Waiting to imitate: on the dynamic pricing of knowledge

Posted by D. Daniel Sokol

Emeric Henry (Sciences Po - Econ), Carlos Ponce (Universidad Carlos III de Madrid - Econ) explain Waiting to imitate: on the dynamic pricing of knowledge.

ABSTRACT: We study the problem of an inventor who brings to the market an innovation that can be legally copied. Imitators may 'enter' the market by copying the innovation at a cost or by buying from the inventor the knowledge necessary to reproduce and use the invention. The possibility of contracting affects the need for patent protection. Our results reveal that: (i) Imitators wait to enter the market and the inventor becomes a temporary monopolist; (ii) The inventor offers contracts which allow resale of the  knowledge acquired by the imitators; (iii) As the pool of potential imitators grows large, the inventor may become a permanent monopolist.