Cumulative Innovation, Experimentation and the Hold-Up Problem

Rufus Pollock ()

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: Extending the basic model of two-stage cumulative innovation with asymmetric information to include `experimentation' by second-stage rms, we nd that the costs of a strong (versus weak) intellectual property (IP) regime may be substantially increased. In addition, these costs increase as experimentation becomes cheaper and as the differential between high and low value second-stage innovations grows, with the result that a weak IP regime is more likely to be optimal. Thus, technological change which reduces the cost of encountering and trialling new `ideas' implies a reduction in the socially optimal level of IP rights such as patent and copyright.

Keywords: Cumulative Innovation; Hold-Up; Experimentation; Intellectual Property. (search for similar items in EconPapers)
JEL-codes: K3 L5 O3 (search for similar items in EconPapers)
Pages: 24
Date: 2008-04
New Economics Papers: this item is included in nep-ino, nep-ipr, nep-pr~, nep-knm and nep-law
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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