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The open source movement evolved in the one industrial context where openness is not required by intellectual property law.1 Nevertheless, openness itself cannot be the driving force behind the open source movement. This is because openness can be achieved in many ways other than the GPL, for example, with proprietary licenses, or licenses that are even more permissive than the GPL, such as the BSD license.Early commentators explained this new development model by focussing on the motives of the programmer, such as to demonstrate skills. See the survey by Stephen M. Maurer and Suzanne Scotchmer (2006). But firms also participate in open-source collaborations, sometimes contributing significant resources (Joachim Henkel, 2006, Dirk Riehle, 2009). Doing so can be profitable even if the contributors are rivals in the market. The quality improvements or cost reductions provided by a rival’s open-source contributions may outweigh the deleterious effect of empowering the rival to be a better competitor.

We investigate rewards to R&D in a model where substitute ideas for innovation arrive to random recipients at random times. By foregoing investment in a current idea, society as a whole preserves an option to invest in a better idea for the same market niche, but with delay. Because successive ideas may occur to different people, there is a conflict between private and social optimality. We characterize the welfare-maximizing reward structure when the social planner learns over time about the arrival rate of ideas, and when private recipients of ideas can bank their ideas for future use. We argue that private incentives to create socially valuable options can be achieved by giving higher rewards where "ideas are scarce."

In a labor market hierarchy, promotions are affected by the noisiness of information about the candidates. I study the hypothesis that males are more risk taking than females, and its implications for rates of promotion and abilities of survivors. I de…fine promotion hierarchies with and without memory, where memory means that promotion depends on the entire history of success. In both types of hierarchies, the surviving risk takers will have lower average ability whenever they have a higher survival rate. Further, even if more risk takers than non risk takers are promoted in the beginning of the hierarchy, that will be reversed over time. The risk takers will eventually have a lower survival rate, but higher ability. As a consequence of these differences, the various requirements of employment law cannot simultaneously be satisfi…ed. Further, if promotion standards are chosen to maximize profit, the standards will reflect gender in ways that are difficult to distinguish from discriminatory intent.

We investigate optimal rewards in an R&D model where substitute ideas for innovation arrive to random recipients at random times. By foregoing investment in a current idea, society as a whole preserves an option to invest in a better idea for the same market niche, but with delay. Because successive ideas may occur to different people, there is a conflict between private and social optimality. We investigate the optimal policy when the social planner learns over time about the arrival rate of ideas, and when private recipients of ideas can bank their ideas for future use. We argue that private incentives to create socially valuable options can be achieved by giving higher rewards where "ideas are scarce."

In a labor market hierarchy, promotions are affected by the noisiness of information about the candidates. I study the hypothesis that males are more risk taking than females, and its implications for rates of promotion and abilities of survivors. I define promotion hierarchies with and without memory, where memory means that promotion depends on the entire history of success. In both types of hierarchies, the surviving risk takers have lower average ability whenever they have a higher survival rate. Further, even if more risk takers than non risk takers are promoted in the beginning of the hierarchy, that will be reversed over time. The risk takers will eventually have a lower survival rate, but higher ability. As a consequence of these differences, the various requirements of employment law cannot simultaneously be satisfied. Further, if promotion standards are chosen to maximize profit, the standards will reflect gender in ways that are difficult to distinguish from discriminatory intent.

We consider a model of the innovative environment where there is a distinction between ideas for R\&D investments and the investments themselves. We investigate the optimal reward policy and how it depends on whether ideas are scarce or obvious. By foregoing investment in a current idea, society as a whole preserves an option to invest in a better idea for the same market niche, but with delay. Because successive ideas may occur to different people, there is a conflict between private and social optimality. We argue that private incentives to create socially valuable options can be achieved by giving higher rewards where "ideas are scarce." We then explore how rewards should be structured when the value of an innovation comes from its applications, and ideas for the innovation may be more or less scarce than ideas for the applications.

If promotion in a hierarchy is based on a random signal of ability, rates of promotion are affected by risk-taking. Further, the statistical properties of the surviving populations of risk-takers and non-risk-takers will be different, and will be changing throughout the hierarchy. I define promotion hierarchies with and without memory, where memory means that promotion depends on the entire history of success. In both types of hierarchies, surviving risk-takers have lower average ability than surviving non risk-takers at any stage where they have a higher probability of survival. However, that will not apply in the limit. With a common set of promotion standards, risk-takers will survive with lower probability than non risk-takers, and will have higher average ability. I give several interpretations for how these theorems relate to affirmative action, in light of considerable evidence that males are more risk-taking than females.

JEL Classifications: L41, K21 Abstract: When infringement of a patent dissipates profit relative to the licensing agreement that would otherwise occur, damages under the lost-profit rule deter infringement, and otherwise not. We develop this point in a general model and give two examples. However, joint profit might not be dissipated by infringement. An important example is where there are restrictions on licensing that arise from competition policy.

From the antitrust case law that governs restrictions on patent licenses, we derive three unifying principles: just reward, profit neutrality and minimalism. The just-reward principle holds that the patentholder's profits should be earned, if at all, from the social value created by his invention. Profit neutrality holds that patent rewards should not depend on the rightholder's ability to work the patent himself. Minimalism holds that licensing contracts should not use more restrictive terms than required for neutrality. We discuss how these principles determine which patent license restrictions should and should not be acceptable from an antitrust perspective. We also compare these principles and the per se rules that follow from them to the potential benefits and drawbacks likely to be encountered under a rule of reason approach.

There is considerable evidence that males are more prone to take risks than females. This difference has implications for rates of promotion in hierarchies where promotion is based on random signals of ability. I explore the promotion consequences of three types of performance standards: gender-blind standards, standards designed to promote agents of equal ability on average, and standards designed to promote equal numbers of both genders. These three objectives lead to different promotion standards, which highlights among other things that the goal of affirmative action is not well defined. Lower promotion standards for females can be necessary to ensure either equal abilities or equal numbers in the promoted populations.

Intellectual property treaties have two main types of provisions: national treatment of foreign inventors, and harmonization of protections. I address the positive question of when countries would want to treat foreign inventors the same as domestic inventors, and how their incentive to do so depends on reciprocity. I also investigate an equlibrium in which regional policy makers choose IP policies that serve regional interests, conditional on each other's policies, and investigate the degree to which "harmonization" can redress the resulting inefficiencies.

Intellectual property treaties have two main types of provisions: national treatment of foreign inventors, and harmonization of protections. I characterize the circumstances in which countries would want to treat foreign inventors the same as national inventors. I then argue that national treatment of foreign inventors leads to stronger intellectual property protection than is optimal, and that this effect is exacerbated when protections must be harmonized. However levels of public and private R&D spending will be lower than if each country took account of the uncompensated externalities that its R&D spending confers on other countries. The stronger protection engendered by attempts at harmonization are a partial remedy.

Our objective in this paper is to review what economists have said about incentive schemes to promote R&D, including intellectual property. While we focus on environments in which other forms of protection are not available, we note that other protections can obviate the need for any formal reward system.In Section II, we compare intellectual property to alternative incentive schemes. In Section III we review optimal design issues for intellectual property, especially the question of patent breadth, and in Section IV we turn to the special problems that arise when innovation is cumulative. In Section V, we summarize the arguments for and against intellectual property. We comment on whether the design recommendations of economists can actually be implemented, and argue that IP regimes should be designed so that the subject matter of each one has relatively homogeneous needs for protection.

We investigate how liability rules and property rules affect the incentives to invest in research tools. We argue that it is hard to deter infringement under any of the enforcement regimes available. However, counterintuitively, a credible threat of infringement can actually be beneficial to the patentholder. We compare the two doctrines of damages under the liability rule, namely, lost profit (lost royalty) and unjust enrichment, and argue that unjust enrichment protects the patentholder better than lost royalty. Both can be superior to a property rule (the right to enjoin infringement), depending on how much delay is permitted before infringement is enjoined. We also show that, for patents on end-user products, the ranking of liability doctrines is reversed: unjust enrichment is inferior to lost profits.

In the past several years, the seed industry worldwide has been dramatically restructured, mostly through mergers and acquisitions. We argue that the restructuring has been technologically driven, and has also resulted in the transformation of several chemical conglomerates into life-sciences firms. We discuss why the restructuring has mostly occurred through mergers rather than contractual relationships such as licensing, and investigate its efficiency implications, both as it concerns anticompetitive effects and the joint use of complementary assets.

Profit on proprietary research tools is determined partly by the remedies for infringement, such as damages and injunctions. We investigate how damages under a liability rule and the opportunity for injunctions under a property rule can affect the incentives to develop research tools. We show that the prevailing legal doctrine of damages under the liability rule, called lost profit or reasonable royalty, suffers from a logical circularity which leads to an indeterminacy in permissible damages. This can create insufficient incentives to develop research tools. Incentives can be improved either by a property rule with injunctions or by a liability rule under the doctrine of unjust enrichment.

Patents differ from other forms of intellectual property in that independent invention is not a defense to infringement. We argue that the patent rule is inferior. First, the threat of entry by independent invention would induce patentholders to license the technology, lowering the market price. Provided independent invention is as costly as the original cost of R&D, the market price will still be high enough to cover the patentholder's costs. Second, a defense of independent invention would reduce the wasteful duplication of R&D effort that occurs in patent races. In either case, the threat of independent invention creates a mechanism that limits patentholders' profits to levels commensurate with their costs of R&D.