airport congestion when carriers have market power this paper analyzes airport congestion when carriers are nonatomistic showing how the results of the road pricing literature are modified when the economic agents causing congestion have market power the analysis shows that when an airport is dominated by a monopolist congestion is fully internalized yielding no role for congestion pricing under monopoly conditions under a cournot oligopoly however carriers are shown to internalize only the congestion they impose on themselves a toll that captures the uninternalized portion of congestion may then improve the allocation of traffic the analysis is supported by some rudimentary empirical evidence

the role of patent rights in mergers consolidation in plant biotechnology few micro level empirical papers have addressed the impact of the patent system on industry structure using firm level patent data for public and private firms in plant biotechnology we develop a measure of patent enforceability duration models show that patent statistics are a useful predictor of the timing of merger activity we find that patent enforceability is an important factor influencing the likelihood of mergers mergers in plant biotechnology may be partially motivated by the enforcement of patent rights when firms have overlapping technologies some of the merger activity may be explained by attempts to avoid mutually blocking technology as exemplified in the case of roundup ready corn

salary arbitration and pre arbitration negotiation in major league baseball two assumptions in this analysis of baseball salary arbitration are that 1 players and clubs to serve their interests in pre arbitration negotiation submit final offers to maximize and minimize

congestion pricing and capacity of large hub airports a bottleneck model with stochastic queues this paper models and estimates congestion prices and capacity for large hub airports the model includes stochastic queues time varying traffic rates and endogenous intertemporal adjustment of traffic in response to queuing delay and fees relative costs of queuing and schedule delays are estimated using data from minneapolis st paul simulations calculate equilibrium traffic patterns queuing delays schedule delays congestion fees airport revenues airport capacity and efficiency gains the paper also investigates whether a dominant airline internalizes delays its aircraft impose it tests game theoretic specifications with atomistic nash dominant stackelberg dominant and collusive airline traffic

pharmaceutical price controls and entry strategies abstract this paper finds that the use of price controls has a statistically and quantitatively important effect on the extent and timing of the launch of new drugs firms headquartered in countries that regulate price reach fewer markets than those in countries without price controls companies avoid price controlled markets and are less likely to introduce products in additional markets after entering a price controlled country launches into low price european countries are further delayed following legalization of parallel imports the results suggest that price regulation in one country affects entry into other countries and may affect the strategies of domestic firms

a theoretical and empirical comparison of free agent and arbitration eligible salaries negotiated in major league baseball this paper presents a theoretical and empirical comparison of determination of negotiated salaries in baseball s free agent market to that in its final offer arbitration foa system the theoretical bargaining model of each system is based on nash 1950 it is argued that farber s 1980 model of foa is not fully applicable in explaining baseball s foa process the free agent market and the arbitration system each determine negotiated salaries that are dependent on the different disagreement outcomes of the negotiators in the respective systems it is thus concluded theoretically that the two systems will determine salaries differently the theoretical analysis also suggests that there may be selection bias present when one empirically analyzes only negotiated settlements using a straightforward regression model that controls for productivity playing experience and the potential selection bias the empirical analysis substantiates the theory s results a method is then developed to estimate the effect that free agent salaries have on salaries for arbitration eligible players it is found that there is a significant positive relationship between them but the systems do not determine equal salaries for comparable players

second best congestion pricing the case of an untolled alternative abstract this paper deals with second best one route congestion pricing in case of an untolled alternative using a two link network simulation model the effects of various demand and cost parameters on the relative efficiency of one route tolling are analyzed it is investigated whether the existence of costs of congestion charging may be a reason for one route tolling to be more overall efficient than two route tolling finally the efficiency of revenue maximizing one route and two route tolling is discussed

agricultural biotechnology s complementary intellectual assets we formulate and test a hypothesis for the dramatic restructur ing that the plant breeding and seed industry has recently undergone the reorganization can be explained in part by the desire to exploit comple mentarities between intellectual assets needed to create genetically mod ified organisms this hypothesis is tested using data on agricultural biotechnology patents notices for field tests of genetically modified organisms and firm characteristics the presence of complementarities is identified with a positive covariance in the unexplained variation of asset holdings results indicate that coordination of complementary assets has increased under the consolidation of the industry ne of the central problems in the economics of inno vation concerns how industries change as they absorb fundamental research breakthroughs rarely has change been more pronounced than in agriculture following the introduction of recombinant dna technology and affiliated techniques of genetic engineering by offering breeders the ability to alter plant traits by directly manipulating se quences of genetic code tools of agricultural biotechnology change the possibilities for crop improvement profoundly the new techniques enhance the speed and precision of agricultural research and development r d while ex panding the space of potential new products seed firms now offer farmers crop varieties embodying new ap proaches for controlling pests managing physical stresses on plants increasing crop yields and growing differenti ated quality enhanced crops concurrent with these technical changes in the r d process the agricultural inputs industry has over the past two decades witnessed a comprehensive restructuring sev eral large chemical firms including monsanto dow and dupont moved aggressively into plant biotechnology mak ing huge investments in the life sciences as newly minted agronomic systems companies these firms acquired all of the large national seed firms in north america including pioneer dekalb asgrow garst and others meanwhile the research intensive agricultural biotechnology sector from its appearance in the 1980s as a large set of small startup firms had by the end of the 1990s already reached a second stage with most of the startups either folded or acquired by the new agronomic systems giants the industry s consoli dation was surprising not only for its rapid pace and com prehensive scope but also for the extremely high valuations at which some firms were acquired in 1997 for example monsanto acquired holdens foundation seeds of wil liamsburg iowa together with two marketing subsidiaries for 1 02 billion 25 times the annual sales of the mature privately held firm whose revenues derived entirely from the breeding and distribution of corn seed the emergent industry structure with a relatively small number of tightly woven alliances each organized around a major life sciences firm each vertically integrated from basic r d through to marketing stands in contrast to the more diffuse structure of twenty years ago this structure is likewise noteworthy when one considers trends in other research intensive fields the pharmaceutical biotechnology industry for example maintains a large number of free standing firms specializing in r d and earning revenues through various licensing agreements majewski 1998 hall and ziedonis 2001 observe that the u s semiconduc

bias in salary arbitration the case of major league baseball this study analyses all baseball arbitration cases from 1985 90 to determine if decisions differ among ethnic groups unlike earlier arbitration analyses extensive controls for individual and team performance are used holding performance constant the results indicate that latin american players have 33 less chance and blacks 19 less chance than does a white player of winning a case these differences are not reflected by more risky salary demands by minority players and only marginally reflected by market salary practices toward minority players therefore bias appears to emanate from arbitrator utility functions

can prior offers and arbitration outcomes be used to predict the winners of subsequent final offer arbitration cases preferences is past outcomes given its goal of driving negotiated settlements an effective foa process requires bargainers to infer useful information about arbitrator preferences from past outcomes using data from major league baseball this article provides evidence that past foa decisions are positively correlated with the outcomes of future foa cases

mobility and redistribution the ability of individuals to move freely from one jurisdiction to another is generally seen as a constraint on the amount of redistribution that each jurisdiction within a system of governments can undertake in this paper we look at this proposition by developing a positive analysis of income redistribution by local governments in a federal system we ask how much redistribution occurs when only local governments can have tax transfer instruments individuals can move freely among jurisdictions and voters in each jurisdiction are fully aware of the migration effects of redistributive policies local redistribution is shown to induce sorting of the population with the poorest households located in the communities that provide the most redistribution while the threat of out migration affects the potential for redistribution our results suggest that significant local redistribution is nonetheless feasible numerical computations indicate that the proportion of residents who are renters is a major factor affecting the local choice of level of redistribution

do negotiated and arbitrated salaries differ under final offer arbitration the authors investigate whether negotiated settlements differ from arbitrated ones under final offer arbitration examining the salaries of all major league baseball players eligible to participate in final offer arbitration between 1986 and 1991 they find that arbitration awards won by players are higher and those won by management are lower than negotiated settlements for players of comparable value this evidence suggests that arbitrated settlements are of low quality relative to negotiated ones in the sense that they tend to fall outside the bounds of potential negotiated settlements another implication of these findings however is that the bargaining agents retain substantial freedom to negotiate salaries that are not determined solely by arbitrator preferences

the efficiency of equilibrium traffic flows abstract this paper studies the behavior of an optimizing driver on a freeway and the equilibrium speed at which specified flows of traffic move it shows that both when passing is not allowed the standard car following framework of the engineering literature and when it is permitted the equilibria tend to exhibit speeds below the pareto optimal speeds the flat congestion toll proposed by oron pines and sheshinski 1973 does not by itself bring about pareto optimality

international patent protection 1960 2005 abstract this note provides an update to the index of patent protection published in this journal in 1997 the original paper presented the index for 1960 1990 for 110 countries the index has now been updated to 2005 and extended to 122 countries the adoption of stronger patent laws and the composition of patent rights vary across countries by level of economic development

the accident externality from driving we estimate auto accident externalities more specifically insurance externalities using panel data on state average insurance premiums and loss costs externalities appear to be substantial in traffic dense states in california for example we find that the increase in traffic density from a typical additional driver increases total statewide insurance costs of other drivers by 1 725 3 239 per year depending on the model high traffic density states have large economically and statistically significant externalities in all specifications we check in contrast the accident externality per driver in low traffic states appears quite small on balance accident externalities are so large that a correcting pigouvian tax could raise 66 billion annually in california alone more than all existing california state taxes during our study period and over 220 billion per year nationally

evaluating californian under age drunk driving laws endogenous policy lags when evaluating the effectiveness of a policy most studies assume that the policy effect begins with the date of enactment however there often exists an endogenous policy lag due to information acquisition and the cost of adjustment meanwhile the policy impact may be a gradual implementation from one level to another instead of a one time shift behavior to account for these issues when evaluating the californian under age drunk driving laws this paper adopts two econometric techniques the multiple structural change methodology and the smooth transition method the methods detect two effective policy changes and also reveal the existence of policy lags in addition ignoring these lags leads to severely biased estimates of policy effects a long transition period is identified for the first under age drunk driving policy while an abrupt transition is found for the other in summary the paper shows that the two econometric techniques complement each other and will be useful for policy evaluation copyright 2011 john wiley sons ltd

arbitrator compromise in final offer arbitration evidence from major league baseball i introduction the purpose of interest arbitration is to encourage two bargainers to reach a mutually agreeable settlement in the event of impasse an independent arbitrator determines the settlement in conventional arbitration ca each of the bargainers submits an offer the arbitrator may select one of the two offers or one of his or her own choosing as the settlement critics have argued that arbitrators split the difference between the offers to enhance their chances of being rehired in future cases this gives each bargainer an incentive to submit an extreme offer to increase its expected gains from arbitration as a result ca chills rather than encourages productive negotiation final offer arbitration foa was created by stevens 1966 to remedy the chilling effect he proposed that arbitrators select one of the two submitted offers as the award unable to compromise between the offers the arbitrator will presumably choose the most reasonable offer as the award ironically arbitrator compromise may exist even in foa according to theory foa arbitrators maximize their chances of being rehired by formulating a notion of the ideal settlement the preferred award and selecting the nearest offer importantly bazerman and farber 1985 farber and bazerman 1986 and gibbons 1988 noted that the preferred award is not exogenous but reflects the perspectives of the bargainers consequently although foa arbitrators may not compromise by splitting the difference between the offers they may formulate preferred awards that compromise between the bargainers perspectives because farber 1980 and gibbons 1988 showed that submitted offers should be strategically aligned around the arbitrator s preferred award an empirical analysis of final offers should reveal any compromises implicit in the preferred award to test the compromised preferred award hypothesis this study examines foa offers in major league baseball unique characteristics in baseball foa allow for a test of the compromised preferred award baseball players become eligible for foa after completing roughly three years of major league service during these first three years the players bargain in a purely monopsonistic environment the players may not freely negotiate with other clubs until they have completed six years of service the coexisting monopsonistic and oligopsonistic free agency markets have led to extraordinary differentials in player salaries that have been well documented in economic literature as in kahn 1993 although players with three to six years of experience continue to be bound to one club they may unilaterally opt for foa consequently the arbitrator must determine the appropriate payscale for an eligible player because the clubs prefer to extend monopsony salaries into the arbitration eligibility years they are likely to stress the importance of the player s prior salary i e the size of the raise a player is entitled to receive whereas the players would rather have the arbitrators rely on free agent salaries to determine the proper wage although the arbitrators could side with one of the positions theory predicts the preferred award will reflect a compromise between the two perspectives the results strongly support the existence of compromised preferred award the submitted final offers are a weighted average between the mean free agent salary and the player s salary in the previous season the notion that the preferred award represents a compromise between the two perspectives is strengthened when one examines the weights of losing offers specifically for both hitters and pitchers the losing player offer does not differ significantly from the mean free agent salary for a comparable player winning player offers on the other hand are less than the comparable free agent salary perhaps the most intriguing finding is that by compromising between the perspectives of players and clubs baseball foa has generated its own unique labor market through which player salaries lie between the monopsony and free agent levels

road accidents and traffic flows an econometric investigation this paper develops an empirical model of the relationship between road traffic accidents and traffic flows the analysis focuses on the accident externality which is determined mainly by the difference between the marginal and average risks the model is estimated using a new data set which combines hourly london traffic count data from automated vehicle recorders together with police records of road accidents the accident flow relationship is seen to vary considerably between different road classes and geographical areas more importantly even having controlled for these and other differences the accident externality is shown to vary significantly with traffic flows in particular while the accident externality is typically close to zero for low to moderate traffic flows it increases substantially at high traffic flows

a behavioural model of traffic congestion endogenizing speed choice traffic safety and time losses abstract conventional economic models of traffic congestion assume that the relation between traffic flow and speed is a technical one this paper develops a behavioural model of traffic congestion in which drivers optimize their speeds by trading off time costs expected accident costs and fuel costs since the presence of other drivers affects the latter two cost components and hence the nash equilibrium speed a behavioural speed flow relationship results for which external congestion costs include expected accident costs and fuel costs in addition to the time costs considered in the conventional model it is demonstrated that the latter in fact even cancel in the calculation of optimal congestion tolls the overall welfare optimum in our model is found to be off the speed flow function and off the average and marginal cost functions derived from it in the conventional approach this full optimum requires tolls to be either accompanied by speed policies or to be set as a function of speed using an empirically calibrated numerical simulation model we illustrate these qualitative findings and attempt to assess their potential empirical relevance

the microeconomic analysis of the external costs of road accidents a disaggregated model of the marginal external costs of road accidents imposed by different road users is developed the model explicitly specifies the adjustment of road users to increases in accident risks imposed by additional road use and is used to estimate the marginal external costs of road accidents the results under certain assumptions are up to 50 less than those obtained using the methods of previous studies however the adjustment to the increased risks of accidents leads to other costs such as congestion and reduced pedestrian mobility these costs should be included in a comprehensive analysis

estimates of the value of patent rights in european countries during the post 1950 period this paper examines the distribution of the values of patent rights in the united kingdom france and germany during the post 1950 period these values are inferred from the behavior of patentees with respect to payment of renewal fees on their patents a simple economic model of renewal decisions is combined with data on the proportion of patents renewed at alternative ages and the renewal fee schedules to produce estimates of the distribution and the total value of patent rights in these countries moreover the data indicate that there have been changes in the value distribution and we follow these changes over the period the empirical results of particular interest concern the total value of patent rights and the relationship between changes in it and changes in the quantity of patents the skew in the distribution of patent values and the rate of obsolescence on the returns to patents

the determinants of international patenting for nine agricultural biotechnology firms this paper examines international patent application decisions of nine agricultural biotechnology firms from 1990 2000 in australia brazil canada china the european patent office japan and south africa the data reveal a low frequency of international applications despite an initial united states application indicating very low values for patents abroad the results indicate that invention quality plays an important role in firms decisions to patent abroad and that a single international application is a good predictor of multiple international applications further significant country fixed effects suggest wide differences in business climates and patent enforcement among countries

patents as options some estimates of the value of holding european patent stocks in many countries holders of patents must pay an annual renewal fee in order to keep their patents in force this paper uses data on the proportion of patents renewed and the renewal fees faced by post world war ii cohorts of patents in france the united kingdom and germany in conjunction with a model of patent holders renewal decisions to estimate the returns earned from holding patents in these countries since patents are often applied for at a nearly stage in the innovation process the model allows agents to be uncertain about the sequence of returns that will be earned if the patent is kept inforce formally then the paper presents and solves a discrete choice optimal stochastic control model derives the implications of the model on aggregate behaviour and then estimates the parameters of the model from aggregate data the estimates enable a detailed description of the evolution of the distribution of returns earned from holding patents over their life spans and calculations of both the annual returns earned from holding the patents still in force or the patent stocks in the alternative countries and the distribution of the discounted value of returns earned from holding the patents in a cohort this abstract was borrowed from another version of this item

comparing alternative policies to reduce traffic accidents abstract this paper derives and implements formulas for the welfare effects of uniform mileage taxes gasoline taxes per mile insurance premiums and mileage taxes differentiated across vehicle and driver groups for reducing the external costs of passenger vehicle accidents the average external accident cost is estimated at 2 2 6 6 cents per mile accidents costs differ substantially across driver groups but only moderately across vehicles groups annual welfare gains from a mileage tax equal to marginal external costs for each driver vehicle group are 9 4 billion in the benchmark case the uniform mileage tax and per mile insurance reform can achieve 76 and 65 of this welfare gain respectively while the gasoline tax can achieve only 28 of the welfare gain unlike other policies the gasoline tax induces costly improvements in average fleet fuel economy that have little effect on reducing external costs

automobile externalities and policies this paper discusses the nature and magnitude of externalities associated with automobile use including local and global pollution oil dependence traffic congestion and traffic accidents it then discusses current federal policies affecting these externalities including fuel taxes fuel economy and emissions standards and alternative fuel policies summarizing insofar as possible the welfare effects of those policies finally we discuss emerging pricing policies including congestion tolls and insurance reform and summarize the appropriate combination of policies to address automobile externalities

manipulable congestion tolls the recent literature on congestion pricing with large agents contains a remarkable inconsistency though agents are large enough to recognize self imposed congestion and exert market power over prices they do not take into account the impact of their own actions on the magnitude of congestion tolls when large agents are confronted with tolls derived under this parametric assumption but understand the rule used to generate them the toll system will no longer guide the market to the social optimum to address this problem the present paper derives alternate manipulable toll rules which are designed to achieve the social optimum when agents anticipate the full impact of their actions on toll liabilities

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

regulation of road accident externalities when insurance companies have market power abstract accident externalities that individual drivers impose on one another via their presence on the road are among the most important external costs of road transport we study the regulation of these externalities when insurance companies have market power some of the results we derive have close resemblance to the earlier literature on externality regulation with market power in aviation and private roads but there are important differences too using analytical models we compare the first best public welfare maximizing outcome with a private profit maximizing monopoly and oligopoly we find that insurance companies will internalize some of the externalities depending on their degree of market power we derive optimal insurance premiums and regular parametric taxes as well as manipulable ones that make the companies set socially optimal premiums the latter take into account that the firm tries to exploit knowledge of the tax rule applied by the government finally we also study the taxation of road users rather than that of firms

the role of firm characteristics in pharmaceutical product launches this paper examines the determinants of new pharmaceutical launches since 1980 in the g7 nations using discrete time hazard models despite the obvious incentive to amortize the large sunk costs of drug development over many markets entry occurs in only 4 of the opportunities the results indicate that firm characteristics such as domestic status and experience in the local market are important in explaining product launches in addition to market characteristics also the interaction between the innovating firm and target country is a critical component of profitability new drugs are 1 5 times more likely to be launched in markets that share a border or a language of a drug company s country of headquarters even for multinational firms the effect of competition depends on the characteristics of both the potential entrant and the incumbents domestic entrants prefer to compete with domestic incumbents although this is an industry with the potential for ubiquitous licensing and low transportation costs the specific match quality between the innovating firm and market conditions remains an important determinant of entry

learning in equilibrium models of arbitration this paper analyzes strategic communication in equilibrium models of conventional and final offer interest arbitration both models emphasize the role of learning by the arbitrator from the parties offers about the state of the employment relationship which is known to the parties but not to the arbitrator in both models the arbitrators equilibrium behavior is identical to the reduced form decision rule typically assumed in the empirical literature the paper thereby provides a structural interpretation for the existing empirical work the paper also represents progress towards a complete theory of arbitration because it satisfies three conditions that will be required of any such theory first the models predictions match the existing empirical evidence second the models describe equilibrium behavior and third the models are built on a common set of assumptions about preferences information and commitment the paper therefore not only provides an equilibrium foundation for the intuition that the arbitrator might learn from the parties offers but also uses the idea of learning to develop a unified analytical treatment of the two major forms of interest arbitration this abstract was borrowed from another version of this item