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Socially Excessive Dissemination

Assigning monopoly power to an inventor is usually viewed as a static efficiency cost needed to obtain the dynamic benefit of increased research and development; public dissemination is considered to be superior. For example, Katz and Shapiro (1986) find that when a monopolist licenses an innovation to competing downstream firms, "[its] incentives to disseminate the innovation typically are [socially] too low." I find that in contrast dissemination can be excessive even if there was monopoly dissemination. For example, it can be profit maximizing for the lab to issue several license while it is socially optimal that no licenses are issued.