Intellectual Property & External Consumption Effects: Generalizations from Pharmaceutical Markets

The paper analyzes the joint problem of the optimal provision of research and development (R&D) and consumption incentives for goods that at the same time undergo technological change and have external consumption effects. The results are discussed in the context of the pharmaceutical industry which simultaneously is one of the most R&D-intensive industries and one for which consumption of its output often seems to involve external effects, e.g. through human rights-based access issues.