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Rewards versus Intellectual Property Rights

  • Steven Shavell
  • Tanguy van Ypersele

This paper compares reward systems to intellectual property rights (patents and copyrights). Under a reward system, innovators are paid for innovations directly by government (possibly on the basis of sales), and innovations pass immediately into the public domain. Thus, reward systems engender incentives to innovate without creating the monopoly power of intellectual property rights, but a principal difficulty with rewards is the information required for their determination. We conclude in our model that intellectual property rights do not possess a fundamental social advantage over reward systems, and that an optional reward system under which innovators choose between rewards and intellectual property rights is superior to intellectual property rights.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6956.

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Date of creation: Feb 1999
Date of revision:
Publication status: published as Shavell, Steven and Tanguy Van Ypersele. "Rewards Versus Intellectual Property Rights," Journal of Law and Economics, 2001, v44(2,Oct), 525-547.
Handle: RePEc:nbr:nberwo:6956
Note: LE PR
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  1. 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.
  2. Machlup, Fritz & Penrose, Edith, 1950. "The Patent Controversy in the Nineteenth Century," The Journal of Economic History, Cambridge University Press, vol. 10(01), pages 1-29, May.
  3. Michael Kremer, 1997. "Patent Buy-Outs: A Mechanism for Encouraging Innovation," NBER Working Papers 6304, National Bureau of Economic Research, Inc.
  4. 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.
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