Econ 483_Lecture 3_Patents_Market structure

Lecture 3 ip market structure econ483 econ of

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Unformatted text preview: : IP & market structure, Econ483: Econ of Innovation & Technology, Evangelia Chalioti c A ll rights reserved. IP Characteristics ! Prices cannot be set e¢ ciently, since consumers who have not paid for the good, cannot be excluded. Lecture 3: IP & market structure, Econ483: Econ of Innovation & Technology, Evangelia Chalioti c A ll rights reserved. IP Characteristics E¢ cient market A competitive market ensures the e¢ cient production & distribution of private goods. Each unit goes to the consumer who values it most; i.e. the consumer who is willing to pay at least the market price gets the good. The price of the good is the opportunity cost of the marginal resources required to produce it. Only the units whose value to the consumer is greater than the opportunity cost will be produced. Lecture 3: IP & market structure, Econ483: Econ of Innovation & Technology, Evangelia Chalioti c A ll rights reserved. IP Characteristics E¢ cient market for private good Suppose each consumer buys at most one unit; the price is p - Everyone with willingness-to-pay (say WTP) higher than p will buy the good. The marginally excluded consumer imposes an incremental cost which is higher than her WTP. Lecture 3: IP & market structure, Econ483: Econ of Innovation & Technology, Evangelia Chalioti c A ll rights reserved. IP Characteristics Market for public good Non-rivalry & non-excludability: demand side: all consumers can use the good simultaneously supply side: the investment...
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