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Public Sector Science and the Strategy of the Commons

38 Pages Posted: 3 Aug 2006  

Lorenzo Garlappi

University of British Columbia (UBC) - Sauder School of Business

Ajay Agrawal

University of Toronto - Rotman School of Management; National Bureau of Economic Research (NBER)

Abstract

We model the conditions under which incumbent firms may purposefully create an intellectual property 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 intellectual property 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

JEL Classification: L10, L12

Suggested Citation

Garlappi, Lorenzo and Agrawal, Ajay, Public Sector Science and the Strategy of the Commons. Economics of Innovation and New Technology, 2007. Available at SSRN: https://ssrn.com/abstract=920925

Lorenzo Garlappi

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

Ajay Agrawal (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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