Theoretical Framework

A disembodied (nonrival) item is often difficult to exclude because, once the initial cost that produced the item is borne, it can often be transferred between individuals at virtually no cost.1 In the case of a new idea, it is not produced until it is communicated for verification, the very act of which ensures nonexcludability. The marginal cost of producing more than one unit of a particular new idea is approximately zero (the cost of communication). The theoretical framework is divided into two scenarios: private production of new ideas under no legally enforceable IPRs and the private production of new ideas under legally enforceable IPRs. These two scenarios are discussed in turn.

1 A good example of this is computer software. It can be copied almost infinitely on media (compact or CDs) that is very inexpensive with little expenditure of time.

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