grand innovation prizes a theoretical normative and empirical evaluation abstract this paper provides a systematic examination of the use of a grand innovation prize gip in action the progressive automotive insurance x prize a 10 million prize for a highly efficient vehicle following a mechanism design approach we define three key dimensions for gip evaluation objectives design and performance where prize design includes ex ante specifications ex ante incentives qualification rules and award governance within this framework we compare observations of gips from three domains empirical reality theory and policy to better understand their function as an incentive mechanism for encouraging new solutions to large scale social challenges combining data from direct observation personal interviews and surveys together with analysis of extant theory and policy documents on gips our results highlight three points of divergence first over the complexity of defining prize specifications secondly over the nature and role of incentives particularly patents thirdly the overlooked challenges associated with prize governance our approach identifies a clear roadmap for future theory and policy around gips

support systems for the diffusion of renewable energy technologies an investor perspective concern over climate change impacts and the projected depletion of fossil fuels has urged more governments to adopt policies that stimulate the diffusion of renewable energy technologies ret with an increasingly diverse suite of support instruments the question emerges as to which instruments or combinations are able to achieve faster more substantial diffusion results although various support instruments were extensively addressed in policy studies there is still no consensus this is partly because many policy studies take a policy maker approach in comparing support instruments leaving relationships between policy design and policy results as a black box this paper proposes an investor oriented perspective to analyze the diffusion potential of support systems for ret the main argument is that it is not the type of support instrument but rather its risk profitability characteristics that influence investor behavior and the rate of diffusion the two instruments most frequently discussed and compared are the feed in tariff and the quota model the analysis in this paper concludes that policy design is crucial while often feed in tariffs are applauded and quota system feared feed in tariffs may also bring about disappointing diffusion results when poorly designed while quota systems may be also conceived as attractive instruments for independent power producers

steam as a general purpose technology a growth accounting perspective the contribution of steam to british economic growth in the nineteenth century is estimated using growth accounting methods similar to those recently employed to examine the role of ict the results indicate that steam contributed little to growth before 1830 and had its peak impact about a hundred years after watt s famous invention only with the advent of highpressure steam after 1850 did the technology realise its potential compared with ict steam s impact on the annual rate of growth was modest it is unlikely that these conclusions are vulnerable to quantification of hitherto unmeasured tfp spillovers

project finance and international energy development this paper explores the preference for and the features unique to project finance one of the favoured vehicles for funding energy development our main focus is on the interests of project sponsors commercial banks and host governments inclusion of the latter reflects the fact host governments are often leading participants in primary energy and energy related projects more recently they have come to use limited recourse structures to finance local infrastructure development traditional analyses whilst providing useful insights into the interests of leading project participants are incapable of isolating a single motive or set of motives that can comprehensively account for all of the features common to this form of debt within an options theoretic framework most of these ambiguities are resolved risk management long recognised as one of the primary reasons for choosing project finance over rival debt structures is affirmed as a key explanatory factor on the other hand options pricing theory provides a radically different perspective on how project finance contributes to the realisation of these objectives

reassessing patent propensity evidence from a dataset of r d awards 1977 2004 it is well known that not all innovations are patented but the exact volume of innovative activities undertaken outside the coverage of patent protection and relatedly the actual propensity to patent an innovation in different contexts remain to a major degree a matter of speculation this paper presents an exploratory study comparing systematically patented and unpatented innovations over the period 1977 2004 across industrial sectors the main data source is the r d 100 awards competition organized by the journal research and development since 1963 the magazine has been awarding this prize to the 100 most technologically significant new products available for sale or licensing in the year preceding the judgments we match the products winners of the r d 100 awards competition with uspto patents and we examine the variation of patent propensity across different contexts industries geographical areas and organizations finally we compare our findings with previous assessments of patent propensity based on several sources of data

an analysis of australia s large scale renewable energy target restoring market confidence in 2001 australia introduced legislation requiring investment in new renewable electricity generating capacity the legislation was significantly expanded in 2009 to give effect to a 20 renewable energy target ret importantly the policy was introduced with bipartisan support and is consistent with global policy trends in this article we examine the history of the policy and establish that the stop start nature of renewable policy development has resulted in investors withholding new capital until greater certainty is provided we utilise the methodology from simshauser and nelson 2012 to examine whether capital market efficiency losses would occur under certain policy scenarios the results show that electricity costs would increase by between 51 million and 119 million if the large scale ret is abandoned even after accounting for avoided renewable costs our conclusions are clear we find that policymakers should be guided by a high level public policy principle in relation to large scale renewable energy policy constant review is not reform

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

correlated demand shocks and price wars during booms the supergame theoretic model of price competition rotemberg and saloner 1986 is re examined in the case of serially correlated demand shocks the equilibrium price is shown to exhibit the same counter cyclical movement as in the i i d case if the discount factor and the number of firms satisfy certain relationship

efficient wage bargaining as a repeated game this paper builds a bridge between the two existing approaches for wage and employment determination in a unionized market the monopoly union model and the efficient bargaining model both fail to capture the dynamic aspects of wage bargaining when the repeated nature of the wage bargaining process is considered the equilibria are neither as inefficient as the monopoly union model predicts nor as fully efficient rather the two models can be regarded as particular cases with certain discount rates we apply our model to issues such as the endgame interpretation of the u s steel industry wage concessions and featherbedding

optimal labour contracts under asymmetric information an introduction the review of economic studies has instituted a new series of lectures to be given annually by a younger british economist at the association of university teachers of economics meetings the choice of lecturer is determined by a panel whose members are currently professors hahn mirrlees and nobay this paper is a revised version of the first lecture in the series it was presented at the aute meeting held at the university of surrey in april 1982 and was refereed in the usual way mak

inducement prizes and innovation we examine the effect of prizes on innovation using data on awards for technological development offered by the royal agricultural society of england at annual competitions between 1839 and 1939 we find large effects of the prizes on competitive entry and we also detect an impact on patents especially when prize categories were set by a strict rotation scheme thereby mitigating the potentially confounding effect that they targeted only hot technology sectors prizes encouraged competition and medals were more important than monetary awards the boost to innovation we observe cannot be explained by the re direction of existing inventive activity

is the merchant power producer a broken model deregulated energy markets were founded on the merchant power producer a stand alone generator that sold its production to the spot and short term forward markets underpinned by long dated project finance the initial enthusiasm that existed for investment in existing and new merchant power plant capacity shortly after power system deregulation has progressively dissipated following an excess entry result in this article we demonstrate why this has become a global trend using debt sizing parameters typically used by project banks we model a benchmark plant then re simulate its performance using live energy market price data and find that such financings are no longer feasible in the absence of long term power purchase agreements

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

how do patent laws influence innovation evidence from nineteenth century world fairs studies of innovation have focused on the effects of patent laws on the number of innovations but have ignored effects on the direction of technological change this paper introduces a new dataset of close to fifteen thousand innovations at the crystal palace world s fair in 1851 and at the centennial exhibition in 1876 to examine the effects of patent laws on the direction of innovation the paper tests the following argument if innovative activity is motivated by expected profits and if the effectiveness of patent protection varies across industries then innovation in countries without patent laws should focus on industries where alternative mechanisms to protect intellectual property are effective analyses of exhibition data for 12 countries in 1851 and 10 countries in 1876 indicate that inventors in countries without patent laws focused on a small set of industries where patents were less important while innovation in countries with patent laws appears to be much more diversified these findings suggest that patents help to determine the direction of technical change and that the adoption of patent laws in countries without such laws may alter existing patterns of comparative advantage across countries jel d2 k11 l51 no 014

a literature review of economic studies on carbon pricing and australian wholesale electricity markets abstract with the ongoing development of australian anthropogenic climate change mitigation policies there has been a steady increase in modelling studies undertaken to estimate australian carbon prices and their impact on existing electricity markets this article summarises some of the more prominent studies completed by many of australia s foremost economic modelling firms we developed a simple approach for testing the consistency of these studies and their findings in relation to carbon pass through unfortunately we have established that the studies are entirely inconsistent in their estimation of carbon pass through furthermore we were unable to establish why the estimation of carbon pass through varies so significantly this has important implications for policy makers given much of the compensation to be paid to households and businesses under the clean energy future package is predicated on simple assumptions of carbon pass through based upon our analysis of these economic studies our conclusion is that australian policy makers are best guided by relying upon the numerous a posteriori estimations of pass through in the european union emissions trading scheme ets rather than australian a priori studies

a resource based view of opportunities to transform australia s electricity sector abstract proponents of low carbon transformation face an uphill battle to reconfigure incumbent energy systems against powerful interests protecting the status quo australia s electricity sector is an example of such a system wedded to fossil fuels and backed by much of the country s political establishment this paper addresses the potential for low carbon transformation in australia s electricity sector it explores the complex and uncertain dynamics shaping the sector and outlines how these can be understood through the lens of strategic agency with an eye for opportunities to drive a shift to renewables it reviews the dynamics of change and re stability shaping australia s electricity sector between 2006 and 2015 and applies a resource based view of transformative agency to analyse these dynamics results show the sector suffers multiple stressors and emphasise disruptive changes in the pipeline critically many of these transformative dynamics stem from factors outside the influence of the electricity sector and its supporters while results do not point to a clear trajectory or outcome of transformation they indicate the uptake of small scale solar photovoltaic pv systems by households and small business will play a defining role in the sector s future configuration furthermore the exploration of transformative dynamics affecting the electricity sector through a resource based lens shows that many opportunities exist for strategic agents to intervene in support of a disruptive shift to renewables the paper suggests a range of mechanisms that agents could use to undermine the strength of fossil energy in the electricity sector and encourage a shift to renewables

vertical integration credit ratings and retail price settings in energy only markets navigating the resource adequacy problem abstract energy only markets are prone to the resource adequacy problem i e the timely entry of new plant the reason for this is that competitive energy only markets struggle to be remunerative given reliability constraints and market price caps historically australia s 45 000 mw national electricity market has managed to navigate this well understood problem albeit with government entities directly or indirectly responsible for a surprisingly large 73 of all new plant investments to 2007 but government involvement in direct investment has now ceased so what will enable the industry to navigate the resource adequacy problem into the future quite simply industrial organisation the presence of merchant utilities with investment grade credit ratings and setting any regulated retail prices or price to beat with an lrmc floor

150 years of patent protection this paper examines three sets of explanations for variations in the strength of patent protection across sixty countries and a 150 year period wealthier nations are more likely to have patent systems to allow patentees a longer time to put their patents into practice and to ratify treaties assuring equal treatment of other nations but they are also likely to charge higher fees and limit patent protection in some important ways countries with democratic political institutions are consistently more likely to have patent protection appear to be determined by historical factors the origin of a country s commercial law appears particularly important in explaining the presence of restrictions on patentees privileges and discriminatory provisions against foreign patentees this abstract was borrowed from another version of this item

hybrid innovation in meiji japan japan s hybrid innovation system during the meiji era provides a useful laboratory for examining the effectiveness of complementary incentives to patents patents were introduced in 1885 and by 1911 1 2 million mostly nonpecuniary prizes were awarded at 8 503 competitions prizes provided a strong boost to patents especially in less developed prefectures and they also induced large spillovers of technical knowledge in prefectures adjacent to those with prizes relative to distant control prefectures without prizes linking competition expenditures with the expected market value of patents induced by the prizes permits a cost benefit assessment of the prize competitions to be made

necessity is the mother of invention input supplies and directed technical change this study provides causal evidence that a shock to the relative supply of inputs to production can 1 affect the direction of technological progress and 2 lead to a rebound in the relative price of the input that became relatively more abundant the strong induced bias hypothesis i exploit the impact of the u s civil war on the british cotton textile industry which reduced supplies of cotton from the southern united states forcing british producers to shift to lower quality indian cotton using detailed new data i show that this shift induced the development of new technologies that augmented indian cotton as these new technologies became available i show that the relative price of indian u s cotton rebounded to its pre war level despite the increased relative supply of indian cotton this is the first paper to establish both of these patterns empirically lending support to the two key predictions of leading directed technical change theories

on intermittent renewable generation the stability of australia s national electricity market abstract energy only markets have an inherently unstable equilibrium even under ideal conditions because participants are unable to optimise voll events the addition of intermittent renewable generation is thought to make conditions harder in this article optimal voll events in an islanded nem region is modelled by substituting high price caps for boiteux capacity charges then analysing the impact of adding progressively more variable renewable energy vre up to 35 market share spot market conditions prove stable and tractable provided thermal plant exit and adjust perfectly but vre asset allocation is important absent highly elastic demand or ultra low cost storage solar pv market share has economic limits because the technology rapidly cannibalises itself furthermore as vre rises in imperfectly interconnected regions a tipping point appears to exist where hedge markets enter an unstable zone through shortages of asset backed firm intra regional swaps and caps government initiated cfds for vre need to be designed carefully to ensure any instability is not exacerbated by extracting contracts from an already shortening hedge market

optimal capital structure and project financing abstract we examine the financing and incorporation modes for new projects there are two objectives the first is to provide a theory of optimal capital structure that links risk leverage and value and is particularly applicable to large firms counter to conventional wisdom we show riskier firms acquire more debt pay higher interest rates and have higher values in equilibrium second we provide an economic rationale for project financing which entails organizing a new project legally distinct from the firm s other assets we explain why project financing involves higher leverage than conventional financing and why highly risky assets are project financed

deregulation and restructuring of the global electricity supply industry and its impact upon power plant suppliers abstract this paper analyses the deregulation and restructuring of the global electricity supply industry and its impact upon fuel usage generation technologies and suppliers of power plant deregulation encouraged the growth of new independent power producers whose business requirements transformed the power plant industry the plant suppliers had to develop new capabilities and services to compete in the global market economies of scale and scope became crucial given the cost of developing the new technologies and providing the services required by the operators this led to the global consolidation of the power plant industry because only large integrated power engineering companies had the necessary resources and capabilities to compete in the new global environment

determining commercially viable two way and one way contract for difference strike prices and revenue receipts abstract in this article we investigate the role that a contract for difference cfd might play in increasing investment in renewable energy in australia two cfd schemes are investigated two way and one way cfd a financial model is developed that determines commercially viable cfd strike prices account is taken of revenue from wholesale electricity market and renewable energy certificate sales capital and operational costs of the project including distribution of funds to holders of equity and debt are also included findings based on analysis of the solar array located at the university of queensland gatton campus in australia is presented employing a typical meteorological year framework the major finding was that government will prefer a two way cfd scheme and single axis tracking solar pv array technology in contrast project proponents will strongly prefer a one way cfd design

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

towards an economics of awards awards are a widespread phenomenon they cater to the fundamental desire for social recognition and serve as a valuable incentive to influence behaviour the study of awards such as medals prizes and titles has in recent years gained momentum in economics complementing the longstanding focus on material incentives to evaluate the effectiveness of awards as a motivator is difficult as the effect of awards must be separated from the fact that awards are meant to be given to the best we show how research on awards has advanced over the last couple of years thus providing points of departure for future work

performance responses to competition across skill levels in rank order tournaments field evidence and implications for tournament design tournaments are widely used in the economy to organize production and innovation we study individual data on 2775 contestants in 755 software algorithm development contests with random assignment the performance response to added contestants varies nonmonotonically across contestants of different abilities precisely conforming to theoretical predictions most participants respond negatively whereas the highest skilled contestants respond positively in counterfactual simulations we interpret a number of tournament design policies number of competitors prize allocation and structure number of divisions open entry and assess their effectiveness in shaping optimal tournament outcomes for a designer

in the transformation of energy systems what is holding australia back abstract australia has had a strong gdp growth rate is endowed with a diversity of renewable energy resources yet has been unable to unshackle its dependency on fossil fuels our study identifies causes underlying australia s underachievement in its transformation towards a renewable energy economy we apply a combined mixed methods case study and multi criteria analysis to evaluate the greenhouse gas emissions and energy targets policies and programs of four australian prime ministers between 1996 and 2015 we identify four high impact factors that contribute to australia s underachievement the prime minister s political stance on climate and energy is critical in setting the direction of government the absence of target driven policy frameworks results in less effective policy outcomes orderly and cost effective energy system transformation requires bipartisan strategic long term planning and substantial capital investment to provide policy certainty and stability that can induce new investment in renewable technologies and industries energy policy is primarily a political and ideological issue not one driven by underlying economic conditions going forward australia must achieve a bipartisan position on climate and energy policy at both federal and state levels this will provide long term certainty and stability to support investment in renewable energy and so doing achieve international emission reduction obligations

using renewables to hedge against future electricity industry uncertainties an australian case study abstract a generation portfolio modelling was employed to assess the expected costs cost risk and emissions of different generation portfolios in the australian national electricity market nem under highly uncertain gas prices carbon pricing policy and electricity demand outcomes were modelled for 396 possible generation portfolios each with 10 000 simulations of possible fuel and carbon prices and electricity demands in 2030 the lowest expected cost generation portfolio includes 60 renewable energy increasing the renewable proportion to 75 slightly increased expected cost by 0 2 mwh but significantly decreased the standard deviation of cost representing the cost risk increasing the renewable proportion from the present 15 to 75 by 2030 is found to decrease expected wholesale electricity costs by 17 mwh fossil fuel intensive portfolios have substantial cost risk associated with high uncertainty in future gas and carbon prices renewables can effectively mitigate cost risk associated with gas and carbon price uncertainty this is found to be robust to a wide range of carbon pricing assumptions this modelling suggests that policy mechanisms to promote an increase in renewable generation towards a level of 75 by 2030 would minimise costs to consumers and mitigate the risk of extreme electricity prices due to uncertain gas and carbon prices

wages and employment in a repeated game with revenue fluctuations abstract empirical investigations suggests that the real wage is surprisingly flat over the business cycle this paper analyses a repeated game between a union and a firm which can contribute to explaining the flat wage the parties cannot enter binding contracts and revenue is fluctuating the paper focuses on the best subgame perfect equilibrium among those sharing the expected surplus in given fixed shares e g equal shares it is shown that for moderate discount factors this equilibrium has a more counter cyclical wage than what would be the case if the parties shared the surplus in each period in the same shares

risk based assessment of the cost efficiency and the effectivity of renewable energy support schemes certificate markets versus feed in tariffs the introduction of renewable energy sources in the electricity generation mix has the potential to reduce power sector s emissions and countries dependence on imported oil climate change concerns and highly volatile oil prices have attracted governments interest and support to sustain investments in renewable energy capacity and different support policies have been implemented in many countries around the world this paper analyzes the effects of investors risk aversion on the performance of support schemes the analysis compares two policy options a feed in tariff mechanism with a certificate market system results show that while a tariff mechanism could obtain better results than a certificate market its performance is strictly dependent on regulator choices a certificate market instead permits to obtain the desired level of renewable energy market share with good cost efficiency as long as investors risk aversion is moderate moreover discounting future cash flows with higher social discount rates further benefits a certificate system making it preferable to feed in tariffs

the impact of cyclical demand movements on collusive behavior recent work by rotemberg and saloner 1986 investigates the effect of the business cycle on optimal collusive pricing by specifying that demand is subject to i i d shocks an implication of the i i d assumption is that firms expectations on future demand are unrelated to the current level of demand we put forth a model that allows for both the level of current demand and firms expectations on future demand to change over time thus it captures two important properties of the business cycle our analysis reveals that while the gain to deviating from a collusive agreement is greatest during booms firms find it most difficult to collude during recessions as the forgone profits from inducing a price war are relatively low an implication of this effect for pricing behavior is that at the same level of demand price is lower when demand is declining than when demand is rising consistent with previous theoretical work we find that firms price countercyclically for a range of values for the discount factor however numerical simulations reveal a greater tendency for firms to price countercyclically during recessions than during booms

overcoming barriers to wind project finance in australia the wind power industry in australia is expected to grow rapidly over the next decade primarily due to a forthcoming expanded national renewable energy target ret which will mandate that renewable sources provide approximately 20 of australia s electricity production by 2020 however development of new wind generation in australia has stalled as a result of several barriers to project finance the mechanism through which most wind farms have been developed historically this paper provides an overview of wind power financing in australia in light of recent political and financial trends drawing upon existing literature and a series of stakeholder interviews it identifies three primary barriers to project finance regulatory risk surrounding legislation of the ret semi privatization of electricity retailers in new south wales and limited capital availability resulting from the recent global credit crisis the paper concludes that the confluence of these barriers limits the availability of long term contracts that provide revenue certainty for pre construction wind projects while simultaneously making these contracts a necessity in order to obtain project finance in an attempt to mitigate these effects this paper identifies four alternative development strategies that can be pursued