Matt Schruers demonstrates that from their earliest days as delivery mechanisms for medicines, to the era of patent elixirs, to today’s resurgence of craft cocktails, alcoholic beverages have been fruitful ground for innovation. Although cocktail recipes are unprotected by copyright or patent law, new cocktail recipes are far from scarce, despite the fact that these inventions can be freely copied and used by competitors. While culinary creations are regulated through informal norms, innovation in the mixological arts is driven by market strategies, in particular by cross-financing the investments made in easily copied information. Cocktails are often devised and sold as services, rather than products, as well as promotion for the spirits they contain. As this chapter colorfully illustrates, classic intellectual property theory often fails to account for market-based innovation incentives.
Paying off the Competition: Market Power and Innovation Incentives