Amazing Grace

Abstract

Grace is the disclosure of an innovation without losing its exclusive rights. It encourages disclosure, while potentially foreclosing access to followers. I propose the outline of a model to analyse this tension and its impacts on knowledge ow and welfare. The model is an adaptation of a discrete, real options framework put forward by Hanemann (1989) and Traeger (2014). For single innovations, I demonstrate that leaders are always at least as well-off with grace. For cumulative innovations, I present the outline of a model which incorporates strategic interactions between a leader and follower.