The Stationary Bandit Model of Intellectual Property

We propose a new model of intellectual property that presents a different view to the market failure/monopoly rent model advanced by Arrow (1962) in which governments protect inventors from private theft. Instead, using Olson (1993), we represent a public theft model of intellectual property arising when entrepreneurs acting in global markets seek protection from a stationary bandit (their home government) principally against the depredations of other governments (the roving bandits). We argue that this model explains why institutional quality matters to the global location of R&D intensive industries, such as biopharma, and why so much intellectual property is located in tax havens