IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/49782.html
   My bibliography  Save this paper

Switching from Patents to an Intertemporal Bounty in a Non-Scale Growth Model: Transitional Dynamics and Welfare Evaluation

Author

Listed:
  • Lin, Hwan C.

Abstract

The prize system for innovation has been criticized as impractical due to the lack of a workable formula or algorithm to determine the size of prizes. In this paper, a decentralized market mechanism via the intertemporal bounty (IB) system can function to duplicate Pareto optimality. Under this system, any bountiable innovation is placed in the public domain, and the prize of innovation is dynamically amortized in an infinitely time domain as periodic bounties paid to holders of bounty claims. Periodic bounties are calculated using a government-determined bounty rate times observed market sales. Two formulas are derived to calculate “long-run Pareto optimal bounty rate” and “long-run suboptimal bounty rate.” The former can correct monopoly distortions and externalities, while the latter can only address monopoly distortions. They are empirically computable and can serve as an upper bound and the lower bound of the bounty rate. This paper provides a dynamic general-equilibrium analysis of replacing finitely-lived patents with the IB system using either of these two bounty rates. Based on a non-scale growth model calibrated to the US economy, transition paths are worked out to compute welfare gains.

Suggested Citation

  • Lin, Hwan C., 2012. "Switching from Patents to an Intertemporal Bounty in a Non-Scale Growth Model: Transitional Dynamics and Welfare Evaluation," MPRA Paper 49782, University Library of Munich, Germany, revised 12 Sep 2013.
  • Handle: RePEc:pra:mprapa:49782
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/49782/1/MPRA_paper_49782.pdf
    File Function: original version
    Download Restriction: no

    File URL: https://mpra.ub.uni-muenchen.de/50203/1/MPRA_paper_49782.pdf
    File Function: revised version
    Download Restriction: no

    File URL: https://mpra.ub.uni-muenchen.de/50205/1/MPRA_paper_50205.pdf
    File Function: revised version
    Download Restriction: no

    File URL: https://mpra.ub.uni-muenchen.de/52608/1/MPRA_paper_52608.pdf
    File Function: revised version
    Download Restriction: no

    References listed on IDEAS

    as
    1. Eicher, Theo S. & Turnovsky, Stephen J., 2001. "Transitional dynamics in a two-sector non-scale growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 25(1-2), pages 85-113, January.
    2. Kremer, Michael R., 1998. "Patent Buyouts: A Mechanism for Encouraging Innovation," Scholarly Articles 3693705, Harvard University Department of Economics.
    3. Heidi L. Williams, 2013. "Intellectual Property Rights and Innovation: Evidence from the Human Genome," Journal of Political Economy, University of Chicago Press, vol. 121(1), pages 1-27.
    4. Jones, Charles I & Williams, John C, 2000. "Too Much of a Good Thing? The Economics of Investment in R&D," Journal of Economic Growth, Springer, vol. 5(1), pages 65-85, March.
    5. Michele Boldrin & David K. Levine, 2013. "The Case against Patents," Journal of Economic Perspectives, American Economic Association, vol. 27(1), pages 3-22, Winter.
    6. Edwin Mansfield & John Rapoport & Anthony Romeo & Samuel Wagner & George Beardsley, 1977. "Social and Private Rates of Return from Industrial Innovations," The Quarterly Journal of Economics, Oxford University Press, vol. 91(2), pages 221-240.
    7. Helpman, Elhanan, 1993. "Innovation, Imitation, and Intellectual Property Rights," Econometrica, Econometric Society, vol. 61(6), pages 1247-1280, November.
    8. Paul Klemperer, 1990. "How Broad Should the Scope of Patent Protection Be?," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 113-130, Spring.
    9. Norrbin, Stefan C, 1993. "The Relation between Price and Marginal Cost in U.S. Industry: A Contradiction," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1149-1164, December.
    10. Hugo Hopenhayn & Gerard Llobet & Matthew Mitchell, 2006. "Rewarding Sequential Innovators: Prizes, Patents, and Buyouts," Journal of Political Economy, University of Chicago Press, vol. 114(6), pages 1041-1068, December.
    11. Shavell, Steven & van Ypersele, Tanguy, 2001. "Rewards versus Intellectual Property Rights," Journal of Law and Economics, University of Chicago Press, vol. 44(2), pages 525-547, October.
    12. Ted O'Donoghue & Josef Zweimueller, 2004. "Patents in a Model of Endogenous Growth," Journal of Economic Growth, Springer, vol. 9(1), pages 81-123, March.
    13. Charles I. Jones & John C. Williams, 1998. "Measuring the Social Return to R&D," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1119-1135.
    14. Luis A. Rivera-Batiz & Paul M. Romer, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 531-555.
    15. Susanto Basu, 1996. "Procyclical Productivity: Increasing Returns or Cyclical Utilization?," The Quarterly Journal of Economics, Oxford University Press, vol. 111(3), pages 719-751.
    16. Mansfield, Edwin & Schwartz, Mark & Wagner, Samuel, 1981. "Imitation Costs and Patents: An Empirical Study," Economic Journal, Royal Economic Society, vol. 91(364), pages 907-918, December.
    17. 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.
    18. Michael Kremer, 1998. "Patent Buyouts: A Mechanism for Encouraging Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1137-1167.
    19. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-784, August.
    20. Grinols, Earl L. & Lin, Hwan C., 2011. "Patent replacement and welfare gains," Journal of Economic Dynamics and Control, Elsevier, vol. 35(9), pages 1586-1604, September.
    21. 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.
    22. 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)

    More about this item

    Keywords

    Patent; Prize; Bounty Claim; Innovation; Growth; Transitional Dynamics;

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:49782. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.