Working Paper: NBER ID: w6956
Authors: Steven Shavell; Tanguy Van Ypersele
Abstract: 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.
Keywords: innovation; intellectual property rights; rewards; patents
JEL Codes: D23; O34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| reward system (J33) | innovation (O35) |
| reward system (J33) | expected social welfare (D69) |
| intellectual property rights system (O34) | innovation (O35) |
| reward system (J33) | deadweight loss (H21) |
| reward system (J33) | monopoly pricing (D42) |
| optional reward system (J33) | patent system (O34) |
| reward system (J33) | government intervention (O25) |
| expected surplus from innovations (O39) | reward system (J33) |