The Distributive Implications of Patents on Indivisible Goods

20 Pages Posted: 5 May 2005

See all articles by Dan Usher

Dan Usher

Queen's University - Department of Economics

Date Written: July 2004

Abstract

Patents raise the price and reduce consumption of the patented good, but the resulting deadweight loss is thought to be worth bearing when patent protection is required as an incentive to invention. The newly-invented good generates a residual surplus, making people better off than they would be if the good had not been invented. This well-known argument is usually framed in a context where people are identical, everybody's demand curve for the newly-invented good is the same and everybody shares to some extent in the residual surplus. However, when the newly-invented good is indivisible - like a heart transplant or a treatment for AIDS, where, in effect, a person consumes either one full unit of the good or none - the effect of a patent is to concentrate the entire benefit of the patented good upon the rich, leaving the poor no better off than if the good had not been invented.

Suggested Citation

Usher, Dan, The Distributive Implications of Patents on Indivisible Goods (July 2004). Available at SSRN: https://ssrn.com/abstract=704742 or http://dx.doi.org/10.2139/ssrn.704742

Dan Usher (Contact Author)

Queen's University - Department of Economics ( email )

99 University Avenue
Kingston K7L 3N6, Ontario
Canada

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