WHO WANTS TO BE A GENIUS?

Abstract

In this paper we present a theoretical model of a dual economy, in which the two groups of individuals (firms) choose between becoming inventors and copying other individuals’ ideas. A particular case, in which some individuals are geniuses and all geniuses become inventors while all ordinary people become pirates, is analyzed. The model is based on Grossman (2005), but considers two main changes: a previous stage is revised (in which there is a fixed cost of becoming a genius) and a wealth analysis for the economy is presented. The main conclusion of the paper is that even when a higher proportion of geniuses represent a higher welfare for the society, the policy implemented by the authorities (in terms of intellectual property rights, among other instruments) to create incentives for such an increase depends on the initial conditions of the economy (in terms of the proportion of geniuses itself).