patents or prizes monopolistic r d and asymmetric information abstract in this paper a model of r d regulation is analysed to compare the effect of two types of asymmetric information on the welfare properties of patents and prizes as r d incentive instruments when there is a technological leader using the case of full information as a benchmark it is found that the trade off between patents and prizes does not change if the innovator s r d costs are private information whereas the relative efficiency of patents decreases if the government is less informed about the market for the innovation

nash implementation a complete characterization the authors extend e maskin s results on nash implementation first they establish a condition that is both necessary and sufficient for nash implementability if there are three or more agents the case covered by maskin s sufficiency result second and more important they examine the two agent case for which there existed no general sufficiency results the two agent model is the leading case for applications to contracting and bargaining for this case too they establish a condition that is both necessary and sufficient the authors use their theorems to derive simpler sufficiency conditions that are applicable in a wide variety of economic environments copyright 1990 by the econometric society

price dependent profit sharing as a channel coordination device we show how an upstream firm by using a price dependent profit sharing rule can prevent destructive competition between downstream firms that produce relatively close substitutes with this rule the upstream firm induces the retailers to behave as if demand has become less price elastic as a result competing downstream firms will maximize aggregate total channel profit when downstream firms are better informed about demand conditions than the upstream firm the same outcome cannot be achieved by vertical restraints such as resale price maintenance price dependent profit sharing may also ensure that the downstream firms undertake efficient market expanding investments the model is consistent with observations from the market for content commodities distributed by mobile networks

the role of fees in patent systems theory and evidence this paper reviews the economic literature on the role of fees in patent systems two main research questions are usually addressed the impact of patent fees on the behavior of applicants and the question of optimal fees studies in the former group confirm that a range of fees affect the behavior of applicants and suggest that a patent is an inelastic good studies in the latter group provide grounds for both low and high application or pre grant fees and renewal or post grant fees depending on the structural context and policy objectives the paper also presents new stylized facts on patent fees of 30 patent offices worldwide it is shown that application fees are generally lower than renewal fees and renewal fees increase more than proportionally with patent age 2012 john wiley sons ltd

the direction of innovation abstract how do innovation policies affect the direction of research is market based innovation too radical or too incremental we construct a novel and tractable model of the direction of innovation firms pursue inefficient research directions because they race to discover easy yet less valuable projects and because they work on difficult inventions where they can appropriate a larger portion of the social value fixing these inefficiencies requires policy to condition on properties of inventions that could have been discovered but were not policies which do not do so like patents and prizes may fail to encourage firms to research in the efficient direction even if they obtain the optimal quantity of r d

repeated interactions and improved outcomes an empirical analysis of movie production in the united states many marketing activities take place within teams these team activities often involve repeated interactions among team members over several projects we study whether and what types of repeated interactions improve current production success and under what conditions we use a unique data set of past experience successes and pairwise interactions between members of production teams of 1 123 movies and employ dynamic panel data estimation methods three unique insights emerge interactions between the producer and other team members have a greater effect on revenues than other repeated pairs for which consumers might have preferences in many instances repeated interactions with current team members are more revenue enhancing than individual successes in past movies in fact repeated interactions between team members improve current revenues even if such interactions were unsuccessful we discuss theoretical explanations for these results and the managerial implications for successful team formation

on platforms incomplete contracts and open source software abstract we analyze investment incentives for a firm a owning a software platform and an application and a firm b deciding whether to develop a new application for the platform while b s entry helps the success of the platform b fears ex post expropriation by a and is hence reluctant to enter and invest we show that different platform governance structures prevalent in the information and communication technology industry integrated proprietary standardized open source platform serve to balance investment incentives for the platform and for the applications

why do salespeople spend so much time lobbying for low prices in business to business settings a company s sales force often spends considerable time lobbying internally for authorization to charge lower prices these internal lobbying activities are time consuming and divert attention from other tasks such as interacting with customers we explain why internal lobbying activities serve an important role they help the firm elicit truthful reporting of demand information from the sales force as a result it may be profitable for the firm to require lobbying and make the requirement onerous even though lobbying is a nonproductive activity that creates an additional administrative burden and imposes a deadweight loss

additive efficiency decomposition in two stage dea kao and hwang 2008 kao c hwang s n 2008 efficiency decomposition in two stage data envelopment analysis an application to non life insurance companies in taiwan european journal of operational research 185 1 418 429 develop a data envelopment analysis dea approach for measuring efficiency of decision processes which can be divided into two stages the first stage uses inputs to generate outputs which become the inputs to the second stage the first stage outputs are referred to as intermediate measures the second stage then uses these intermediate measures to produce outputs kao and huang represent the efficiency of the overall process as the product of the efficiencies of the two stages a major limitation of this model is its applicability to only constant returns to scale crs situations the current paper develops an additive efficiency decomposition approach wherein the overall efficiency is expressed as a weighted sum of the efficiencies of the individual stages this approach can be applied under both crs and variable returns to scale vrs assumptions the case of taiwanese non life insurance companies is revisited using this newly developed approach

centralized pricing versus delegating pricing to the salesforce under information asymmetry the issue of delegating pricing responsibility to the salesforce is of interest to marketing academics and practitioners it has been shown by lal 1986 that under certain situations with information asymmetry it is more profitable for the firm to delegate pricing authority to the salesforce than to have centralized pricing in this paper we re examine situations where information asymmetry exists and analyze its effect on the decision of the firm to set a price or delegate pricing responsibility to the salesforce using contract theory we find that when the salesperson s private information can be revealed to the firm through contracting centralized pricing performs at least as well as price delegation we derive the optimal centralized pricing contract under a set of standard assumptions used in the economics and business literature

how valuable is patent protection estimates by technology field i present evidence on the private value of patent rights in france for different technology fields and nationalities of ownership using nonparametric techniques and a parametric model of patent renewal i find that the distribution of the value of patent rights is highly skewed that patent protection is a significant but not the major source of private returns to r d and that these characteristics vary across technology fields i compute the r d cash subsidy that is equivalent to the value of patent rights measure the variations in value of time technology fields and nationalities and show that these differences are correlated with patent grant rates

computing economies of vertical integration economies of scope and economies of scale using partial frontier nonparametric methods abstract so far in the nonparametric literature only full frontier nonparametric methods have been applied to search for economies of scope and scale particularly the data envelopment analysis method dea however these methods present some drawbacks that might lead to biased results this paper proposes a methodology based on more robust partial frontier nonparametric methods to look for scope and scale economies through this methodology it is possible to assess the robustness of these economies and in particular to assess the influence that extreme data or outliers might have on them the influence of the imposition of convexity on the production set of firms was also investigated this methodology was applied to the water utilities that operated in portugal between 2002 and 2008 there is evidence of economies of vertical integration and economies of scale in drinking water supply utilities and in water and wastewater utilities operating mainly in the retail segment economies of scale were found in water and wastewater utilities operating exclusively in the wholesale and in some of these utilities diseconomies of scope were also found the proposed methodology also allowed us to conclude that the existence of some smaller utilities makes the minimum optimal scales go down

bargaining and sharing innovative knowledge we consider the problem of bargaining over the disclosure of interimresearch knowledge between two participants in an r d race for an ultimate patentable invention licence fee schedules that are functions of the amount of knowledge disclosed by the leading to the laggingagent are examined for their abilities to attain efficient outcomes andvarying shares of the surplus arising from disclosure in hersequential offers bargaining games the uninformed buyer is able to elicitfull disclosures without sharing the incremental surplus with any type ofthe licensor and thus do as well as a perfectly informed and discriminatingknowledge licensee

encouraging private sector research for tropical agriculture summary agricultural needs in poor tropical countries differ significantly from those in temperate rich countries yet little agricultural research is performed on products for the tropics private research is particularly concentrated in rich countries this is a result of significant failures in the market for research and development r d in particular the difficulty of preventing the resale of seed in developing countries to encourage private r d in tropical agriculture traditional funding of research may be usefully supplemented by a commitment to reward developers of specific new agricultural technologies rewards tied to adoption may be especially useful in increasing up take an illustration of how a commitment to reward developers of new agricultural technologies might work is provided

regulating a monopolist with unknown demand and cost functions we consider the design of regulatory policy when the regulator is imperfectly informed about both the firm s cost function and the demand function it faces to some extent the optimal policy here is the natural combination of the optimal policies when there is uncertainty only about either demand or cost important qualitative differences also exist however for example it may be optimal to set prices below marginal cost and the pricing authority delegated to the firm may be more limited when there is uncertainty about both cost and demand

the effects of patent regime changes a case study of the european patent office abstract patent system in europe has undergone significant changes during the 1970s around the establishment of the european patent office epo and this paper tries to quantify the influences of such policy changes on the private value of european patents based on the patent renewal records i estimate the private value of patents in germany france and the uk obtained through the epo patenting route during the early 1980s and compare the estimated value with the patent value in the same three countries before the establishment of the epo as estimated by pakes pakes ariel 1986 patents as options some estimates of the value of holding european patent stocks econometrics 54 4 755 784 the average quality and the private value of the epo patents are substantially higher than those obtained through the national route the uniform examination and granting procedure at the epo has effectively eliminated the inter country differences in the patentability standards and the scope of patents and significantly decreased the differences in the patent value across these countries i also find that the extension of the statutory limit to the maximal length of patent life and changes in the renewal fee schedule only had modest effects on the patent value and that the learning process of the epo patents are much longer than that of the national patents

the economics of invention incentives patents prizes and research contracts though public intervention in the market for research is virtually universal economists have paid surprisingly little attention to the choice of the form of research incentive in a given market structure many studies concentrate on patents but any assumption of their superiority over other incentives has been founded on intuition rather than on formal analysis in this paper i analyze the choice between three of the most common alternative means of public intervention in the research market namely patents prizes and direct contracting for research services i show why and under what conditions any one of the three may be preferred by a social welfare maximizing administrator in a competitive economy using a model that for the first time pays explicit attention to differences in the informational roles of each of these alternatives in the extensive literature on the economics of patents see arnold plant 1934 fritz machlup 1958 charles taylor and z a silberston 1973 morton kamien and nancy schwartz 1975 and f m scherer 1977 for valuable surveys formal analysis weighs the benefits of patents as a solution to the market failure associated with the inappropriability of knowledge against the welfare cost due to the restriction on the use of the knowledge generated and this tradeoff is optimized by patent life adjustment in william nordhaus 1969 scant analytical attention is paid to alternative incentive mechanisms an exception is ben yu 1981 who considers the role of prior contracting for inventions but as many writers for example dan usher 1964 yoram barzel 1968 joseph stiglitz 1969 carole kitti 1973 glenn loury 1979 partha dasgupta and stiglitz 1980a have pointed out in various contexts the incentive offered by an unlimited patent to competitive researchers may be excessive due to the common pool problem discussed further in section i below if the patent administrator and researchers share the same information as implicitly assumed in previous models then the patent life limitation can be adjusted to provide the optimal patent incentive given the common pool problem but in all such models patents would not be chosen in a fully optimized fiscal system researchers and the administrator are assumed to have identical information about the shadow price of potential inventions a patent is just a means of turning this shadow price into a monetary reward but monetary compensation can instead be offered directly to researchers by the state assuming that patent revenues incur a higher deadweight loss than an equivalent amount of public funds financed by less distortionary means for example a minimally efficient tax system appropriate prizes or government contracts are socially preferable to patents with optimal lives if the patent is ever to be the optimal incentive mechanism for research it must possess advantages not captured in existing models informal discussions of patents emphasize their informational role to include the latter as a justification for decentralized invention incentives i incorporate an ex ante imbalance of information about costs and benefits of research in the model presented in section ii but this alone is not quite enough it is further necessary to specify that the terms of the award must be fixed before department of economics economic growth center box 1987 yale station yale university new haven ct 06520 i thank with the usual caveat marguerite alejandro wright cindy arfken martin baily nuong brennan steven englander robert evenson richard levin richard nelson susan rose ackerman denis wright and two referees for assistance of various kinds

essential facility financing and market structure abstract the paper analyzes the funding of an infrastructure project when an incumbent operator has private information about market profitability and the regulator does not have access to taxpayers money an open access policy raises welfare but may make the project non viable since funding must be provided by operators capital contributions we characterize the optimal market structure the regulator can ask the incumbent to bear a higher share of investment cost if the latter insists on an exclusive use yet the incumbent is willing to pay more for exclusivity the higher the demand that is precisely when competition yields the highest benefits at the optimum the incumbent s information is not used to determine market structure we further investigate the implications of this basic result in a dynamic context we show that the monopoly franchise policy is time consistent while an open access policy is not we also demonstrate that a threat of regulatory capture creates an open access presumption last we show that when the decision involves multiple projects monopoly segments should cross subsidize open access ones

shared patent rights and technological progress we study how to reward innovators who build on one another rewards come in the form of patents because patent rights are scarce the optimal allocation involves sharing more than one innovator s patent is in force at a given time we interpret such allocations as patents that infringe one another as licensing through an ever growing patent pool and as randomization through litigation we contrast the rate of technological progress under the optimal allocation with the outcome if sharing is prohibitively costly avoiding sharing initially slows progress and leads to a more variable rate of technological progress

openness open source and the veil of ignorance author s scotchmer suzanne abstract the open source movement evolved in the one industrial context where openness is not required by intellectual property law 1 nevertheless openness itself cannot be the driving force behind the open source movement this is because openness can be achieved in many ways other than the gpl for example with proprietary licenses or licenses that are even more permissive than the gpl such as the bsd license early commentators explained this new development model by focussing on the motives of the programmer such as to demonstrate skills see the survey by stephen m maurer and suzanne scotchmer 2006 but firms also participate in open source collaborations sometimes contributing significant resources joachim henkel 2006 dirk riehle 2009 doing so can be profitable even if the contributors are rivals in the market the quality improvements or cost reductions provided by a rival s open source contributions may outweigh the deleterious effect of empowering the rival to be a better competitor

is the general public licence a rational choice open source projects are networks of developers distributors and end users of non proprietary created knowledge goods it has been argued that this form of organization has some advantages over the firm or market coordination i show that for sufficiently convex and modular projects proprietary licences are not able to sustain sequential knowledge production which however can be carried out if the project is run on the open source basis

is there a wage premium for volunteer oss engagement signalling learning and noise abstractvolunteer based open source production has become a significant new model for the organization of software development economics often pictures this phenomenon as a case of signalling individuals engage in the volunteer programming of open source software oss as a labour market signal resulting in a wage premium yet this explanation could so far not be empirically tested this article fills this gap by estimating an upper bound composite wage premium of voluntary oss contributions and by separating the potential signalling effect of oss engagement from other effects although some 70 of oss contributors believe that oss involvement benefits their careers we find no actual labour market premium for oss engagement the presence of other motives such as fun of play or altruism renders oss contributions too noisy to function as a signal

patent office in innovation policy nobody s perfect abstract the number of patent applications and bad patents issued has been rising rapidly in recent years based on this trend we study the overload problem within the patent office and its consequences on the firms r d incentives we assume that the examination process of patent applications is imperfect and that its quality is poorer under congestion depending on policy instruments such as submission fees and the toughness of the non obviousness requirement the system may result in a high r d equilibrium in which firms self select in their patent applications or in an equilibrium with low r d opportunistic patent applications and the issuance of bad patents multiple equilibria often co exist which deeply undermines the effectiveness of policy instruments we investigate the robustness of our conclusions as to how the value of patent protection is formalized taking into consideration the introduction of a penalty system for rejected patent applications as well as the role of commitment to a given patent protection policy

individual team incentives and managing competitive balance in sports leagues an empirical analysis of major league baseball abstract major league baseball and other professional sports leagues have long been concerned with competitive imbalances caused by differences in local revenues the fear is that in the absence of salary caps or other regulatory mechanisms smaller market teams will be unable to remain competitive this research uses a structural dynamic programming model to analyze ownership s payroll investment decisions this model estimates the relationship between optimal payrolls and local market populations and the influence of long term customer equity dynamics on payroll investments in addition the author analyzes the impact of a recent policy intervention that implemented revenue transfers from high local revenue markets to low local revenue markets the statistical results indicate that market population has a significant impact on the value of a team s payroll investments for example optimal payrolls double as the population increases from 2 5 million to 7 5 million furthermore rather than improving com

a survey of the economics of patent systems and procedures the last several decades have seen increases in patenting activity worldwide as well as growing issues related to patent quality in response to these quality issues a recent patent literature has emerged that investigates the behavior and incentives of patent examiners applicants and third parties in this paper we provide an overview of patent procedures patent systems and a survey of the new economic literature on patent systems both theoretical and empirical papers are considered policy implications coming from this literature are presented

patents imitation and licensing in an asymmetric dynamic r d race abstract rd some may have an advantage in early stages of the r d process while others may have advantages in other stages of the process this paper uses a two firm asymmetric ability multistage r d race model to analyze the effect of patents imitations and licensing arrangements on the speed of innovation firm value and consumers surplus by using numerical analyses to study the mpe of the r d race the paper demonstrates the circumstances under which a weak patent protection regime that facilitates free imitation of any intermediate technology may yield a higher consumers surplus and total surplus than a regime that awards a patent for the final innovation the advantage of imitation may hold even when we allow for voluntary licensing of intermediate technologies

patent protection in the shadow of infringement simulation estimations of patent value empirical estimates of the private value of patent protection are derived for four technology areas computers textiles combustion engines and pharmaceuticals using new patent data for west germany 1953 1988 patentees must pay renewal fees to keep their patents in force as well as legal expenses in order to enforce them a dynamic stochastic discrete choice model of optimal renewal decisions is developed incorporating both learning and depreciation as well as the potential need to prosecute infringement the evolution of the distribution of returns over the life of a group of patents is calculated for each technology using a minimum distance simulation estimator results indicate that the aggregate value of protection generated per year is on the order of 10 of related r d expenditure

r d in the pharmaceutical industry a world of small innovations it is commonly argued that in recent years pharmaceutical companies have targeted their research and development r d at small improvements of existing compounds instead of riskier drastic innovations in this paper we show that the bias in the pharmaceutical industry toward small innovations might be driven by the low sensitivity of the demand in particular small innovations get a proportionally larger reward because pharmaceutical firms target them at the inelastic segments of the demand as a consequence firms find it relatively more profitable to invest in small innovations we also study the effect on r d incentives of marketing strategies and regulatory instruments aimed at controlling pharmaceutical expenditure

modeling undesirable factors in efficiency evaluation abstract data envelopment analysis dea measures the relative efficiency of decision making units dmus with multiple performance factors which are grouped into outputs and inputs once the efficient frontier is determined inefficient dmus can improve their performance to reach the efficient frontier by either increasing their current output levels or decreasing their current input levels however both desirable good and undesirable bad factors may be present for example if inefficiency exists in production processes where final products are manufactured with a production of wastes and pollutants the outputs of wastes and pollutants are undesirable and should be reduced to improve the performance using the classification invariance property we show that the standard dea model can be used to improve the performance via increasing the desirable outputs and decreasing the undesirable outputs the method can also be applied to situations when some inputs need to be increased to improve the performance the linearity and convexity of dea are preserved through our proposal

efficiency decomposition and aggregation in network data envelopment analysis abstract network data envelopment analysis dea is extended from conventional dea to explore the internal structure of network production systems so that the efficiencies are measured more appropriately there are two approaches for discussing the relationships between the system and division efficiencies efficiency decomposition and efficiency aggregation this paper develops a relational model from the viewpoint of efficiency decomposition to derive the relationships between the system and division efficiencies for network systems the system efficiency can be decomposed into a weighted average of the division efficiencies adjusted by a factor and the efficiency of the system is less than the weighted average of those of the divisions the major league baseball example that has been discussed in the literature is used to illustrate the idea presented in this paper the results of the efficiency decomposition model are compared to those obtained from an efficiency aggregation model that defines the aggregate efficiency of the divisions to be the system efficiency this system efficiency is found to be very close to a measure contained in the proposed model the proposed model can thus be used for both efficiency decomposition and aggregation

a dynamic model of open source vs proprietary r d abstract we propose a dynamic model in which firms compete to produce sequential and cumulative innovations and in which the more firms do research in one sector the more likely it is that one of them innovates firms choose research effort and whether to patent innovations or to use an open source license like the general public license we show that i patents generate a larger stationary reward but foreclose research within a sector and that ii open source generates a smaller stationary reward but allows everyone to use the technology and therefore by attracting firms to the sector it induces a faster pace of innovation we characterize all the equilibria of the model and show that in equilibrium an open source sector appears only after a proprietary sector we also find conditions under which the model has a unique equilibrium in which a proprietary and an open source sector coexist and compete in the short run but the open source sector dominates the industry in the long run we use our model to study whether patents are inefficient and to explain firms behavior in the software and the biomedical industry

the dynamics of the transfer and renewal of patents this article explores new data on the transfer and renewal of u s patents and interprets this new evidence using a model of patent transfers and renewal we find that the proportion of transferred patents is large and differs across technology fields and especially type of patentees we also find that the probability of a patent being traded depends on a number of factors the age of the patent the number of citations received by a given age the patent generality and whether the patent has been previously traded or not these findings are consistent with the predictions of a model of patent transfers and renewals

market segmentation self selection and product line design the purpose of this paper is to develop a theory of market segmentation based on consumer self selection the extant theory is based on the third degree price discrimination model of pigou central assumptions of which are that the firm can directly address individual segments and isolate them by using consumer self selection i am relaxing these assumptions in the context of a monopolist designing a product line i show that this relaxation has significant implications for how the products and prices are chosen and what they look like in particular segments may be aggregated even though there are no economies of scale furthermore consumer self selection enables us to model cannibalization and competition among firms

on the effectiveness of patenting strategies in innovation races which if any of a firm s inventions should it patent should it patent at all many companies engaged in an innovation race seek a patenting strategy that balances protection of their intellectual property against the knowledge spillovers resulting from disclosure requirements not much is known about factors that determine the patenting strategy best able to resolve this trade off although scholars in various management economics and engineering disciplines have researched patents and patenting regimes little work has addressed the normative issues that pertain to forming an appropriate firm level patenting strategy we develop an inventory of real life patenting strategies and integrate them into a coherent framework our simulation model characterizes the optimal patenting choices for different environmental and firm level contingencies while capturing the dynamics between competing firms we identify the firm s research and development strategy as the most salient determinant of its optimal patenting strategy our research contributes to establishing a contingency theory of patenting strategies this paper was accepted by david hsu entrepreneurship and innovation

voluntary contributions to a joint project with asymmetric agents we revisit admati and perry 1991 s model of voluntary contributions to a joint project their main result that equilibrium contributions are small appears not to be robust to the introduction of asymmetries

firm strategies in the mid tail of platform based retailing while millions of products are sold on its retail platform amazon com itself stocks and sells only a very small fraction of them most of these products are sold by third party sellers who pay amazon a fee for each unit sold empirical evidence clearly suggests that amazon tends to sell high demand products and leave long tail products for independent sellers to offer we investigate how a platform owner such as amazon facing ex ante demand uncertainty may strategically learn from these sellers early sales which of the mid tail products are worthwhile for its direct selling and which are best left for others to sell the platform owner s cherry picking of the successful products however gives an independent seller the incentive to mask any high demand by lowering his sales with a reduced service level unobserved by the platform owner we analyze this strategic interaction between a platform owner and an independent seller using a game theoretic model with two types of sellers one with high demand and one with low demand we show that it may not always be optimal for the platform owner to identify the seller s demand interestingly the platform owner may be worse off by retaining its option to sell the independent seller s product whereas both types of sellers may benefit from the platform owner s threat of entry the platform owner s entry option may reduce consumer surplus in the early period although it increases consumer surplus in the later period we also investigate how consumer reviews influence the market outcome

a data envelopment analytic model for assessing the relative efficiency of the selling function abstract this paper presents a data envelopment analytic model for assessing the relative efficieny of sales units that simultaneously incorporates multiple sales outcomes controllable and uncontrollable resources and environmental factors the model enables comparisons among a reference set of sales units engaged in selling the same product service by deriving a single summary measure of relative sales efficiency in addition it provides insights into modifications that are necessary in order to enhance relative efficiency of an individual sales unit conditions when the sales unit has additional control over resources are explored and the effects on relative efficiency are examined an illustration of the model in the context of sales units from a sample of insurance companies demonstrates the critical features of the model

salesforce compensation plans in environments with asymmetric information in this paper we present a theory of salesforce compensation plans to provide insights into why it may be advantageous for a profit maximizing firm to offer members of its salesforce the opportunity to choose from a menu of compensation plans although such contractual arrangements are not commonly used in the industry they have been introduced and implemented by firms such as ibm and st regis paper as in our previous work on salesforce compensation plans basu lal srinivasan and staelin basu a k r lal v srinivasan r staelin 1985 salesforce compensation plans an agency theoretic perspective marketing sci 4 fall 267 291 we use an agency theory framework in this paper we relax the assumptions of information symmetry and salesforce homogeneity and show the conditions under which it is optimal to offer a menu of compensation plans we also show that even when these assumptions are relaxed there are situations where offering a single plan characterized by basu lal srinivasan and staelin basu a k r lal v srinivasan r staelin 1985 salesforce compensation plans an agency theoretic perspective marketing sci 4 fall 267 291 is still optimal insights gained from the analyses are discussed in the context of an existing compensation scheme

optimization models for salesforce compensation abstract this paper reviews models which address the design of optimal salesforce compensation schemes the discussion starts with agency theoretic models that are able to derive the optimal form for a compensation scheme under assumptions regarding the degree of information asymmetry and heterogeneity within the salesforce for the four resulting extreme cases models are presented that allow for the determination of optimal parameter values for specific compensation schemes such as fixed salary plus commission bonus for quota achievement and menus of plans finally there follows an examination of approaches through which commission rates or bonuses can be optimally differentiated such that the salespersons allocate their selling time in their own and at the same time in the firm s best interest all of these models are reviewed in particular with respect to their applicability in practice

price versus quantity monitoring in an adverse selection context this article explores the relative usefulness of price information over quantity information the main finding is that price monitoring can induce a sales level that is greater than the full information sales level this imposes additional selling costs on the agent and reduces that agent s rents the analysis identifies sufficient conditions for the principal to prefer price monitoring over quantity monitoring business format franchises exhibit many of the features of the setting analyzed here and the article s findings have implications for designing information systems in that sector of the economy

delegating pricing decisions an outstanding problem in marketing is why some firms in a competitive market delegate pricing decisions to agents and other firms do not this paper analyzes the impact of competition on the delegation decision and in turn the impact of delegation on prices and incentives the theory builds on the simplest framework of competition in two dimensions prices and sales agents effort specifically we are interested in answering the following questions 1 does competition affect the price delegation decision and if yes why 2 how do prices vary under price delegation and no price delegation scenarios 3 do the incentives to the sales representatives vary under the delegation and no delegation scenarios to address these issues we build a game theoretic model that consists of two firms selling through their sales representatives these representatives are company employees sales are a function of prices and selling efforts the risk neutral firms decide whether or not to delegate the pricing decision to risk averse sales representatives the wages to the sales representatives consist of salary plus a commission on gross margins the commission on gross margins can be adjusted either through communicated marginal cost of production which we call virtual marginal cost or directly the firm and the sales representative are assumed to have the same information about the market that is there is no information asymmetry with competition in two dimensions the strategic nature of decision variableprice depends on the relative intensity of competition with unobservable contracts and risk averse sales representatives firms delegate the pricing decision when price competition is intense part of the uncertainty in demand is absorbed by the firm by keeping virtual marginal cost greater than the marginal cost of production the competing firm infers this through the risk aversion of the sales representatives under price delegation the sales representatives wages are higher and they set a price that is higher than what the firms would have set themselves this leads to softening of price competition that is to the advantage of both firms when the effort competition is dominant however the firms prefer to make the pricing decision themselves because this reduces the intensity of effort competition among agents a single instrument commission structure in which the firms adjust the virtual marginal cost is compared to a two instrument commission structure in which the firms can adjust the commission rate as well the virtual marginal cost under no price delegation the two incentive schemes are the same however under price delegation the risk premium with the two instrument scheme is lower however the prices and efforts are higher with the single instrument scheme when price competition is intense the increase in risk premium with the single instrument scheme is more than compensated for by the increase in profits this is the benefit of softening price competition through higher prices

the impact of perceived environmental uncertainty and perceived agent effectiveness on the composition of compensation contracts recently a stream of theoretical development concerning the design of optimal compensation plans has emerged in the marketing literature little empirical work has been done so far to validate the theoretical predictions the findings from the few field studies are equivocal and conflicting which we ascribe to failure to account for the major assumptions underlying the theoretical predictions we argue that in order to enhance the rigor of theory testing the field studies must be complemented by laboratory experiments where the conditions stipulated by the assumptions of the theory can be systematically imposed and or relaxed this should help in the reconciliation of the differences found in the field studies the experiment reported in this paper is a first step towards filling this void in the empirical research in this area here we assess the impact of perceived environmental uncertainty and perceived agent effectiveness on the magnitude total pay and composition salary incentive mix of employment compensation the hypotheses stem from propositions analytically derived by basu lal srinivasan and staelin 1985 and lal and srinivasan 1988 the insurance industry middle management compensation problem served as the experimental context the results of the experiment ratified the hypothesis that an increase in perceived agent effectiveness leads to award of compensation contracts of larger total expected value and a larger proportion of performance contingent pay however the hypothesis that an increase in perceived environmental uncertainty prompts the principal to award compensation contracts of smaller total expected value and a smaller proportion of performance contingent pay was rejected we discuss possible alternative explanations for the conflicting results associated with the uncertainty variable and identify future research opportunities in this area

runner up patents is monopoly inevitable exclusive patents sacrifice product competition to provide firms incentives to innovate we characterize an alternative mechanism whereby later inventors are allowed to share the patent if they discover within a certain time period of the first inventor these runner up patents increase social welfare under very general conditions furthermore we show that the time window during which later inventors can share the patent should become a new policy tool at the disposal of the designer this instrument will be used in a socially optimal mix with the breadth and length of the patent and could allow sorting between more or less efficient firms

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

subgame perfect implementation this paper examines the use of stage mechanisms in implementation problems and provides a partial characterization of the set of subgam e perfect implementable choice rules it is shown that in many economic environments virtually an y choice rule can be implemented to illustrate the power of this approach the paper discusses a number of models in which it is possible to implement the first best although it wouldn t have been possible to do so without using stage mechanisms the diversity of these models suggests that subgame perfect implementation may find wide application copyright 1988 by the econometric society

the salesperson as outside agent or employee a transaction cost analysis this descriptive study explores the reasons for integration of the personal selling function i e the use of employee direct salespeople rather than manufacturers representatives reps a hypothesized model is developed based on both transaction cost analysis and the sales force management literature data from 13 electronic component manufacturers covering 159 u s sales districts are used to estimate a logistic model of the probability of going direct in a given district results are shown to be stable across specification and estimation methods and to fit the data well the transaction cost model is generally supported the principal finding is that the greater the difficulty of evaluating a salesperson s performance the more likely the firm to substitute surveillance for commission as a control mechanism i e to use a direct sales force among other findings direct sales forces are also associated with complex hard to learn product lines and with districts that demand considerable nonselling activities several factors prove unrelated including company size the amount of travel a district requires and the importance of key accounts this article was originally published in marketing science volume 4 issue 3 pages 234 254 in 1985

ex post regret and the decentralized sharing of information abstract firms reveal private information about the value of investment through their investment decisions as a consequence they may have ex post regret once they see other firms investments we define a notion of rational expectations equilibrium for games which imposes a no regret property in this equilibrium all firms make the same investment decision but despite the absence of ex post regret the investment herd can be inefficient in addition equilibrium might not exist we introduce a notion of probabilistic existence and identify conditions under which if the number of firms is large enough information comes out so that investment herds are first best efficient with high probability and equilibrium exists with high probability journal of economic literatureclassification numbers c7 d8

on the optimality of the patent renewal system the patent system is mainly a renewal system the patent life is chosen by the patentee in return for fees i ask whether such a system can be justified by asymmetric information on costs and benefits of research in such a model i show that renewal mechanisms possibly with subsidies are equivalent to direct revelation mechanisms and therefore cannot be improved on regardless of the objective function under plausible circumstances patents should have a uniform life rather than varying in length as typically occurs under a renewal system

an industry equilibrium analysis of downstream vertical integration this paper investigates the effect of product substitutability on nash equilibrium distribution structures in a duopoly where each manufacturer distributes its goods through a single exclusive retailer which may be either a franchised outlet or a factory store static linear demand and cost functions are assumed and a number of rules about players expectations of competitors behavior are examined it is found that for most specifications product substitutability does influence the equilibrium distribution structure for low degrees of substitutability each manufacturer will distribute its product through a company store for more highly competitive goods manufacturers will be more likely to use a decentralized distribution system this article was originally published in marketing science volume 2 issue 2 pages 161 191 in 1983

quota based compensation plans for multiterritory heterogeneous salesforces we compare quota based salesforce compensation plans with the blss plan i e the optimal curvilinear agency theory based compensation plans proposed in basu lal srinivasan and staelin basu a k r lal v srinivasan r staelin 1985 salesforce compensation plans an agency theoretic perspective marketing sci 4 fall 267 291 a quota plan pays a fixed salary which is supplemented by commission income that is a prespecified fraction of the dollar sales that exceed the quota for a salesforce comprised of multiple salespersons territories we consider a basic quota plan where the commission rate and salary remain the same across salespersons however quotas vary across salespersons territories compared to the blss plan that is individually tailored to each salesperson territory the basic quota plan s total nonoptimality in profit has two components i a shapeinduced nonoptimality arising from the fact that the quota based plan does not have the same optimal shape as the curvilinear blss pl

structuring a multiproduct sales quota bonus plan for a heterogeneous sales force a practical model based approach this paper presents an agency theoretic model based approach that assists sales managers in determining the profit maximizing structure of a common multiproduct sales quota bonus plan for a geographically specialized heterogeneous sales force operating in a repetitive buying environment this approach involves estimating each salesperson s utility function for income and effort and using these models to predict individual sales achievements and the associated aggregate profit for the firm under a specified plan the utility function estimation is based on the salesperson s own preference rank ordering of alternative sales quota bonus plans once these functions have been estimated they are incorporated in a mathematical programming model that the sales manager can use to determine the best plan the authors demonstrate the approach in the context of a case involving the design of a two product sales quota bonus plan for a set of salespeople at a pharmaceutical products firm

managerial motivation dynamics and incentives firms can increase profitability by appropriately motivating managers we investigate drivers of managerial motivation and propose how firms can use performance pay to alter motivational patterns we focus on the agent s optimal effort decision in trading off compensation utility with effort cost in a static and dynamic setting surprisingly we find that lower risk aversion or increased pay are not necessarily motivating factors and identify the relevant effort drivers underlying the agent s utility and compensation plan we characterize properties of agents preferences for output lotteries risk aversion aggressiveness prudence that trigger systematic motivational patterns with respect to a variety of factors such as the agent s productivity and past performance time to evaluation the firm s capabilities and market factors our insights are robust holding under very general modeling assumptions on preferences rewards and the stochastic effort output function

games of perfect information predatory pricing and the chain store paradox the thesis of this paper is that finite noncooperative games possessing both complete and perfect information ought to be treated like one player decision problems that is players ought to assign at every move subjective probabilities to every subsequent choice in the game and ought to make decisions via backward induction this view is in contrast with the gametheoretic approach of nash equilibrium after expanding on this view for games in the abstract in sections 2 and 3 attention is turned in section 4 to an example due to reinhard selten called the chain store paradox which possesses the flavor of a situation involving a predatory pricing monopolist it is argued that for the chain store game the decision analytic approach leads under certain assumptions to more realistic outcomes than the standard nash equilibrium approach

a theory of grand innovation prizes abstract the past decade has witnessed a resurgence in innovation awards in particular of grand innovation prizes gips which are rewards to innovators developing technologies reaching performance goals and requiring breakthrough solutions gips typically do not preclude the winner also obtaining patent rights this is in stark contrast with mainstream economics of innovation theories where prizes and patents are substitute ways to generate revenue and encourage innovation building on the management of innovation literature which stresses the difficulty to specify ex ante all the technical features of the winning technologies we develop a model in which innovative effort is multi dimensional and only a subset of innovation tasks can be measured and contracted upon we show that in this environment patent rights and cash rewards are complements and that gips are often preferable to patent races or prizes requiring technologies to be placed in the public domain moreover our model uncovers a tendency for patent races to encourage speed of discovery over quality of innovation which can be corrected by gips we explore robustness to endogenous entry costly public funds and incomplete information by gip organizers on the surplus created by the technology

on limiting or encouraging rivalry in technical progress the effect of patent scope decisions abstract this essay is on the effects of the scope of a patent e g how broad its allowed claims on subsequent inventing in a field it is argued that this depends on the topography of technical advance in a field in particular on how inventions are linked to each other and in the extent to which rapid technical advance requires a diversity of actors and minds as contrasted with being facilitated by express coordination of inventive activity technical advance is examined in several different fields with a focus on how patents influenced the pace and quality of development the authors conclude that allowing and enforcing broad patent claims tends to hinder technical progress

on manufacturing marketing incentives stereotypically marketing is mainly concerned about satisfying customers and manufacturing is mainly interested in factory efficiency using the principal agent agency paradigm which assumes that the marketing and manufacturing managers of the firm will act in their self interest we seek incentive plans that will induce those managers to act so that the owner of the firm can attain as much as possible of the residual returns one optimal incentive plan can be interpreted as follows the owner subcontracts to pay the manufacturing manager a fixed rate for all capacity he delivers each marketing manager receives all of the returns from his product in turn all managers pay a fixed fee to the owner under this plan the marketing managers will often complain about the stock level decisions even though these levels are announced in advance under a revised plan the owner can eliminate such complaints by delegating the stocking decisions to the respective marketing managers without any loss this plan is interpreted as requiring the owner to make a futures market for manufacturing capacity paying the manufacturing manager the expected marginal value for each unit of capacity delivered receiving the realized marginal value from the marketing managers and losing money on average in the process

salesforce incentives market information and production inventory planning salespeople are the eyes and ears of the firms they serve they possess market knowledge that is critical for a wide range of decisions a key question is how a firm can provide incentives to its salesforce so that it is in their interest to truthfully disclose their information about the market and to work hard many people have considered this question and provided solutions perhaps the most well known solution is due to gonik 1978 who proposed and implemented a clever scheme designed to elicit market information and encourage hard work the purpose of this paper is to study gonik s scheme and compare it with a menu of linear contracts a solution often used in the agency literature in a model where the market information possessed by the salesforce is important for the firm s production and inventory planning decisions

market power screens willingness to pay what is the best way to reward innovation while prizes avoid deadweight loss intellectual property selects high social surplus projects optimal innovation policy thus trades off the ex ante screening benefit and the ex post distortion it solves a multidimensional screening problem in the private information held by the innovator research cost quality and market size of the innovation the appropriate degree of market power is never full monopoly pricing and is determined by measurable market characteristics the inequality and elasticity of innovation supply making the analysis open to empirical calibration the framework has applications beyond ip policy to the optimal pricing of platforms or the optimal procurement of public infrastructure

an economic analysis of deferred examination system evidence from a policy reform in japan we investigate how a deferred patent examination system promotes ex ante screening of patent applications which reduces both the number of granted patents and the use of economic resources for examinations without reducing the return from r d based on a real option theory we develop a model of examination request behaviors exploiting the responses of japanese firms to recent policy reform we find that the shortening of the allowable period for an examination request significantly increases both eventual and early requests controlling for the blocking use of a pending patent application this effect is stronger in technology areas with higher uncertainty these results support the importance of uncertainty for an applicant and of ex ante screening

how broad should the scope of patent protection be i explore the trade off between a patent s length that is its lifetime and its width that is its scope of coverage a wider patent generally reduces the distortion of consumers choices between the patented brand of the product and unpatented lower priced varieties sold by competitors but also permits higher prices which increase relative to profits the deadweight losses from consumers switching consumption out of the product class i show under what conditions infinitely lived but very narrowly focused patents are the socially efficient way to reward innovation and under what conditions very short lived but very broad patents are optimal

coordinating research through research joint ventures abstract in a simple model we show that a joint venture can implement the rates of investment that maximize joint profit when firms research abilities are private information this can be done with budget balance even though there are participation constraints there is no conflict between budget balance and participation constraints because firms payoffs can depend on ex post signals of abilities the conflict between budget balance and participation constraints is restored when both abilities and rates of investment are unobservable we give a condition under which the profit maximizing rates of investment can be implemented if we relax budget balance

risk behavior in response to quotas and contests much of the salesforce compensation literature has focused on developing incentive schemes to maximize effort levels on the part of the salesforce the amount of effort to expend in the selling task is considered to be the sole decision variable for a sales representative in this paper we introduce another key decision variable for a sales representative which is how much risk to undertake in the selling task in other words we consider the fact that for a sales representative riskiness of performance e g the dispersion of the probability distribution for sales is often a choice and not a given fate for example a sales representative trying to increase sales may have the choice of allocating a given amount of effort on the low risk approach of pursuing a small set of existing customers or incur the same effort on the high risk option of getting new larger customers to switch from competitors this paper examines how decisions on risk behavior on the part of the sales representatives are influenced by compensation schemes we show that such decisions are sensitive to the payoff structure when a quota based or a rank order contest based compensation scheme is used more specifically we argue that a high quota level or a rank order contest where only the top few win induce sales representatives to opt for high risk prospects whereas a low quota level or a rank order contest where a high proportion win induce sales representatives to opt for low risk prospects this does not stem from any kind of violation of standard expected utility theory but arises from the specific structure of jumps in payoffs it is not that the inherent risk attitudes of the sales representatives are being altered rather under some quota and contest conditions a more risky prospect may yield higher expected utility for an inherently risk averse sales representative while under some other quota and contest conditions a less risky prospect may lead to a higher expected utility for an inherently risk seeking sales representative the theoretical propositions are tested in a series of five experiments the first two experiments test the theoretical results of quota based compensation the quota levels are manipulated subjects select between segment types where the mean expected sales are the same but the variance varies the next two experiments test the risk behavior of subjects in contest based incentive schemes when the proportion of winners in the contest is manipulated the results provide strong support for our models with only a few subjects departing from the theoretical predictions a fifth experiment shows some cognitive response data to explain the behavior that is inconsistent with the theoretical predictions this paper provides implications that are useful for managers who design compensation schemes a common assumption in most normative models on salesforce compensation is that all sales representatives are either risk averse or risk neutral this might often lead to the conclusion that sales representatives cannot be expected to engage in high risk activities in the absence of a risk premium over and above the compensation scheme while this may be true if sales representatives are facing only a piece rate compensation plan it need not be the case when quota based or contest based compensation schemes are used our results suggest that when the sales quotas are set high or if the proportion of winners in a sales contest is low sales representatives may engage in high risk behavior alternatively if the quotas are low or the proportion of winners in a sales contest is high sales representatives may engage in low risk prospects hence if a firm would like to dampen high risk behavior on the part of the salesforce lowering quota levels or increasing the proportion of winners in sales contests might do so similarly in order to reduce conservatism towards risk moving up the quota levels or reducing the proportion of winners in sales contests could be useful our results extend beyond just salesforce management to any situation where payoffs are based on reaching a certain threshold level in performance or are based on relative performance for example similar implications hold in tournaments for promotion to a limited number of top management positions in an organization influencing the portfolio of r d managers and so on

monitoring and incentives in sales organizations an agency theoretic perspective our primary objective in this paper is to analyze a framework that simultaneously examines the role of both monitoring and incentives in the design of sales force control systems previous research has focused exclusively on the role of incentives in directing sales force effort we build on the structure provided by the past work and analyze an agency thoeretic model in which a sales person generates wealth for the firm by expending effort across two dimensions namely internal and external we assume that effort in the internal dimension can be monitored relatively cheaply whereas effort in the external dimension can be monitored only at infinite cost we then analyze the following two scenarios i a pure incentives world where in both effort dimensions are governed through the use of incentive pay and ii a monitoring and incentives world wherein the internal dimension is monitored and the external dimension is governed through the use of incentive pay in addition to modeling the notion of partial monitoring in this manner we also explicitly allow the firm to choose the level of risk aversion desired in its salesperson of course sales people who are relatively risk tolerant command higher reservation wages consequently such sales people are likely to be valuable only to those firms that emphasize incentive pay in their control systems our analysis across the two scenarios helps us to demonstrate the implications and value of introducing monitoring into the control structure specifically we find that monitoring allows the firm to decrease the weight placed on incentives and hire a relatively risk averse salesperson from the salesforce labor market these actions in turn permit the firm to reduce the risk premium and the reservation wage offered to the salesperson in direct contrast to these monetary savings however we find that an adverse side effect of monitoring is that it induces salespeople to overemphasize the effort devoted to the monitored dimension while underemphasizing the effort devoted to the nonmonitored dimension this adverse effect of monitoring notwithstanding we find that the overall benefit of increased monitoring is that it allows the firm to lower the a mount of total compensation paid to the salesperson these analytical findings are consistent with the prescriptions found in the popular business press where it is often stated that compensation plans that emphasize incentive pay are characterized by independence in managing activities lack of monitoring as well as high income potential these findings are also consistent with the popular wisdom that incentive laden compensation plans are generally more appropriate for individuals who are risk takers and entrepreneurial in nature we also delineate the conditions where monitoring can improve on the profits obtained in a pure incentives world specifically we find that monitoring can prove to be most valuable when the importance of internal activities is highand the level of incentives is low finally we conclude by conducting a sensitivity analysis to examine the robustness of our results to the specifications we utilize in our modeling efforts overall we view the main contribution of our research efforts as one of explicitly delineating the tradeoffs associated with the use of monitoring and incentives in the design of salesforce control systems as such our paper should be of interest to academics and practitioners interested in the design of salesforce control systems

novelty and disclosure in patent law the stringency of the novelty requirement in patent law affects the pace of innovation because it affects the amount of technical information that is disclosed among firms it also affects ex ante profitability of research we compare weak and strong novelty requirements from the standpoint of social efficiency we ask how our answer depends on the rule that determines which firm gets a patent when two firms have patents pending on the same technology the possible rules are first to invent which applies in the u s and first to file which applies everywhere else

salesforce compensation theory and managerial implications this paper discusses recent advances in the study of salesforce motivation and compensation special emphasis is given to quantitative approaches from the economics finance and marketing literatures the paper summarizes the findings in this analytical work in the context of some examples of compensation practice in order to illustrate the usefulness of the paradigm for the evaluation and setting of compensation systems we consider some major issues in setting compensation such as the firm s own objective the salesperson s objective and the nature of the sales response function variations in these factors imply significant variation in optimal compensation policy where optimal takes into account the components in the plan the parameter levels of the components and whether or not a menu of such plans should be made available to the salesforce by highlighting the results in the literature in light of some relevant compensation examples we show the applicability of theory to the practical concerns of salesforce management we close with a summary of these insights and directions for future research in the area

do patents work thickets trolls and antibiotic resistance this paper connects ideas from recent literature on the economics of intellectual property ip to address the question did the strengthening and broadening of ip rights from important patent policy changes in the us promote greater innovation the analysis rests on the theory of cumulative innovation which shows that if ip rights on a pioneer invention extend to follow on research and impediments to contracting exist then strengthening patents can actually reduce overall innovation recent empirical studies are consistent with the theory patents can significantly deter follow on research in complex technology areas where contracting is difficult computers electronics telecommunications but not in drugs chemicals and human genes i outline remedies from court decisions and antitrust policy for addressing inefficiencies from patent trolling patent thickets and the anti commons of fragmented ownership i then apply the analysis to the antibiotics market drawing on recent research to examine how patent and competition policies can be used to improve incentives for drug development in the battle against antibiotic resistance the literature provides persuasive evidence that the policy changes overreached in broadening and strengthening ip rights and reveals important patent reforms for improving the effectiveness of patent systems in the us and canada

setting the right incentives for global planning and operations we study incentive issues seen in a firm performing global planning and manufacturing and local demand management the stochastic demands in local markets are best observed by the regional business units and the firm relies on the business units forecasts for planning of global manufacturing operations we propose a class of performance evaluation schemes that induce the business units to reveal their private demand information truthfully by turning the business units demand revelation game into a potential game with truth telling being a potential maximizer an appealing refinement of nash equilibrium moreover these cooperative performance evaluation schemes satisfy several essential fairness notions after analyzing the characteristics of several performance evaluation schemes in this class we extend our analysis to include the impact of effort on demand

knowledge disclosure as intellectual property rights protection abstract we consider the problem of an inventor who discloses knowledge under the threat of a rival who may patent a competing idea disclosure diminishes the probability that the rival has of receiving a patent legal externality but it also decreases the rival s marginal r d cost knowledge externality our results reveal that i when the knowledge externality is large small relative to the legal one an increase decrease in the patentability standard leads to higher disclosure and promotes r d and ii if subsequent research creates positive external effects the patentability standard should be set to promote further disclosure and r d in equilibrium the impact on the equilibrium configuration of changes in market profits is also examined

eliciting time versus money time scarcity underlies asymmetric wage rates marketing strategies are often tied to how consumers spend time e g waiting in lines searching across stores in return for money e g receiving a discount viewing such time money tradeoffs in terms of a reservation wage rate for consumers we identify a wage rate asymmetry between two elicitation procedures a money elicit mel state the minimum amount of money m that you would accept in return for spending a given number of hours t and b time elicit tel state the maximum number of hours t that you would spend in return for accepting a given amount of money m while these procedures are normatively equivalent we propose that tel vs mel wage rates are higher because time scarcity receives a higher weight in tel judgments in eight studies including both hypothetical and real settings we document the wage rate asymmetry the time scarcity process and a downstream consequence of tel vs mel reducing the likelihood of accepting a time money tradeoff we discuss the implications for practice and for research on wage rates time versus money procedural invariance and scarcity

uncertainty spillovers and cooperative r d abstract this paper extends the literature on cooperative r d in an oligopoly with spillovers the model has three new features it introduces uncertainty focuses on spillover of innovation instead of effort spillover and offers a new definition of the research joint venture rjv the rjv is an arrangement to coordinate r d efforts and also to share the innovation firms form an rjv only if the innovation raises flow industry profit but independently of the speed of spillovers and the degree of uncertainty the model is robust when we allow for licensing the single lab endogenous spillovers and r d effort spillovers

dynamic data envelopment analysis a relational analysis abstract this paper proposes a dynamic data envelopment analysis dea model to measure the system and period efficiencies at the same time for multi period systems where quasi fixed inputs or intermediate products are the source of inter temporal dependence between consecutive periods a mathematical relationship is derived in which the complement of the system efficiency is a linear combination of those of the period efficiencies the proposed model is also more discriminative than the existing ones in identifying the systems with better performance taiwanese forests where the forest stock plays the role of quasi fixed input are used to illustrate this approach the results show that the method for calculating the system efficiency in the literature produces over estimated scores when the dynamic nature is ignored this makes it necessary to conduct a dynamic analysis whenever data is available

compensation plans for single and multi product salesforces an application of the holmstrom milgrom model the agency theory approach to understanding salesforce compensation plans is modified to incorporate the intratemporal nature of the salesperson s effort rate decision i e the decision about the effort rate at any given point in time potentially depends upon the sales performance up to that point in time in the accounting period under the assumptions considered in this paper holmstrom and milgrom 1987 have shown that the optimal compensation plan is linear in total sales over the accounting period the comparative statics results obtained here corroborate most of the corresponding results in the salesforce compensation literature moreover we derive many additional results not available in the literature it is demonstrated that the commission income as a fraction of total compensation goes up with an increase in the effectiveness of the sales effort or an increase in base sales on the other hand the salary component of the total compensation goes up with increases in uncertainty absolute risk