Game Theory Perspective on Intellectual Property

There is a fundamental disconnect happening in the marketplace at the moment. While protections on intellectual property are being lengthened, the rate of technological advancement is speeding up.

There certainly seem to be merits to protection of intellectual property. If a group takes the time to invest research efforts in the form of time and money towards the development of a new idea, they should be protected from theft of this idea. In the event that theft does occur, the stealing party could be at an advantage to the developing party. They did not have to invest the time and money into creating the product. Thus, they would be in a stronger position to market the idea.

However, with thinking based on economic game theory, Boldrin and Levine argue that not everything about IP is rosey. IP also imposes a high cost of supervision. This require funds to be expended to ensure that no competing parties are making use of the controlled ideas. This can be seen very clearly in the costs of the legal fees that music producers have been forced to expend fighting cases against Napster and other file sharing services.

In addition, IP creates rent seeking behavior. This means, that a patent will be made for the sole purpose of preventing other parties from using it. Here it becomes more of a business tactic of large groups, rather than a protection of significant investment.

Other arguments against IP can also be made. For instance, ideas are being generated much more quickly in recent times. This is thanks for more advanced tools, and a great wealth of information that is now made available through information technology. The investment in creating a new idea in modern times is no longer as substantial as it once was... in many cases.