Market Power Screens Willingness-to-Pay

Tirole, Jean and Weyl, Glen (2012) Market Power Screens Willingness-to-Pay. The Quarterly Journal of Economics, vol. 127 (n° 4). pp. 1971-2003.

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Official URL: http://tse-fr.eu/pub/24720

Abstract

What is the best way to reward innovation? While prizes avoid deadweight loss, intellectual property selects high social surplus projects. Optimal innovation policy thus trades off the ex-ante screening benefit and the ex-post distortion. It solves a multidimensional screening problem in the private information held by the innovator: research cost, quality and market size of the innovation. The appropriate degree of market power is never full monopoly pricing and is determined by measurable market characteristics, the inequality and elasticity of innovation supply, making the analysis open to empirical calibration. The framework has applications beyond IP policy to the optimal pricing of platforms or the optimal procurement of public infrastructure.

Item Type: Article
Language: English
Date: October 2012
Refereed: Yes
Uncontrolled Keywords: Intellectual property, market power, screening, stretch parametrization
JEL codes: D40 - General
D61 - Allocative Efficiency; Cost-Benefit Analysis
D82 - Asymmetric and Private Information
L10 - General
L40 - General
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 18 Jan 2012 05:45
Last Modified: 07 Mar 2018 13:20
OAI ID: oai:tse-fr.eu:24720
URI: http://publications.ut-capitole.fr/id/eprint/951

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