DP3317 Matching Demand and Supply in a Weightless Economy: Market-Driven Creativity With and Without IPRs

Author(s): Danny Quah
Publication Date: April 2002
Keyword(s): cultural good, finitely expansible, innovation, intellectual asset, intellectual property, internet, IP valuation, IPR, knowledge product, MP3, non-rival, software
JEL(s): D90, O14, O30
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3317

Many cultural products have the same non-rival nature as scientific knowledge. They therefore face identical difficulties in creation and dissemination. One traditional view says market failure is endemic ? societies tolerate monopolistic inefficiency in intellectual property (IP) protection to incentivize the creation and distribution of intellectual assets. This Paper examines that trade-off in dynamic, representative agent general equilibrium, and characterizes socially efficient creativity. Markets for intellectual assets protected by IP rights can produce too much or too little innovation.