ECON 104 Chapter Notes - Chapter 8: Deadweight Loss, Smart People, Monopoly
7 Apr 2016
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General principle: it"s a good idea to reward good behaviour, but it"s a bad idea to sanction bad behaviour even as a reward. Inventiveness: good for consumers: monopoly power bad for consumers, reward by grant 17 years" monopoly power. Too little because 17 years patent is frequently worth far less than full social value of invent so inventiveness under rewarded and we don"t get enough of it. Too much because any gratuitously granted monopoly power is too much. Solution: reward successful inventors the same way we reward successful salesmen or players: by pay for performance not with monopoly power but with case. Inventions that people enjoy, as known as public at large through their elected representatives: by government and placed in public domain. Action over, flip a coin: if heads, high bidder pays and gets patent, if tails, government pays high bid and gets patent. Bias as 90% of all patents end up in public domain.
