38 Pages Posted: 3 Aug 2006
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 rightsthe strategy of the commonsis 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: 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
By Scott Stern