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Waiting to Imitate: On the Dynamic Pricing of Knowledge

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  • Carlos Ponce

    (Departamento de Economía (Universidad Carlos III de Madrid))

  • Emeric Henry

    (Département d'économie)

Abstract

We study the problem of an inventor who brings to the market an innovation that can be legally copied. Imitators may `enter' the market by copying the innovation at a cost or by buying from the inventor the knowledge necessary to reproduce and use the invention. The possibility of contracting dramatically affects the need for patent protection. Indeed, our results reveal that: (i) Imitators wait to enter the market and the inventor becomes a temporary monopolist; (ii) The inventor offers contracts which allow resale of the knowledge by the imitators; (iii) The proffits of the inventor typically increase with the number of potential imitators.

Suggested Citation

  • Carlos Ponce & Emeric Henry, 2011. "Waiting to Imitate: On the Dynamic Pricing of Knowledge," Sciences Po publications info:hdl:2441/eu4vqp9ompq, Sciences Po.
  • Handle: RePEc:spo:wpmain:info:hdl:2441/eu4vqp9ompqllr09iatr32p81
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    References listed on IDEAS

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    Cited by:

    1. Dirk Bergemann & Marco Ottaviani, 2021. "Information Markets and Nonmarkets," Cowles Foundation Discussion Papers 2296, Cowles Foundation for Research in Economics, Yale University.
    2. Tuomas Takalo, 2012. "Rationales and Instruments for Public Innovation Policies," Journal of Reviews on Global Economics, Lifescience Global, vol. 1, pages 157-167.
    3. Mohamed MABROUKI, 2018. "What Kind Of Intellectual Propfrty Regime Is More Favorable To Innovation: With Or Without A Patent?," Journal of Smart Economic Growth, , vol. 3(1), pages 77-95, Juin.
    4. Mabrouki, Mohamed, 2018. "Le brevet : un instrument efficace pour promouvoir l’innovation au profit de la croissance ou un mal nécessaire ? [Patent: an effective instrument to promote innovation for the benefit of growth or," MPRA Paper 85752, University Library of Munich, Germany.
    5. Julia Cagé & Nicolas Hervé & Marie-Luce Viaud, 2020. "The Production of Information in an Online World," Review of Economic Studies, Oxford University Press, vol. 87(5), pages 2126-2164.
    6. Mohamed Mabrouki, 2018. "Supporting economic growth through innovation: How does human capital influence the rate of growth?," Economics Bulletin, AccessEcon, vol. 38(2), pages 957-972.
    7. Correia-da-Silva João & Pinho Joana & Vasconcelos Hélder, 2015. "How Should Cartels React to Entry Triggered by Demand Growth?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(1), pages 1-47, January.
    8. Tesoriere, Antonio & Balletta, Luigi, 2017. "A dynamic model of open source vs proprietary R&D," European Economic Review, Elsevier, vol. 94(C), pages 221-239.
    9. Benoît, Jean-Pierre & Galbiati, Roberto & Henry, Emeric, 2017. "Investing to cooperate: Theory and experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 144(C), pages 1-17.
    10. Benoit, Jean-Pierre & Galbiati, Roberto & Henry, Emeric, 2013. "Rational parasites," CEPR Discussion Papers 9351, C.E.P.R. Discussion Papers.
    11. Henry, Emeric & Ruiz-Aliseda, Francisco, 2012. "Innovation Beyond Patents: Technological Complexity as a Protection against Imitation," CEPR Discussion Papers 8870, C.E.P.R. Discussion Papers.
    12. Leppälä, Samuli, 2013. "Arrow's paradox and markets for nonproprietary information," Cardiff Economics Working Papers E2013/2, Cardiff University, Cardiff Business School, Economics Section.
    13. Emeric Henry & Francisco Ruiz-Aliseda, 2016. "Keeping Secrets: The Economics of Access Deterrence," American Economic Journal: Microeconomics, American Economic Association, vol. 8(3), pages 95-118, August.
    14. Rousakis, Michael, 2012. "Implementation Cycles : Investment-Specific Technological Change and the Length of Patents," The Warwick Economics Research Paper Series (TWERPS) 983, University of Warwick, Department of Economics.
    15. Bronwyn Hall & Christian Helmers & Mark Rogers & Vania Sena, 2014. "The Choice between Formal and Informal Intellectual Property: A Review," Journal of Economic Literature, American Economic Association, vol. 52(2), pages 375-423, June.
    16. Bronwyn H. Hall & Christian Helmers & Mark Rogers & Vania Sena, 2012. "The Choice between Formal and Informal Intellectual Property: A Literature Review," NBER Working Papers 17983, National Bureau of Economic Research, Inc.
    17. Fernandez Donoso, Jose, 2014. "Do complex inventions need less international patent protection?," Economics Letters, Elsevier, vol. 125(2), pages 278-281.
    18. Rousakis, Michael, 2012. "Implementation Cycles: Investment-Specific Technological Change and the Length of Patents," Economic Research Papers 270656, University of Warwick - Department of Economics.

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    More about this item

    Keywords

    Patents; contracting; knowledge trading; delay; war of attrition;
    All these keywords.

    JEL classification:

    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • 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
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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