Re: Intellectual Property II

[Alexander Terekhov]

Rui Miguel Silva Seabra wrote:

[... "monopoly" ...]

William M. Landes and Richard Posner:

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A property right is a legally enforceable power to exclude others 
from using a resource, without need to contract with them. So if A 
owns a pasture, he can forbid others to graze their cattle on it 
without having to negotiate an agreement for exclusive use. A 
property right confers two types of economic benefit, static and 
dynamic. The former is illustrated by a natural (that is, 
uncultivated) pasture. If the owner cannot exclude others from using 
his pasture, there will be overgrazing because users of the pasture 
will ignore the costs they impose on each other in reducing the 
cattle's weight by making the cattle expend more energy in grazing 
in order to find enough to eat. The dynamic benefit of a property 
right is the incentive that the right imparts to invest in the 
creation or improvement of a resource in period 1 (for example, 
planting a crop), given that no one else can appropriate the 
resource in period 2 (harvest time). For example, a firm is less 
likely to expend resources on developing a new product if competing 
firms that have not borne the expense of development can duplicate 
the product and produce it at the same marginal cost as the 
innovator; competition will drive price down to marginal cost, and 
the sunk costs of invention will not be recouped.
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regards,
alexander.