Shavell and van Ypersele (1999)
|Shavell and van Ypersele (1999)
|Rewards versus Intellectual Property Rights
|Shavell, S., Van Ypersele, T.
|Shavell, S. and Van Ypersele, T., 1999. Rewards versus intellectual property rights (No. w6956). National bureau of economic research.
|Definitive , Open Access
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|About the Data
|This study proposes an economic model comparing a reward system with Intellectual Property Rights. It uses no original data.
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This paper compares reward systems to intellectual property rights (patents and copyrights). Under a reward system, innovators are paid for innovations directly by the 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.
Main Results of the Study
In a regime with rewards, drugs would be far cheaper and more widely used, all computer software would be free, and electronically recorded materials would be inexpensive, arguably engendering significant increases in consumer welfare. Moreover, there would also be potential gains from enhanced incentives to innovate, as profits from patent and copyright may fall considerably short of consumer surplus. For example, Kremer suggests that studies of the social versus the private returns from research indicate that private profits from research might well be only one-third of the social returns. Because optimal rewards would reflect thesocial returns, rewards would increase overall incentives to invest.
Policy Implications as Stated By Author
Reward systems, or optional reward systems, and especially those based on sales-related information, appear on reflection to hold promise as alternatives to our system of intellectual property rights, because there is no necessity to marry the incentive to innovate to conferral of monopoly power in innovations. As such, serious study of the possibility of reward systems, with a view toward their implementation at least on an experimental, partial basis, is worth contemplating.
Coverage of Study