Reference no: EM13221995

Milton Reynolds was an Ameican entrepreneur who was impressed with the Biro pen on a visitto Argentina. Biro's patent prevented him from producing an exact copy so Reynolds reverse engineered the product, developing an alternative, arguably inferior design and introduced Reynolds ballpoint pens to the United States in October 1945 as the first ball point pen in the U.S. market. The pens, one model of which is shown below, were an immediate success and sold by the millions and Milton Reynolds made millions of dollars. Unfortunately they were a failure as a writing instrument.
The Reynolds pen cost about 80 cents to produce and was priced at $12 to $20. For this reason,Reynolds International Pen Co. attracted about 100 competitors and ended up going bankrupt within ten years of the pen's introduction. Price fell to close to marginal cost. The overwhelming majority of those other 100 companies went bankrupt or were bought by larger concerns such as Parker Pen; today the industry is dominated by half a dozen firms.

Neither Bio nor Reynolds were in the writing products industry prior to the introduction of ballpoint pens. Traditonal fountain pen manufacturers were among those that entered the fray and eventually dominated the industry in the United States. Many subsequent innovations such as eraser pens and disposable pens were pioneered by those companies. Biro, for his part, sold his interest to a Frenchmen named Bich, whose principal product became the Biro, as it is known in many coutries outside the United States today. Today you know that company as Bic.
Answer the following questions to the assignment section based on Chapter 16 and the above brief history:

(1)In what sense was ball point pen technology a public good? (See also Chapter 15, especially about page 318)
(2) Is this history an argument for or against free markets in spurring innovation?
(3)What does this history say about the appropriateness of Baumol and Blinder's "arms race" argument regarding innovation?
(4)What about the relationship among monopoly, invention and innovation?