Public Sector Science And The Strategy Of The Commons

Ajay K. Agrawal and Lorenzo Garlappi

Economics of Innovation and New Technology, 2007, vol. 16, issue 7, pages 517-539

Abstract: We model the conditions under which incumbent firms may purposefully create an intellectual property (IP) commons such that no firm has the incentive to invest in new product development, despite the potential profitability of a public sector invention. The strategy of spoiling incentives to innovate by eliminating exclusive IP rights - the strategy of the commons - is motivated by a fear of cannibalization and supported by a credible threat. We show how the degree of potential cannibalization is related to this market failure and characterize the subgame perfect equilibrium in which the strategy of the commons is played.

Keywords: Entry deterrence; Intellectual property; University research; Welfare loss; Cannibalization (search for similar items in EconPapers)
Date: 2007
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