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Patent Buyouts: A Mechanism for Encouraging Innovation

  • Kremer, Michael R.
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    In 1839 the French government purchased the Daguerreotype patent and placed it in the public domain. Such patent buyouts could potentially eliminate the monopoly price distortions and incentives for rent-stealing duplicative research created by patents, while increasing incentives for original research. Governments could offer to purchase patents at their estimated private value, as determined in an auction, times a markup equal to the typical ratio of inventions' social and private value. Most patents purchased would be placed in the public domain, but to induce bidders to reveal their valuations, a few would be sold to the highest bidder.

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    File URL: http://dash.harvard.edu/bitstream/handle/1/3693705/Kremer_PatentBuyouts.pdf
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    Paper provided by Harvard University Department of Economics in its series Scholarly Articles with number 3693705.

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    Date of creation: 1998
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    Publication status: Published in Quarterly Journal of Economics -Cambridge Massachusetts-
    Handle: RePEc:hrv:faseco:3693705
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    Web page: http://www.economics.harvard.edu/

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    1. Frank R. Lichtenberg, 1992. "R&D Investment and International Productivity Differences," NBER Working Papers 4161, National Bureau of Economic Research, Inc.
    2. Mark Johnston & Richard Zeckhauser, 1991. "The Australian Pharmaceutical Subsidy Gambit: Transmuting Deadweight Loss and Oligopoly Rents to Consumer Surplus," NBER Working Papers 3783, National Bureau of Economic Research, Inc.
    3. Taylor, Curtis R, 1995. "Digging for Golden Carrots: An Analysis of Research Tournaments," American Economic Review, American Economic Association, vol. 85(4), pages 872-90, September.
    4. Bernstein, Jeffrey I. & Nadiri, M. Ishaq, 1988. "Interindustry R&D, Rates of Return and Production in High-Tech Industries," Working Papers 88-04, C.V. Starr Center for Applied Economics, New York University.
    5. Bernstein, Jeffrey I. & Nadiri, M. Ishaq, 1990. "Product Demand, Cost Of Production, Spillovers And The Social Rate Or Return To R&D," Working Papers 90-53, C.V. Starr Center for Applied Economics, New York University.
    6. M. Ishaq Nadiri, 1993. "Innovations and Technological Spillovers," NBER Working Papers 4423, National Bureau of Economic Research, Inc.
    7. Henderson, Rebecca. & Cockburn, Iain., 1993. "Racing or spilling? : the determinants of research productivity in ethical drug discovery," Working papers 3642-93., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    8. Enrique Schroth & Dezsö Szalay, 2010. "Cash Breeds Success: The Role of Financing Constraints in Patent Races," Review of Finance, European Finance Association, vol. 14(1), pages 73-118.
    9. Cockburn, Iain. & Henderson, Iain., 1994. "Racing to invest? : the dynamics of competition in ethical drug discovery," Working papers 3710-94., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    10. Ugo Pagano & Maria Alessandra Rossi, 2009. "The crash of the knowledge economy," Cambridge Journal of Economics, Oxford University Press, vol. 33(4), pages 665-683, July.
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