Ch 4 - Optimal Design of Intellectual Property

Ch 4 - Optimal Design of Intellectual Property - Ch 4 -...

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DWL 1. 2. Flaws of Strong IPR Ideas, innovation, and length of practice (4.1) Nordhaus Increasing duration of patent increases DWL (bad from social point of view) Duplicated costs Strong intellectual protection Equilibrium and optimal number of entrants (4.2) 4.1 How Profitable Should Intellectual Property Rights Be? More elastic and generally lower, if close substitutes are allowed in the market Demand curve Very elastic Competitive will keep price down Narrow - Paper cup sleeves Non-human transgenic mammals Later researchers will not be saved from infringements even if they use walruses Doctrine of equivalents Broad - Oncomouse Example: Narrow and Broad Lower demand function for proprietary good = patent is narrow Higher demand function for proprietary good = patent is broad Proprietary and possibly infringing goods (figure 4.3) Closeness of noninfringing substitutes 1. Breadth, the size of the market for the patented product
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Ch 4 - Optimal Design of Intellectual Property - Ch 4 -...

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