What is the optimal allocation of prizes in an innovation race? Should the winner take all, or is it preferable that the original inventor shares the market with subsequent independent duplicators? Some recent papers in law and economics have argued that the latter, more permissive solution is...

We investigate the conditions for the desirability of exclusive intellectual property rights for innovators as opposed to weak rights allowing for some degree of imitation and ex-post competition. The comparison between the two alternatives reduces to a specific "ratio test," which suggests that...