An experiment on protecting intellectual property

We conduct a laboratory experiment to explore whether the protection of intellectual property (IP) incentivizes people to create non-rivalrous knowledge goods, foregoing the production of other rivalrous goods. In the contrasting treatment with no IP protection, participants are free to resell and remake non-rivalrous knowledge goods originally created by others. We find that creators reap substantial profits when IP is protected and that rampant pirating is common when there is no IP protection, but IP protection in and of itself is neither necessary nor sufficient for generating wealth from the discovery of knowledge goods. Rather, individual entrepreneurship is the key.