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Science 6 March 2009:
Vol. 323. no. 5919, pp. 1335 - 1339
DOI: 10.1126/science.1158624
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Reports

Promoting Intellectual Discovery: Patents Versus Markets

Debrah Meloso,1* Jernej Copic,2 Peter Bossaerts3

Because they provide exclusive property rights, patents are generally considered to be an effective way to promote intellectual discovery. Here, we propose a different compensation scheme, in which everyone holds shares in the components of potential discoveries and can trade those shares in an anonymous market. In it, incentives to invent are indirect, through changes in share prices. In a series of experiments, we used the knapsack problem (in which participants have to determine the most valuable subset of objects that can fit in a knapsack of fixed volume) as a typical representation of intellectual discovery problems. We found that our "markets system" performed better than the patent system.

1 Bocconi University, 20136 Milan, Italy.
2 University of California Los Angeles, Los Angeles, CA 90095, USA.
3 California Institute of Technology (Caltech), Pasadena, CA 91125, USA, and Ecole Polytechnique Fédérale Lausanne, 1015 Lausanne, Switzerland.

* To whom correspondence should be addressed. E-mail: debrah.meloso{at}unibocconi.it

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Science. ISSN 0036-8075 (print), 1095-9203 (online)