Journal Article

WHEN IS INTELLECTUAL PROPERTY NEEDED AS A CARROT FOR INNOVATORS?

Christoph Engel

in Journal of Competition Law & Economics

Volume 7, issue 2, pages 277-299
Published in print June 2011 | ISSN: 1744-6414
Published online March 2011 | e-ISSN: 1744-6422 | DOI: https://dx.doi.org/10.1093/joclec/nhq025
WHEN IS INTELLECTUAL PROPERTY NEEDED AS A CARROT FOR INNOVATORS?

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  • Technological Change; Research and Development
  • Property Law
  • Game Theory and Bargaining Theory

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Policymakers all over the world claim that there can be no innovation without protection. For more than a century, critics have objected that the case for intellectual property is far from clear. This article uses a game theoretic model to organize the debate. It is possible to model innovation as a prisoner's dilemma between potential innovators and to interpret intellectual property as a tool for making cooperation the equilibrium. However, this model rests on assumptions about costs and benefits that are unlikely to hold, or have even been shown to be wrong, in many empirically relevant situations. Moreover, even if the problem is indeed a prisoner's dilemma, in many situations, intellectual property is an inappropriate solution. It sets incentives to race to be the first, or the last, to innovate, as the case may be. In equilibrium, the firms would need to randomize between investment and noninvestment, which is unlikely to work out in practice. Frequently, firms would need to invent cooperatively, which proves difficult in larger industries.

Keywords: C72; O31; K11

Journal Article.  7570 words.  Illustrated.

Subjects: Technological Change; Research and Development ; Property Law ; Game Theory and Bargaining Theory

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