The Stationary Bandit Model of Intellectual Property

19 Pages Posted: 15 Jun 2016

Date Written: June 14, 2016


We propose a new model of intellectual property that presents a different view to the market failure/monopoly rent model advanced by Arrow (1962) in which governments protect inventors from private theft. Instead, using Olson (1993), we represent a public theft model of intellectual property arising when entrepreneurs acting in global markets seek protection from a stationary bandit (their home government) principally against the depredations of other governments (the roving bandits). We argue that this model explains why institutional quality matters to the global location of R&D intensive industries, such as biopharma, and why so much intellectual property is located in tax havens.

Keywords: intellectual property, stationary bandit model, institutional quality, tax havens

JEL Classification: D02, O34, D72, F51, F55, F61, H71, H87, K39

Suggested Citation

Davidson, Sinclair and Potts, Jason, The Stationary Bandit Model of Intellectual Property (June 14, 2016). Available at SSRN: or

Sinclair Davidson

RMIT University ( email )

124 La Trobe Street
Melbourne, 3000

Jason Potts (Contact Author)

RMIT University ( email )

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