Title

Intellectual Property Rights and Crop-Improving R&D under Adaptive Destruction

Campus Units

Economics, Center for Agricultural and Rural Development

Document Type

Article

Publication Version

Submitted Manuscript

Publication Date

5-2008

Journal or Book Title

Environmental and Resource Economics

Volume

40

Issue

1

First Page or Article ID Number

53

Last Page

72

DOI

10.1007/s10640-007-9140-5

Abstract

This paper studies how the strength of intellectual property rights (IPRs) affects investments in biological innovations when the value of an innovation is stochastically reduced to zero because of the evolution of pest resistance. We frame the problem as a research and development (R&D) investment game in a duopoly model of sequential innovation. We characterize the incentives to invest in R&D under two competing IPR regimes, which differ in their treatment of the follow-on innovations that become necessary because of pest adaptation. Depending on the magnitude of the R&D cost, ex ante firms might prefer an intellectual property regime with or without a “research exemption” provision. The study of the welfare function that also accounts for benefit spillovers to consumers—which is possible analytically under some parametric conditions, and numerically otherwise—shows that the ranking of the two IPR regimes depends critically on the extent of the R&D cost.

JEL Classification

L00, O31, O34, Q28

Comments

This is a working paper of a an article from Environmental and Resource Economics 40 (2008): 53, doi: 10.1007/s10640-007-9140-5.

Link to Full Text

Share

COinS