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CEP discussion paper
Matching Demand and Supply in a Weightless Economy: Market-Driven Creativity With and Without IPRs
Danny Quah
June 2002
Paper No' CEPDP0534:
Full Paper (pdf)

JEL Classification: D90;O14;O30

Tags: cultural good; finitely expansible; innovation; intellectual asset; intellectual property; internet; ip valuation; ipr; knowledge product; mp3; nonrival; software

Many cultural products have the same nonrival 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 tradeoff 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.