Intellectual property and price discrimination: Do as you please in the name of innovation?

This paper considers policy towards the exercise of market power by holders of intellectual property rights (IPRs). In particular, we ask whether intellectual property protection should extend to price discrimination. To answer this question, we present a very simple model of IPRs, designed to make clear the trade-offs that face government policy makers in designing IPRs. We find that there are strong arguments for requiring price discrimination undertaken in the context of enforcing IPRs, that results, or is likely to result, in a substantial lessening of competition, to be subject to some form of public benefits test. 2003 Elsevier B.V. All rights reserved. JEL classification: D4; K2; O34