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Forward Markets to Spur Innovation

  • Linda Cohen

    ()

    (Department of Economics, University of California-Irvine)

  • Amihai Glazer

    ()

    (Department of Economics, University of California-Irvine)

Registered author(s):

    This paper presents a mechanism inducing costly research and innovation in the absence of intellectual property rights. The mechanism relies on forward contracting between the provider of the innovation and firms or individuals that benefit from the pecuniary effects of the innovation, rather than from its direct use. Applied to innovation as a non-discrete public good, the mechanism resolves time consistency, agency, and free-riding problems, and provides an incentive for ex post efficient pricing.

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    File URL: http://www.economics.uci.edu/files/docs/workingpapers/2013-14/13-14-05.pdf
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    Paper provided by University of California-Irvine, Department of Economics in its series Working Papers with number 131405.

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    Length: 22 pages
    Date of creation: Apr 2014
    Date of revision:
    Handle: RePEc:irv:wpaper:131405
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    1. Remco van Eijkel & José Luis Moraga Gonzalez, 2010. "Do Firms Sell Forward for Strategic Reasons? An Application to the Wholesale Market for Natural Gas," CESifo Working Paper Series 3270, CESifo Group Munich.
    2. Heidi L. Williams, 2010. "Intellectual Property Rights and Innovation: Evidence from the Human Genome," NBER Working Papers 16213, National Bureau of Economic Research, Inc.
    3. Michael Kremer & Heidi Williams, 2010. "Incentivizing Innovation: Adding to the Tool Kit," Innovation Policy and the Economy, University of Chicago Press, vol. 10(1), pages 1 - 17.
    4. 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.
    5. Kremer, Michael R., 1998. "Patent Buyouts: A Mechanism for Encouraging Innovation," Scholarly Articles 3693705, Harvard University Department of Economics.
    6. Scott Barrett, 2006. "Climate Treaties and "Breakthrough" Technologies," American Economic Review, American Economic Association, vol. 96(2), pages 22-25, May.
    7. Laffont, J.J. & Tirole, J., 1995. "Pollution Permits and Environmental Innovation," Papers 95.396, Toulouse - GREMAQ.
    8. David Sappington, 1982. "Optimal Regulation of Research and Development under Imperfect Information," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 354-368, Autumn.
    9. Michael Kremer, 1998. "Patent Buyouts: A Mechanism For Encouraging Innovation," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1137-1167, November.
    10. Mahenc, P. & Salanie, F., 2004. "Softening competition through forward trading," Journal of Economic Theory, Elsevier, vol. 116(2), pages 282-293, June.
    11. 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.
    12. Allen, Robert C., 1983. "Collective invention," Journal of Economic Behavior & Organization, Elsevier, vol. 4(1), pages 1-24, March.
    13. Hirshleifer, Jack, 1971. "The Private and Social Value of Information and the Reward to Inventive Activity," American Economic Review, American Economic Association, vol. 61(4), pages 561-74, September.
    14. Barrett, Scott, 2005. "Environment and Statecraft: The Strategy of Environmental Treaty-Making," OUP Catalogue, Oxford University Press, number 9780199286096.
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