Location, Taxation, and Governments: An Exchange Theory of Intellectual Property
42 Pages Posted: 27 Nov 2019
Date Written: November 13, 2019
The standard economic model of intellectual property is an efficient property rights solution to a market failure problem of investment in a non-rival and non-excludable good. We propose a new ‘stationary bandit’ model of intellectual property based on a contracting approach in the context of market-making and enforcement of economic rights in exchange for monopoly taxation rights. We use a formal Hotelling type model to show the relationship between location and pricing decisions of innovating firms under differing intellectual property regimes, institutional quality, and taxation.
Keywords: intellectual property, stationary bandit model, institutional quality, tax havens, tax competition, strategic trade policy
JEL Classification: D02, O34, D72, F51, F55, F61, H71, H87, K3
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