Arnold Kling

Software Contest

Arnold Kling, Great Questions of Economics
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Information goods are costly to develop and costless to distribute. So Google's idea of using a contest as a way of rewarding software developers has some merit. The winner receives $10,000. However, all entrants are subject to this:

With regard to an entry you submit as part of the Contest, you grant Google a worldwide, perpetual, fully paid-up, non-exclusive license to make, sell, or use the technology related thereto, including but not limited to the software, algorithms, techniques, concepts, etc., associated with the entry.

The problem that I have with these rules is that a loser who gets nothing still has to grant Google a license. Instead, I would argue that any entry that Google chooses to license should be declared a winner and receive $10,000.

In general, I like the idea of prizes and contests for research and development. In our current system of dealing with intellectual property, your "prize" is a patent or copyright. Whether this benefits you personally depends on your ability to exploit the temporary monopoly, which requires a different skill set than doing research and development. Moreover, patents and copyrights are costly to administer. In addition, the temporary monopoly leads to pricing above marginal cost.

Discussion Question. In drug research, the "prize" is the exclusive right to sell the drug until the patent expires. What are the pros and cons of instead giving a pharmaceutical company a dollar reward for development of a successful drug and then allowing any company to manufacture and sell the drug?

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