current and future innovators. The resulting mechanism resembles a menu of patents that have infinite duration and fixed scope, where the latter increases in the value of the idea. Finally, we provide a way to implement this patent menu by using a simple buyout scheme: The innovator commits at the outset to a price ceiling at which he will sell his rights to a future inventor. By paying a larger fee initially, a higher price ceiling is obtained. Any subsequent innovator must pay this price and purchase its own buyout fee contract.
|Date of creation:||2000|
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- Jerry R. Green & Suzanne Scotchmer, 1995.
"On the Division of Profit in Sequential Innovation,"
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- Steven Shavell & Tanguy van Ypersele, 1999. "Rewards versus Intellectual Property Rights," NBER Working Papers 6956, National Bureau of Economic Research, Inc.
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- Ted O'Donoghue & Suzanne Scotchmer & Jacques-François Thisse, 1998. "Patent Breadth, Patent Life, and the Pace of Technological Progress," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(1), pages 1-32, 03.
- O'DONOGHUE, Ted & SCOTCHMER, Suzanne & THISSE, Jacques-François, "undated". "Patent breadth, patent life, and the pace of technological progress," CORE Discussion Papers RP 1314, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Arrow, Kenneth J, 1969. "Classificatory Notes on the Production and Transmission of Technological Knowledge," American Economic Review, American Economic Association, vol. 59(2), pages 29-35, May.
- Suzanne Scotchmer, 1999. "On the Optimality of the Patent Renewal System," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 181-196, Summer.
- Wright, Brian Davern, 1983. "The Economics of Invention Incentives: Patents, Prizes, and Research Contracts," American Economic Review, American Economic Association, vol. 73(4), pages 691-707, September. Full references (including those not matched with items on IDEAS)
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