the exponential convergence of bayesian learning in normal form games abstract this paper continues the study of bayesian learning processes for general finite player finite strategy normal form games bayesian learning was introduced in an earlier paper by the present author as an iterative mechanism by which players can learn nash equilibria the main result of the present paper is that if prior beliefs are sufficiently uniform and expectations converge to a regular nash equilibrium then the rate of convergence is exponential

unknown wage offer distribution and job search duration abstract if job searchers do not know the wage offer distribution they are facing they might take the wage structure in their last firm as a prior doing so reservation wages will be biased which will also bias unemployment duration using data for austrian workers it is shown that workers seem to have good knowledge of expected mean wages but less so for higher moments of the wage offer distribution

rationalizable conjectural equilibrium between nash and rationalizability abstract static equilibria can be viewed as steady states of recurring play of a game such steady states in which players do not perfectly observe the actions of others need not be nash equilibria this paper suggests a static solution concept rationalizable conjectural equilibrium that corresponds to such steady states to present it the basic model of a normal form game is enriched by specifying the signals that players get about others actions the solution is a profile of actions such that each player s action is optimal given that it is common knowledge that all players maximize utility given their signals journal of economic literature classification number c72

skill biased technological change and rising wage inequality some problems and puzzles the recent rise in wage inequality is usually attributed to skill biased technical change sbtc associated with new computer technologies we review the evidence for this hypothesis focusing on the implications of sbtc for overall wage inequality and for changes in wage differentials between groups a key problem for the sbtc hypothesis is that wage inequality stabilized in the 1990s despite continuing advances in computer technology sbtc also fails to explain the evolution of other dimensions of wage inequality including the gender and racial wage gaps and the age gradient in the return to education

cyclical dynamics in idiosyncratic labor market risk is individual labor income more risky in recessions this is a difficult question to answer because existing panel data sets are so short to address this problem we develop a generalized method of moments estimator that conditions on the macroeconomic history that each member of the panel has experienced variation in the cross sectional variance between households with differing macroeconomic histories allows us to incorporate business cycle information dating back to 1930 even though our data do not begin until 1968 we implement this estimator using household level labor earnings data from the panel study of income dynamics we estimate that idiosyncratic risk is i highly persistent with an annual autocorrelation coefficient of 0 95 and ii strongly countercyclical with a conditional standard deviation that increases by 75 percent from 0 12 to 0 21 as the macroeconomy moves from peak to trough

separations sorting and cyclical unemployment abstract this paper establishes a new fact about the compositional changes in the pool of unemployed over the us business cycle using microdata from the current population survey for the years 1962 2012 it documents that in recessions the pool of unemployed shifts toward workers with high wages in their previous job and that these shifts are driven by the high cyclicality of separations for high wage workers the paper finds that standard theories of wage setting and unemployment have difficulty in explaining these patterns and evaluates a number of alternative theories that do better in accounting for the new fact jel e24 e32 j31 j63 j64

rationalized subjective equilibria in repeated games the purpose of this paper is to provide a new equilibrium concept of repeated games that involve incomplete information rationalized subjective equilibrium and a related framework subjective game and to analyse the relationships between players subjective images of games and the realized outcomes we demonstrate the relationships among rationalized subjective equilibria subjective equilibria and original nash equilib ria by providing several examples we also present several theorems analogous to the ordinary folk theorem and a simple application using the cournot duopoly model jel classification c70 c72

market trade in patents and the rise of a class of specialized inventors in the 19th century united states it has long been recognized that one of the original aims of the u s patent system was to stimulate technological development by granting inventors temporary monopoly rights to their discoveries this paper argues that the u s system fostered inventive activity in another important way as well by providing the institutional infrastructure necessary for the growth of a market for technology early 19thcentury inventors often had to play a direct role in the commercial development of their ideas a situation that constrained their ability to focus on the generation of new technologies b zorina khan and sokoloff 1993 the growth of a market in patents not only made invention a more attractive activity by raising retums but also enabled creative individuals to extract income from their ideas by selling them off making it possible for them to specialize in the inventive activities for which they had a comparative advantage ever since adam smith economists have understood that one of the most fundamental processes at work in economic development is the specialization in the use of resources that the growth of market trade makes possible given the importance of the generation of new technologies to economic growth as well as the long standing recognition that investment in invention like other types of investment activity is responsive to material returns the lack of research on the dynamics of these processes for the case of technology is somewhat puzzling the answer may simply be that this topic did not seem very relevant in a world dominated by large scale businesses that integrated both the generation and commercialization of new technologies in recent years however venture capital has flowed to firms that focus on inventive activity and sell off or license the resulting intellectual property to enterprises better positioned to exploit its commercial advantages in other words it now seems that whatever the coordination benefits of conducting these various activities within a single large firm investors are realizing that there are also potential gains to be derived from a division of labor across organizations this specialization of function is not however a modern innovation in organization on the contrary as we will show such a division of labor was commonplace by the late 19th century a period which like the present age was characterized by rapid technological change the institutional foundation for market trade in technology was the u s patent system created in accordance with the commerce clause of the constitution although influenced by british law the framers of the u s system self consciously made a number of important innovations among them were dramatically lower fees impersonal administrative procedures for handling applications and the requirement that a patentee be the first and true inventor anywhere in the world patentees also had to be humans not firms these provisions extended the protection of property rights to a much broader range of inventions than obtained in britain or elsewhere in europe and when coupled with effective enforcement meant that inventors could advantageously reveal information about their ideas to prospective buyers even before they received a patent grant moreover uncertainty about the value of the patents decreased dramatically after the law was reformed in 1836 replacing a registration system which left to civil litigation the resolution of questions of originality novelty and appropriate scope by an examination system in which technically department of economics university of california los angeles 90095 and national bureau of economic research lamoreaux is also affiliated with the department of history at ucla we thank marigee bacolod lisa boehmer yael elad brian rivera ludmila skulkina matthew wiswall and tamara zavaliyenko for research assistance research support was provided by the national science foundation and the ucla academic senate

demographic differences in cyclical employment variation demographic differences in patterns of employment variation over the business cycle are examined in this paper three primary conclusions emerge first both participation and unemployment must be considered in any analysis of cyclical changes in the labor market second young people bear a disproportionate share of cyclical employment variation third failure to consider participation has led to undue pessimism about the effect of aggregate demand policy on high unemployment groups if participation did not surge reduction in overall unemployment to its 1969 level would reduce the unemployment of almost all demographic groups to very low levels

good jobs versus bad jobs this article develops a model of noncompetitive labor markets in which high wage good and low wage bad jobs coexist minimum wages and unemployment benefits shift the composition of employment toward high wage jobs because the composition of jobs in the laissez faire equilibrium is inefficiently biased toward low wage jobs these labor market regulations increase average labor productivity and may improve welfare

learning and self confirming long run biases abstract we consider an ambiguity averse sophisticated decision maker facing a recurrent decision problem where information is generated endogenously in this context we study self confirming actions as the outcome of a process of active experimentation we provide inter alia a learning foundation for self confirming equilibrium with model uncertainty battigalli et al 2015 and we analyze the impact of changes in ambiguity attitudes on convergence to self confirming equilibria we identify conditions under which the set of self confirming equilibrium actions is invariant to changes in ambiguity attitudes and yet ambiguity aversion may affect the dynamics indeed we argue that ambiguity aversion tends to stifle experimentation increasing the likelihood that the decision maker gets stuck into suboptimal certainty traps

on the job search and the wage distribution the article structually estimates an on the job search model of job separations given each employer pays observably equivalent workers the same but wages are dispersed across employers an employer s separation flow is the sum of an exogenous outflow unrelated to the wage and a job to job flow that decreases with the employer s wage using data from the danish integrated database for labour market research the empirical results imply as predicted by theory that search effort declines with the wage furthermore the estimates explain the employment effect defined as the horizontal difference between the distribution of wages earned and the wage offer distribution

bounded rationality dynamic oligopoly and conjectural variations abstract we propose a dynamic model of n firm oligopoly that provides a logically consistent reinterpretation of conjectural variations each firm solves a dynamic optimization problem believing that the other firms will alter their future choices in proportion to its own current change these beliefs adapt in light of observed behavior we show that steady state equilibria can range from complete cooperation to predatory play and provide conditions under which the firms behavior and beliefs converge to a steady state the sufficient conditions for stability are more easily satisfied the smaller the cross effects among firms through demand or belief parameters they are also more easily satisfied in a price setting than in a quantity setting differentiated products model

income redistribution consumer credit and keeping up with the riches in this study we set up a dynamic stochastic general equilibrium dsge model with upward looking consumption comparison and show that consumption externalities are an important driver of consumer credit dynamics our model economy is populated by two different household types investors who hold the economy s capital stock own the firms and supply credit and workers who supply labor and demand credit to finance consumption furthermore workers condition their consumption choice on the investors level of consumption we estimate the model and find a significant keeping up mechanism by matching business cycle statistics in reproducing credit moments our proposed model significantly outperforms a model version in which we abstract from consumption externalities

payoff assessments without probabilities a simple dynamic model of choice abstract we develop a model which reflects the tendency of people to simplify the decision problems they face the decision maker chooses among alternate strategies only on the basis of the payoff she assesses she would obtain from them and these assessments do not explicitly take into account her subjective judgements regarding the likelihood of alternate states of the world at each stage the decision maker chooses the strategy that she assesses to give the highest payoff she updates her assessments adaptively we show that such behavior leads to maxmin choices we also consider the decision maker who experiences shocks journal of economic literature classification numbers c7 d8

a quality index for patent systems abstract this paper presents a quality index for patent systems the index is composed of nine operational design components that shape the transparency and stringency of patent systems and affect the extent to which they comply with patentability conditions seven components are related to rules and regulations e g grace period opposition process and continuation in parts while two components measure patent offices resource allocation policy i e workload per examiner and incentives the index is computed for 32 national patent systems and displays a high degree of heterogeneity across countries cross sectional quantitative analyses suggest that the demand for patent rights is lower in patent systems with a higher quality index controlling for research efforts patent fees and the strength of enforcement mechanisms these results have important policy and research metrics implications

optimal cartel trigger price strategies abstract a dynamical model of industry equilibrium is described in which a cartel deters deviations from collusive output levels by threatening to produce at cournot quantities for a period of fixed duration whenever the market price falls below some trigger price in this model firms can observe only their own production level and a common market price the market demand curve is assumed to have a stochastic component so that an unexpectedly low price may signal either deviations from collusive output levels or a downward demand shock

correlated equilibrium as an expression of bayesian rationality if it is common knowledge that the players in a game are bayesian utility maximizers who treat uncertainty about other players actions like any other uncertainty then the outcome is necessarily a correlated equilibrium random strategies appear as an expression of each player s uncertainty about what the others will do not as the result of willful randomization use is made of the common prior assumption according to which differences in probability assessments by different individuals are due to the different information that they have where information may be interpreted broadly to include experience upbringing and genetic makeup copyright 1987 by the econometric society

three problems in learning mixed strategy nash equilibria this paper discusses three problems that can prevent the convergence of learning mechanisms to mixed strategy nash equilibria first while players expectations may converge to a mixed equilibrium the strategies played typically fail to converge second even in 2 2 games fictitious play can produce a sequence of frequency distributions in which the marginal frequencies converge to equilibrium mixed strategies but the joint frequencies violate independence third in a three player matching pennies game with a unique equilibrium it is shown that if players learn as bayesian statisticians then the equilibrium is locally unstable journal of economic literature classification numbers c72 c73 d83

rationalizable strategic behavior the notion of equilibrium proposed by nash 19 has come to play a dominant role in economic applications of noncooperative games while analyses of nash equilibria have unquestionably contributed to our understanding of economic behavior it would be unreasonably optimistic to maintain that nash solved the problem of noncooperative strategic choice there is a small literature beginning with ellsberg 6 and a much larger oral tradition which argues that nash behavior is neither a necessary consequence of rationality nor a reasonable empirical proposition in this paper i take the view that although there may be various reasons why an agent might select a nash strategy the notion of an equilibrium has little intrinsic appeal within a strategic context when an agent reaches a decision in ignorance of the strategies adopted by other players rationality consists of making a choice which is justifiable by an internally consistent system of beliefs rather than one which is optimal post hoc this point of view is not original indeed most serious justifications of the nash hypothesis embrace such an approach arguing that agents will expect the game to yield a nash outcome and consequently will choose their equilibrium strategies nevertheless when we think in terms of maximizing utility subject to expectations rather than realizations it becomes clear that the nash hypothesis far from being a consequence of rationality arises from certain restrictions on agents expectations which may or may not be plausible depending upon the game being played we are then quite naturally led to ask are there any restrictions of individuals expectations and hence choices which are required by rationality alone rather than by subjective plausibility this paper is concerned with defining justifying characterizing and refining a criterion for rational strategic choice which i label rationalizability

imperfect monitoring and impermanent reputations we study the long run sustainability of reputations in games with imperfect public monitoring it is impossible to maintain a permanent reputation for playing a strategy that does not play an equilibrium of the game without uncertainty about types thus a player cannot indefinitely sustain a reputation for noncredible behavior in the presence of imperfect monitoring

characteristics of patent litigation a window on competition we examine the patenting behavior of firms in an industry characterized by rapid technological change and cumulative innovation recent survey evidence suggests that semiconductor firms do not rely heavily on patents to appropriate returns to r d yet the propensity of semiconductor firms to patent has risen dramatically since the mid 1980s we explore this apparent paradox by conducting interviews with industry representatives and analyzing the patenting behavior of 95 u s semiconductor firms during 1979 1995 the results suggest that the 1980s strengthening of u s patent rights spawned patent portfolio races among capital intensive firms but it also facilitated entry by specialized design firms copyright 2001 by the rand corporation

rationalizable strategic behavior and the problem of perfection this paper explores the fundamental problem of what can be inferred about the outcome of a noncooperative game from the rationality of the players and from the information they possess the answer is summarized in a solution concept called rationalizability strategy profiles that are rationalizable are not always nash equilibria conversely the information in an extensive form game often allows certain unreasonable nash equilibria to be excluded from the set of rationalizable profiles a stronger form of rationalizability is appropriate if players are known to be not merely rational but also cautious what constitutes rational behavior in a noncooperative strategic situation this paper explores the issue in the context of a wide class of finite noncooperative games in extensive form the traditional answer relies heavily upon the idea of nash equilibrium nash 17 the position developed here however is that as a criterion for judging a profile of strategies to be reasonable choices for players in a game the nash equilibrium property is neither necessary nor sufficient some nash equilibria are intuitively unreasonable and not all reasonable strategy profiles are nash equilibria the fact that a nash equilibrium can be intuitively unattractive is well known the equilibrium may be imperfect introduced into the literature by selten 20 the idea of imperfect equilibria has prompted game theorists to search for a narrower definition of equilibrium while this research some of which will be discussed here has been extremely instructive it remains inconclusive theorists often agree about what should happen in particular games but to capture this intuition in a general solution concept has proved to be very difficult if this paper is successful it should make some progress in that direction the other side of the coin has received less scrutiny can all non nash profiles really be excluded on logical grounds i believe not the standard justifications for considering only nash profiles are circular in nature or make gratuitous assumptions about players decision criteria or beliefs the following discussion of these points is extremely brief due to space constraints more detailed arguments may be found in pearce 18

essential patents frand royalties and technological standards in this paper we abandon the usual assumption that patents bring known benefits to the industry or that their benefits are known to all parties when royalty payments are increasing in one s patent portfolio private information about the quality of patents leads to a variety of distortions in particular the incentives of firms to pad by contributing weak patents three main results that emerge from the analysis are that i the threat of court disputes reduces incentives to pad but at the cost of lower production of strong patents ii mitigating this undesirable side effect calls for a simultaneous increase in the cost of padding that is a better filtering of patent applications iii upstream firms have more incentives to pad than vertically integrated firms which internalize the fact that patent proliferation raises the share of profits going to the upstream segment of the industry but at the expense of its downstream segment this seems consistent with recent evidence concerning padding

what is behind the recent surge in patenting abstract we investigate the cause of an unprecedented surge of us patenting over the past decade conventional wisdom points to the establishment of the court of appeals of the federal circuit by congress in 1982 we examine whether this institutional change which has benefited patent holders explains the burst in us patenting using both international and domestic data on patent applications and awards we conclude that the evidence is not favorable to the conventional view instead it appears that the jump in patenting reflects an increase in us innovation spurred by changes in the management of research

the quality factor in patent systems this article develops a methodology to compare the quality of examination services in three major patent systems quality is defined as the extent to which patent systems comply with the patentability conditions in a transparent way the methodology consists of a two layer analytical framework encompassing legal standards ls and their operational design od which includes several interdependent components that affect the stringency and transparency of the filtering process the comparison of patent systems in europe japan and the united states shows that their operational designs differ substantially the european system provides higher quality and more expensive examination services than the united states one while the japanese patent system is in an intermediate position the results illustrate that different system designs lead to different outcomes in terms of backlogs patent propensity and the number of dubious patent rights in force in this respect these findings i provide an empirical validation of the conjecture of a vicious cycle linking the quality of examination and demand for patents and ii highlight the need for a multifaceted convergence of patent systems before mutual recognition is put in place the author 2011 published by oxford university press on behalf of associazione icc all rights reserved

limits to rational learning a long standing open question raised in the seminal paper of kalai and lehrer 1993 is whether or not the play of a repeated game in the rational learning model introduced there must eventually resemble the play of exact equilibria and not just the play of approximate equilibria as demonstrated there this paper shows that play may remain distant in fact mutually singular from the play of any equilibrium of the repeated game we further show that the same inaccessibility holds in bayesian games where the play of a bayesian equilibrium may continue to remain distant from the play of any equilibrium of the true game

self confirming equilibrium rium path of play thus if a self confirming equilibrium occurs repeatedly no player ever observes play that contradicts his beliefs even though beliefs about play at off path information sets need not be correct we characterize the ways in which self confirming equilibria and nash equilibria can differ and provide conditions under which self con firming equilibria correspond to standard solution concepts nash equilibrium and its refinements describe a situation in which i each player s strategy is a best response to his beliefs about the play of his opponents and ii each player s beliefs about the opponents play are exactly correct we propose a new equilibrium concept self confirming equilibrium that weakens condition ii by requiring only that players beliefs are correct along the equilibrium path of play thus each player may have incorrect beliefs about how his opponents would play in contingencies that do not arise when play follows the equilibrium and moreover the beliefs of different players may be wrong in different ways the concept of self confirming equilibrium is motivated by the idea that noncooperative equilibria should be interpreted as the outcome of a learning process in which players revise their beliefs using their observations of previous play suppose that each time the game is played the players observe the actions chosen by their opponents but that players do not observe the actions their opponents would have played at the information sets that were not reached along the path of play then if a self confirming equilibrium occurs repeatedly no player ever observes play that contradicts his beliefs so the equilibrium is self confirming in the weak sense of not being inconsistent with the evidence by analogy with the literature on the bandit problem e g rothschild 1974 one might expect that a non nash self confirming equilibrium can be the outcome of plausible learning processes this point was made by fudenberg and

pioneering inventors or thicket builders which u s firms use continuations in patenting why do firms use continuations in the prosecution of their patents motivated by the widespread use of continuations by u s firms and the prominence of this procedure in u s patent policy debates we investigate the influence of corporate and patent characteristics on the use of continuations we employ novel data on applicants and their filings of three types of continuations the continuation application cap the continuations in part cip and divisions during 1981 2000 to distinguish among the motives for continuing patents we find that cips are disproportionately filed by research and development intensive firms that patent heavily and that these continuations are more common in chemical and biological technologies patents issuing from cips cover relatively important inventions and their use appears consistent with a strategy of protecting pioneering inventions in contrast caps and divisions are associated with less important patents assigned to capital intensive firms particularly in computer and semiconductor fields and appear to be used in defensive patenting strategies we analyze the effects of the 1995 change in patent term and find that the act reduced continuations overall and shifted the output of continuations toward less important patents

axiomatic characterizations of rational choice in strategic environments for more than forty years economists have wrestled with the elusive notion of rational behavior in strategic environments generating a variety of competing approaches even for simple simultaneous move games four distinct solution concepts including the notions of nash equilibria correlated equilibria rationalizability and iterated dominance currently have some standing as theories of strategic rationality here i propose four axioms for rational choice in strategic environments and use these to characterize the sets of pure strategies that players may select under each of the solution concepts mentioned above my results underscore both the similarities and differences between the four concepts

the patent paradox revisited an empirical study of patenting in the u s semiconductor industry 1979 1995 we examine the patenting behavior of firms in an industry characterized by rapid technological change and cumulative innovation recent survey evidence suggests that semiconductor firms do not rely heavily on patents to appropriate returns to r d yet the propensity of semiconductor firms to patent has risen dramatically since the mid1980s we explore this apparent paradox by conducting interviews with industry representatives and analyzing the patenting behavior of 95 u s semiconductor firms during 1979 1995 the results suggest that the 1980s strengthening of u s patent rights spawned patent portfolio races among capital intensive firms but it also facilitated entry by specialized design firms

oligopsony and monopsonistic competition in labor markets we argue that models of oligopsony or monopsonistic competition provide insights and explanation for many empirical phenomena in labor markets using a simple model with job differentiation and preference heterogeneity we illustrate how such models can be employed to explain the existence of wage dispersion the persistence of labor market discrimination market failures in the provision of training and the anomalous employment effects of minimum wages

selfcon rming equilibrium and model uncertainty we propose to bring together two conceptually complementary ideas 1 selfcon rming equilibrium sce at rest points of learning dynamics in a game played recurrently agents best respond to con rmed beliefs i e beliefs consistent with the evidence they accumulated and 2 ambiguity aversion agents other things being equal prefer to bet on events with known rather than unknown probabilities and more generally distinguish objective from subjective uncertainty a behavioral trait captured by their ambiguity attitudes using as a workhorse the smooth ambiguity model of klibano marinacci and mukerji 2005 we provide a de nition of smooth sce which generalizes the traditional concept of fudenberg and levine 1993a b here called bayesian sce and admits waldean maxmin sce as a limit case we show that the set of equilibria expands as ambiguity aversion increases the intuition is simple by playing the same strategy in

wage dispersion over the business cycle abstract in this paper i provide robust evidence that fluctuations in wage dispersion are independent of the business cycle while residual wage dispersion i e dispersion of wages within narrowly defined demographic and skill groups of workers increases during booms and lessens during recessions moreover i show that the procyclical fluctuations in residual wage dispersion are mainly generated by cyclical changes in the upper half of the residual wage distribution

exploring the income distribution business cycle dynamics abstract we document the business cycle behavior of the us income distribution and explore the extent to which unemployment spells and cyclically moving factor shares account for this behavior by analyzing four heterogeneous household extensions of the neoclassical growth model we conclude i that partitioning the population into five types subject to type specific employment processes seems to be enough to account for most aspects of the us income distribution business cycle dynamics ii that the role played by cyclically moving factor shares is small and iii that the income distribution business cycle dynamics may be essentially independent from the significant part of the observed wealth concentration that these model worlds fail to account for

equilibrium learning in simple contests abstract the paper studies a repeated contest when contestants are uncertain about their true relative abilities when ability and effort are complements a favorable belief about one s own ability stimulates effort and increases the likelihood of success success in turn reinforces favorable beliefs we show that this implies that with positive probability players fail to learn their true relative abilities in equilibrium and one player wins the contest with high probability forever in this case the prevailing player may be the actually worse player and persistent inequality arises we discuss some features of the model when the complementarity assumption is dropped

earnings inequality and the business cycle abstract economists have long viewed recessions as contributing to increasing inequality however this conclusion is largely based on data from a period in which inequality was increasing over time this paper examines the connection between long run trends and cyclical variation in earnings inequality we develop a model in which cyclical and trend inequality are related and find that in our model recessions tend to amplify long run trends i e they involve more rapidly increasing inequality when long run inequality is increasing and more rapidly decreasing inequality when long run inequality is decreasing in support of this prediction we present evidence that during the first half of the 20th century when earnings inequality was generally declining earnings disparities indeed appeared to fall more rapidly in downturns at least among workers at the top of the earnings distribution

subjective games and equilibria applying the concepts of nash bayesian and correlated equilibria to the analysis of strategic interaction requires that players possess objective knowledge of the game and opponents strategies such knowledge is often not available the proposed notions of subjective games and of subjective nash and correlated equilibria replace essential but unavailable objective knowledge by subjective assessments when playing a subjective game repeatedly subjective optimizers converge to a subjective equilibrium we apply this approach to some well known examples including single and multi person multi arm bandit games and repeated cournot oligopoly games journal of economic literature classification numbers c73 and c83

disappearing private reputations in long run relationships for games of public reputation with uncertainty over types and imperfect public monitoring cripps mailath and samuelson 2004 showed that an informed player facing short lived uninformed opponents cannot maintain a permanent reputation for playing a strategy that is not part of an equilibrium of the game without uncertainty over types this paper extends that result to games in which the uninformed player is long lived and has private beliefs so that the informed player s reputation is private journal of economic literature classi cation numbers c70 c78

subjective rationality self confirming equilibrium and corporate strategy this paper presents a formal theory of subjective rationality and demonstrates its application to corporate strategy an agent is said to be subjectively rational when decisions are consistent with the available facts and where these are lacking with the agent s own subjective assessments a self confirming equilibrium arises when agents subjectively rational actions generate events that are consistent with their own expectations equilibrium strategies may be suboptimal because certain counterfactual beliefs may be erroneous and yet fail to be contradicted by events observed in equilibrium this weakening of the stronger rationality assumptions inherent in many of the more familiar equilibrium ideas appears well suited to applications in strategy in particular performance advantage may be sustained by a firm when its subjectively rational competitors persistently employ suboptimal self confirming strategies

a multisectorial matching model of unions abstract we develop an equilibrium matching model where unions have an important institutional presence monopolistic competition characterizes the goods market where only some sectors are unionized thus the model can vary the coverage of collective bargaining it can vary the degree of coordination between unions and alternatively consider national and sectorial unions calibration to the union premium implies a workers rent extraction parameter much lower than assumed in the matching literature we introduce unemployment insurance to study the interactions of policies with unions and find that unions only push for more generous benefits if this does not entail higher payroll taxes

wage differentials employer size and unemployment the unique equilibrium solution to a game in which a continuum of individual employers choose permanent wage offers and a continuum of workers search by sequentially sampling from the set of offers is characterized wage dispersion is a robust outcome provided that workers search while employed as well as when unemployed the unique nondegenerate equilibrium distribution of wage offers is constructed for three cases 1 identical workers and employers 2 identical employers and an atomless distribution of worker supply prices and 3 identical workers and an atomless distribution of job productivities copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

patent quality and research productivity measuring innovation with multiple indicators we analyse the determinants of the decline in research productivity using panel data on manufacturing firms in the us for the period 1980 93 we focus on three factors the level of demand the quality of patents and technological exhaustion we develop an index of patent quality using detailed patent information and show that using multiple indicators substantially reduces the measured variance in quality research productivity at the firm level is inversely related to patent quality and the level of demand as predicted by theory and patent quality is positively associated with the stock market value of firms

patent quality and examination in europe following the publication of the federal trade commission report 2003 policymakers in many jurisdictions started to consider administrative patent system reforms the three largest patent offices the european patent office epo the japanese patent office jpo and the united states patent and trademark office uspto introduced measures to cope with the growing number of claims and volume of patent applications which were deemed too complex and thus prone to uncertain interpretation by courts and competitors besides revamping the fee structure the epo also modified its rule base in 2010 under the motto raising the bar requiring applicants to restrict the scope of subject matter considered in prior art search and examination this paper reports on some effects of these measures in patents granted by the epo the number of claims started to decline in 2008 when new claims fees became effective claims sections in patents became shorter and independent claims longer and presumably more specific the grant rate remained at relatively low levels but the epo was unable to stem the use of divisional filings 1 the developments at the epo point to a high private value of delay options delay may be achieved either by making use of explicit statutory rules or by

on the equivalence of walrasian and non walrasian equilibria in contract markets the case of complete contracts this paper explores two models of an economy in which contracts are exchanged in the first model contracts are exchanged on a competitive market in which traders expectations concerning conditions that prevail within specific markets adjust until markets clear in the second model contract designers compete directly against one another by offering alternate contracts it is shown that walrasian allocations correspond with the equilibrium allocations in the model with direct competition when the number of traders is made large furthermore the expectational assumptions that drive the walrasian analysis coincide with off the equilibrium path conjectures in the problem with direct competition