Matching Demand and Supply in a Weightless Economy: Market-Driven Creativity with and Without Iprs

Abstract

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.

Keywords: Cultural good, finitely expansible, innovation, intellectual asset, intellectual property, Internet, IP valuation, IPR, knowledge product, MP3, non-rival, software

JEL Classification: D90, O14, O30