Public sector science and "the strategy of the commons"

Summary form only given, as follows. This paper provides a game-theoretical explanation for the puzzling behavior of large firms and private sector consortia (incumbents) whom, while sponsoring university research labs, at the same time require all inventions generated by the sponsored labs be licensed openly on a purely nonexclusive basis. Under certain conditions, this results in an intellectual property ´commons´ with the consequence that no firm has the incentive to innovate, despite the potential profitability of the new technology. The strategy of spoiling incentives to innovate by eliminating exclusive intellectual property rights-the strategy of the common-is motivated by a fear of cannibalization and supported by a credible threat: The authors show that the degree of cannibalization to which the new technology exposes the old market is responsible for this market failure and they characterize the subgame perfect equilibrium in which the strategy of the commons is played. Within this framework, they also investigate welfare implications as well as strategy and policy issues