The Patent Lottery: Exploiting Behavioral Economics for the Common Good
Dennis D. Crouch
University of Missouri School of Law
November 1, 2008
George Mason Law Review, Vol. 16, No. 1, 2008
University of Missouri School of Law Legal Studies Research Paper No. 2008-31
Lotteries are immensely popular. Players are willing to give the organizer a large monetary cut of every ticket purchase in return for a chance at a jackpot. In some ways, our current patent system operates as a lottery as well. Most patents are relatively worthless, while a few are highly valuable. Reaching the major payout of a highly valuable patent takes perseverance in the face of tremendous uncertainty. Like lottery players, small entrepreneurial companies and individuals have shows signs of bounded rationality. In particular, what I call the patent lottery effect is associated with the phenomena of potential innovators overweighting the size of a potential payout on innovation while neglecting to fully consider the actual probability of obtaining that payout. The potential bounded rationality of actors in the patent system challenges our traditional notions of the patent incentive.
In many settings, bounded rationality problems are patched-up with education and paternalism such as in the form of consumer protection. In this article, I take a different approach and instead explore ways that the overconfidence of innovators may alter our choice of innovation policy levers in ways that increase innovation but decrease the monopoly cost of patents.
Number of Pages in PDF File: 33
Keywords: Patent, Patent Lottery, Lottery, Bounded Rationality, BehavioralAccepted Paper Series
Date posted: December 10, 2008 ; Last revised: January 22, 2009
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