durable goods and product obsolescence the issue of product obsolescence is addressed by examining the optimal sales strategy of a monopolist firm that may introduce an improved version of its current product consumers expectations of a forthcoming product lowers the price that they are willing to pay for the current product because of its loss in value due to obsolescence the new product is characterized by consumers increased willingness to pay and by its competitive interaction with the old product these characteristics affect the tradeoff that the firm makes between the cost of waiting for new product sales versus the cost of cannibalizing these sales we analyze the effect of these characteristics of the new product on the firm s optimal sales strategy we consider the various policy measures available to the firm including limiting initial sales in order to lower cannibalization of the new product buying back the earlier version of the product in order to generate greater demand for the new product and announcements of future product introductions we find that for modest levels of product improvement the firm s optimal policy is to phase out sales of the old product while for large improvements a buy back policy is more profitable lastly we find that the firm is better off if it informs consumers whether a new product is forthcoming

on the role of input and output spillovers when r d projects are risky abstract this paper analyzes the impact of input and output spillovers on the expected effective cost reductions in a two stage model of r d where all r d projects are risky it is shown that relative to the deterministic case output spillovers tend to reduce expected cost reductions whereas input spillovers tend to increase investment in r d and hence expected cost reductions in particular the relations between cost reductions in the presence of input and output spillovers known from deterministic models may be reversed under certain parameter constellations

modelling the joint determination of household labour supplies and commodity demands in addition to choosing the allocation of total expenditure between commodities households may also be able to make decisions over the allocation of their time between market work and leisure in both theoretical and empirical work it has often been the case that these decisions have been analysed separately in this paper we stress the theoretical attractions of considering the joint determination of the allocation of time between work and leisure and the allocation of total expenditure between commodities in a utility maximising framework using a sample of individual households we attempt to evaluate the empirical importance of the joint determination model over the separate determination of labour supplies and commodity demands our approach follows that of abbott and ashenfelter i976 phlips i978 barnett i979 deaton and muellbauer i980 and atkinson and stern i980 here we pay particular attention to the following four important aspects of household decision making over commodity demand and labour supply the first concerns the commonly assumed restriction on the household s preferences of weak separability between goods and leisure this assumption allows the estimation of commodity demand systems and engel curves that exclude wage rate variables in cross section household budget data with large variation in wage rates across the sample the invalidity of this assumption would involve a serious mis specification any correlation between the excluded wage variable and the included price income and demographic variables would lead to biased parameter estimates and hence biased estimated elasticities similarly this assumption allows the estimation of labour supply curves that exclude relative price variables and its invalidity could produce biased labour supply elasticities a second aspect of household decision making which we wish to highlight arises from the suspicion commonly alluded to in labour economics texts that primary male workers may not be free to choose their hours of work thus we estimate a matched pair of rationed and unrationed systems following the work of neary and roberts i 980 and deaton and muellbauer i 979 the separability restriction is not unrelated to this point since without it we will see that the rationed hours of work enter demand systems in a complex fashion in effect

shipwrecks and treasure hunters we examine dynamic search as a game in which two rivals explore an island for a hidden prize of known value in every period until its discovery the players decide how much of the unsearched area to comb if a player finds the prize alone he wins it and the game ends players have a per period discount factor and costs proportional to the area they search first as a benchmark for efficiency we solve the one player search problem second in the two player setting we show that typically there is inefficient over search a result akin to the tragedy of the commons however for players with intermediate levels of patience there is the possibility of inefficient under search as players incorporate the expected future payoffs in their current search decisions finally with patient players several counterintuitive results can arise for example players might be better off searching a larger island or looking for a less valuable prize

the impact of market structure and learning on the tradeoff between r d competition and cooperation this paper compares r d competition and cooperation when firms can devote resources to a safe investment or a risky r d investment when the discovery of a new product creates positive externalities on non discovering firms equilibrium investment flow ex ante investment and welfare under r d competition are less than or equal to what they are under research cooperation with negative externalities r d cooperation results in the same or lower ex ante investment than under r d competition and social welfare may also be less our results have relevance for empirical studies of the impact of r d cooperation on r d outcomes

the effects of minimum wages on wage dispersion and employment evidence from the u k wages councils using data on wages council coverage from the united kingdom new earnings survey the authors examine the impact of mandated minimum wages on wage dispersion and employment in the united kingdom in the 1980s they find evidence that a dramatic decline in the toughness of the regulation imposed by the wages councils through the 1980s a decline that is in the level of the minimum wage relative to the average wage significantly contributed to widening wage dispersion over those years there is however no evidence of an increase in employment resulting from the weakening bite of the wages council minimum pay rates instead consistent with the conclusions of several recent u s studies the findings suggest that the minimum wage had either no effect or a positive effect on employment

innovation policy in an open economy a normative framework for strategic and tactical issues abstract in this paper we present a normative analysis of innovation policy grounded in traditional economic principles which responds to the schumpeterian critique of previous efforts in the neoclassical vein focusing directly on specific policy issues we pursue our analysis in two main directions investigating the role of government in developing an infrastructure for innovation and the optimal design of support schemes for r d projects the analysis suggests that while the structural and developmental issues stressed by the schumpeterian school are of fundamental importance identification of disparities between social and private gains the market failure approach provides an invaluable tool for understanding and formulating innovation policy focusing our attention on such factors as economics of scale the incidence of externalities and the supranormal profits offered by imperfectly competitive markets it provides a rational and realistic basis for anticipating where and how government intervention on behalf of industrial innovation is likely to be most effective we view our contribution as a step towards bridging the gap between the neoclassical mainstream of economic analysis and the practice of innovation policy

technological leadership and persistence of monopoly under endogenous entry static versus dynamic analysis abstract we build a dynamic oligopoly model with endogenous entry in which a particular firm leader invests in an innovation process facing the subsequent entry of other firms followers we identify conditions that make it optimal for the leader in the initial oligopoly situation to undertake pre emptive r d investment strategic predation eventually resulting in the elimination of all followers compared to a static model the dynamic one provides new insights into the leader s intertemporal investment choice its optimal decision making and the dynamics of the market structure over time we also contrast the leader s investment decisions with those of the social planner

technological expectations and adoption of improved technology abstract attention is focused upon the adoption demand rather than the creation supply of new technology which improves from time to time based on the expected flow of technological progress over which the firm demander has no control it must decide either to adopt the current best available technology or to postpone adoption the distinguishing features of the model are that more than one technological innovation is anticipated and expectations about the likelihood of such innovations are revised as time passes since the last innovation our analysis shows that the firm will adopt the current best practice if its technological lag exceeds a certain threshold moreover as time passes without new technological advances it may become profitable to purchase a technology that has been available even though it was not profitable to do so in the past

simultaneous signaling through investment in an r d game with private information abstract we analyze an r d game of two sided incomplete information in which firms can invest in cost reducing technology before engaging in cournot competition investment is observable but r d outcomes are not we focus on partial pooling equilibria in which high cost firms mimic the strategy of low cost firms resulting in under investment in equilibrium these equilibria generally involve mixed strategies with the novel feature that players are not indifferent among their mixed strategies due to the beliefs and subsequent actions they induce further results suggest that firms may be willing to pay to keep their r d outcomes concealed

racing with uncertainty and strategic interaction between competitors as the race unfolds most of the existing literature examines one or other of these features but not the two combined our aim is to see how the efforts of competitors in a race vary with the intensity of rivalry between them in our principal model whch is of a one dimensional race it is shown that the leader in the race makes greater efforts than the follower and efforts increase as the gap between competitors decreases under certain conditions the same results hold in our second related model which is of a two dimensional race

welfare analysis of tax reforms using household data abstract this paper discusses a methodology for calculating the distribution of gains and losses from a policy change using data for a large sample of households estimates are based on the equivalent income function which is money metric utility defined over observable variables this enables calculations to be standardised and a computer program to compute the statistics presented in the paper is available for a general demand system equivalent income is related to measures of deadweight loss and standard errors are computed for each of the welfare measures an application to u k data for 5 895 households is given which simulates a reform that involves eliminating housing subsidies

corporate science in the patent system an analysis of the semiconductor technology corporate scientific publications are often presented as a strategic means for firms to create prior art with the objective to prevent others from patenting related inventions this presumes that corporate publications enter the pool of prior art which is relevant to judge the novelty of patent applications at the patent office and that corporate science has the power to block patent applications this paper analyses for the first time whether the presumed mechanism behind corporate publications as a means to preempt patents works with focus on the semiconductor technology our results show that scientific publications by corporations challenge the novelty of patent applications at the european patent office epo significantly more than other pieces of prior art detailed information from the epo patent examination procedure allows us to show that corporate publications threaten the novelty of patent applications if combined with other pieces of prior art like patents rather than as standalone documents this supports the view that corporate scientific publishing can be an effective means for firms to protect their freedom to operate if used as a complementary part of a firms overall ip protection strategy as proposed by scholars in the field of law and management science

a utility based analysis of the wage subsidy program abstract because the poverty line is usually defined in terms of income two families may be classified as having poverty level incomes even though their hours of work and therefore their utilities may be very different this paper compares a government income support program that defines the poverty line in terms of utility with several other support programs that define the poverty line in terms of income through the use of the wage solution of the indirect utility function we find the amount of wage subsidy required to raise a subpoverty line family to the poverty line as defined by the utility function this subsidy is compared with wage subsidies based on directly observable quantities such as income

a patent race in a real options setting investment strategy valuation capm beta and return volatility abstract in this paper we study financial properties of r d intensive firms through a continuous time real options patent race model numerical analysis in this study shows that intense competition drives a firm to invest more aggressively which then pushes up its cost of capital and return volatility while introducing negative return correlation with its competitor furthermore we find that a firm s position in competition has important impacts on its financial properties for instance a firm s cost of capital is a non monotonic function of its relative position in the race in addition the relationship between cash flow uncertainty and investment can be negative when a firm is far ahead or far behind or positive when firms are close in the race

time consistent protection with learning by doing abstract can a government induce efficiency gains in his domestic industry by protecting it against foreign competition would such trade protection be time consistent the present paper builds a dynamic equilibrium model that accounts for learning by doing effects that link firms strategies over time the model shows that the existence of dynamic economies of scale suffices to overcome the traditional government s lack of commitment of its tariff policy this paper compares the infinite horizon markov perfect equilibrium of this game with the dynamic equilibrium under commitment as well as the static nash equilibrium equilibrium strategies are derived in closed form by solving a linear quadratic differential game optimal trade policy involves higher tariff levels than in the static setup in order to account for future gains in efficiency under reasonable assumptions the unique stable mpe is characterized by a domestic price and tariff that decrease as experience accumulates thus supporting the future liberalization of trade as an equilibrium feature of this dynamic game

a dynamic model of differentiated oligopoly with capital accumulation abstract we consider a dynamic model of differentiated oligopoly with capital accumulation we prove that the model may converge to either a steady state replicating the optimum of the static problem or a steady state driven by capital accumulation alone in the latter case the same steady state equilibrium is observed under both cournot and bertrand competition as well as social planning journal of economic literature classifications numbers c73 l13

innovation in vertically related markets we examine the impact of vertical industry structure on upstream process innovation we find that vertical integration vi generally enhances innovation under downstream cournot competition but can diminish innovation under downstream bertrand competition we also find that under bertrand competition vi can increase innovation when the direct incentives for innovation are limited but can reduce innovation when the direct incentives are pronounced

unemployment and female labour supply the definition of labour force participation in the standard labour supply model stands in sharp contrast to that used in compiling the labour force statistics in the labour supply models only those supplying positive hours of work are considered to be labour force participants on the other hand participation in the labour force statistics is often defined to include not only those supplying positive hours but also those actively searching for work this paper is an attempt to reconcile these concepts by allowing unemployed workers to enter a generalisation of the standard labour supply model this turns out to be a convenient way to enter demand side factors directly into the determination of an individual s labour market position the model is applied with some success to the working behaviour of married women in the uk family expenditure survey

some analytics of the laffer curve abstract it is shown that in a general equilibrium model with one private good one public good labour and an income tax certain widely assumed properties of the laffer curve do not necessarily hold for well behaved functional forms it may not be continuous and may not have an interior maximum its slope depends on technology as well as on the tax elasticity of labour supply for certain technologies a more negative elasticity may imply a more positive slope moreover the relevant tax elasticity is a general equilibrium one which may differ in sign from the widely quoted partial equilibrium one

differential game models in management science abstract this paper reviews a number of differential games applications to management science and operations research problems published with a few exceptions during the last decade the purpose of the article is to provide the reader with an up to date account of the state of the art within this field after having stated in an introduction the general differential games framework as well as some conceptual problems we proceed to review the models which have been divided into the following functional areas investment consumption and employment production inventories and maintenance marketing advertising pricing and rd bargaining natural resources and pollution the survey concludes with some remarks on applicability solvability and directions for future research

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

labour force participation timing and persistence this paper examines the relative importance of timing and persistence elements in explaining cyclical fluctuations in labour supply data from the natural experiment provided by world war ii and cross sectional data on american local labour markets as well as aggregate time series data are used in the empirical work we find little evidence that timing effects play an important role in labour market dynamics the evidence suggests that views emphasizing persistence are more accurate and that previous employment tends to raise the probability of subsequent employment much of the development of applied economic theory within the past 25 years has emphasized the importance of viewing economic decisions in a life cycle context consumption decisions are today frequently viewed as being determined by wealth or permanent income the human capital revolution has brought life cycle considerations to the forefront of modern labour economics while the life cycle dynamics of labour force participation decisions have important implications for macroeconomic theory and policy they have received relatively little empirical attention with the notable exceptions of lucas and rapping 1969 and hall 1980 none of the large body of work on cyclical fluctuations in employment has explicitly relied on a dynamic model of labour supply this paper uses several types of data to examine two elements of participation dynamics the first is the aspect of timing which is implicit in the work of lucas and rapping and in mincer s 1966 early discussion of hidden unemployment the timing argument which is presented most explicitly in ghez and becker 1975 holds that leisure is easily substitutable across periods hence relatively small transitory movements in the perceived real wage or real rate of return can have large effects on the path of labour supply as individuals time their participation to coincide with periods of high transitory wages on the other hand permanent changes because they do not affect the timing decision are expected to have a much smaller effect on participation it is this view of labour supply which underlies new classical macroeconomic models the dependence is made explicit in lucas 1975 who claims that what we do know indicates that leisure in one period is an excellent substitute for leisure in other nearby periods the ability of classical macroeconomic models to explain fluctuations in employment depends on the presence of strong intertemporal substitution effects unless

the underground economy in spain an alternative to unemployment this paper analyses the factors which determine whether an individual works in the formal sector in the informal sector or remains unemployed in the spanish labour market we highlight the implications of high unemployment on an individual s decision to work in the underground economy we postulate that an individual decides or is chosen whether to work in the formal sector or not in a first stage and if not in a second stage decides whether to work in the underground sector or to remain unemployed we estimate a bivariate probit model which controls for selectivity bias in the second stage the result indicates on the one hand that heads of household who benefit more from social security provisions obtained in formal sector jobs are more likely to work in such sector than others besides demand restrictions seem to operate as well individuals with higher education have easier access to the formal sector on the other hand among those who do not work in the formal sector the probability of wor

innovation timing games a general framework with applications abstract we offer a new algorithm for analyzing innovation timing games its main advantage over the traditional approach is that it applies to problems that had previously been intractable we use the algorithm to examine two classical innovation problems we find that the competition takes the form of a waiting game with a second mover advantage either for any level of r d costs process innovation or for high r d costs product innovation moreover both models predict that the second mover advantage is monotonically increasing in the costs of r d

the politics of compromise abstract an organization must select among competing projects that differ in their payoff consequences for its members each agent chooses a project and exerts effort affecting its completion time when one or more projects are complete the agents select which one to adopt the selection rule for multiple projects that maximizes ex post welfare leads to inefficiently high polarization rules that favor later proposals improve upon ex post optimal selections the optimal degree of favoritism increases in the cost of effort and discount rate this trade off informs the design of process rules in standard setting organizations and helps explain their performance jel c78 d23 d71 d72 d83 l15

on the multiplicity of perfect equilibria in a dynamic oligopoly abstract in this paper we study the subgame perfect equilibrium solution of a dynamic oligopoly model we show how there exists a family of perfect equilibria since the perfectness concept does not encompass regularity conditions on the feedback rules

strategic interaction among governments in the provision of a global public good abstract how do governments respond to other governments when providing a global public good using data from 2007 to 2014 on medical research funding for infectious and parasitic diseases we examine how governments and foundations in 41 countries respond to funding changes by the us government which accounts for half of funding for these diseases because funding across governments might be positively correlated due to unobserved drivers they have in common we use variation in the representation of research intensive universities on us congressional appropriations committees as an instrument for us funding we find that a 10 increase in us government funding for a disease is associated with a 2 to 3 reduction in funding for that disease by another government in the following year

dynamic patent races with risky choices this paper investigates equilibrium rd firms compete more vigorously in the later stages of innovation than in the earlier stages and a follower is more likely to choose a riskier innovation path than one requiring on average equivalent effort it provides an explanation of how the expected benefits the cost of r d and interactions between competing firms combine to determine dynamic r d strategies over time

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

appropriability and commercialization evidence from mit inventions the effects of appropriability on invention have been well studied but there has been little analysis of the effect of appropriability on the commercialization of existing inventions exploiting a database of 805 attempts by private firms to commercialize inventions licensed from the massachusetts institute of technology mit between 1980 and 1996 we explore the influence of several appropriability mechanisms on the commercialization and termination of projects to develop products based on university inventions our central hypothesis is that the relationship between a licensee s decision to either terminate or commercialize the invention is driven by the current market value of the invention as well as the option value of delaying its commercialization we use a competing risks framework that allows for nonparametric heterogeneity and correlated risks we find that better appropriability in the sense of more effective patent strength and secrecy has a strong negative effect on the hazard of license termination the effectiveness of learning has a strong positive effect on the hazard of technology commercialization while lead time has a negative effect

labour supply incentives and the taxation of family income taxing family income richard blundell and ian walker will lower marginal rates of income tax increase incentives to work the traditional theoretical argument ignores the fact that many individuals are members of households with more than one potential participant in paid employment the theory of optimal income tax is utilized to argue that the tax system should discriminate between individuals in the same household if their labour supply responses are different empirically the response of labour supply to changes in after tax wages is largest for secondary workers particularly married women hence the largest beneficial incentive effect is obtained if such individuals face lower tax rates since these individuals typically have below average pre tax earnings this suggests a simple way to implement our proposal establish a progressive income tax with individual earnings as the basis of assessment this might have additional advantages of fairness but its primary purpose would be to ensure that low earning but highly responsive individuals face low marginal tax rates while high earning but relatively unresponsive individuals face higher marginal tax rates contrary to popular wisdom a flat rate tax system would be less favourable for work incentives we illustrate this theoretical argument using an empirical model of labour supply embedded in a micro computer programme capable of simulating alternative tax systems

market for software vulnerabilities think again software vulnerability disclosure has become a critical area of concern for policymakers traditionally a computer emergency response team cert acts as an infomediary between benign identifiers who voluntarily report vulnerability information and software users after verifying a reported vulnerability cert sends out a public advisory so that users can safeguard their systems against potential exploits lately firms such as idefense have been implementing a new market based approach for vulnerability information the market based infomediary provides monetary rewards to identifiers for each vulnerability reported the infomediary then shares this information with its client base using this information clients protect themselves against potential attacks that exploit those specific vulnerabilities the key question addressed in our paper is whether movement toward such a market based mechanism for vulnerability disclosure leads to a better social outcome our analysis demonstrates that an active unregulated market based mechanism for vulnerabilities almost always underperforms a passive cert type mechanism this counterintuitive result is attributed to the market based infomediary s incentive to leak the vulnerability information inappropriately if a profit maximizing firm is not allowed to or chooses not to leak vulnerability information we find that social welfare improves even a regulated market based mechanism performs better than a cert type one but only under certain conditions finally we extend our analysis and show that a proposed mechanism federally funded social planner always performs better than a market based mechanism

the econometrics of nonlinear budget sets traditional empirical analysis of consumer demand has usually made the assumption of linear budget sets that is the consumer is assumed to purchase any desired quantity at a constant price subject to a budget constraint the major exception to this framework is the analysis of demand when some goods are rationed 2 in the rationed case the price is constant up to a quantity limit in contrast to the rationed case here i consider the situation where the price varies with the amount of the good purchased empirical situations with nonconstant prices come readily to mind and of course they have received much recent attention from theorists since mirrlees 44 paper on optimal nonlinear taxation the following examples are meant to give a partial listing of cases when nonlinear budget sets occur i electricity prices many electric utilities engage in declining block pricing that is the marginal price of successive kwh s of electricity decrease at a given number of points determined by total demand thus the budget set is piecewise linear houthakker 36 was the first to propose an approach to this problem taylor 51 analyzes the problem at length and hausman kinnucin and mcfadden 31 use an instrumental variables estimator to provide consistent estimates of the demand function

csr in an asymmetric duopoly with environmental externality we investigate a linear state differential game describing an asymmetric cournot duopoly with capacity accumulation a la ramsey and a negative environmental externality pollution in which one of the firms has adopted corporate social responsibility csr in its statute and therefore includes consumer surplus and the environmental effects of production in its objective function if the market is sufficiently large the csr firm sells more accumulates more capital and earns higher profits than its profit seeking rival

regulatory errors with endogenous agendas how do a regulator s decisions depend on the characteristics and strategies of its external clients we develop a theory of approval regulation in which an uninformed regulator may veto the submission of a better informed rm the rm can perform

selection criteria for a microeconometric model of labour supply the wide variety of observed behaviour that is displayed in survey data suggests that microeconometric models should allow a reasonable degree of flexibility in specification however since these models are generally used for policy analysis they are required to satisfy some degree of theoretical consistency this requirement has generally led to the adoption of rather simple inflexible models based on additive preferences or linear labour supply responses we estimate and test a sequence of models for the labour supply of married working women emphasizing the importance of testing both the thecretical and statistical assumptions underlying the models

are weak patent rights a barrier to u s exports abstract this paper assesses whether how and to what extent u s exports are sensitive to national differences in patent rights i estimate bilateral trade equations that account for trade distortions related to patent rights using data on state to country manufacturing exports in 1992 i find that weak patent rights are a barrier to u s exports but only to countries that pose a strong threat of imitation e g china the stronger patent rights required under the wto agreement increase u s exports to these high threat markets alternatively strengthening patent rights in countries that pose a weak threat of imitation reinforces monopoly power and reduces u s exports to these markets

innovation and cooperation under vertical product differentiation abstract this paper analyzes the strategic decisions of two identical duopolists who determine both the timing and the quality of their innovation through their research and development activities the product market is vertically differentiated and the firms choose the prices of their innovations in bertrand competition the firms interact in a two stage non cooperative game where they first decide on the quality and innovation date and then choose the prices in the second stage appropriately the existence of equilibria in pure and mixed strategies is analyzed it is shown that the firms have an incentive to form a research joint venture and to share their research know how even when research results are certain and there are no spillover effects and that cooperation is not socially desirable

racing with uncertainty a patent race experiment this paper presents an experimental test of the multi stage patent race model of harris and vickers rev econ stud 54 1987 1 tied competitors invested more when nearer the end of the race but this may have followed from a more general and unexplained pattern of a positive correlation between investment and progress in the race the relationship between investment and gap between competitors was mostly not as predicted also leaders did not invest more than not heavily lagging followers and the race did not approach monopoly as the gap between competitors widened overall the evidence brings only limited support to the theory

property rights and entrepreneurship in science this paper examines the evolving relationship in science between the reward structure and entrepreneurial activity we draw a distinction between two types of property rights basic science is fostered by a mechanism of reputational rights technological advances and the products and processes they produce are fostered by a mechanism of proprietary rights the two forms of property rights differ markedly in terms of the incentives they provide to share information in a timely fashion we argue that because of a host of factors university based scientists in certain fields are more likely to privatize knowledge today than in the past trading reputational rights for proprietary rights events in the life sciences serve as a case study a discussion of how privatization affects basic science follows although the evidence is far from complete we conclude that the movement towards privatization may be more beneficial to product development and the scientists engaged in the activity than to basic science

rivals search for buried treasure competition and duplication in r d we model an r d race in which each fi rm decides in each period between two research projects only one of which has positive success probability and it is not known which there is symmetric information and hence scope for strategic search if the prize is shared when discovery is simultaneous there is too much duplication of projects if neither is rewarded in this event then equilibrium is efficient unless projects have asymmetric costs in which case there is a bias toward the high cost project or asymmetric success probabilities in which case too little duplication is possible if one firm is informed it may choose the wrong project to put the other off the scent

transfers targeting and poverty poverty ravi kanbur in spite of poverty alleviation programmes in the uk and the us poverty still exists in both countries and a significant share of welfare funds do not even reach the poor this is partly because funds are simply limited and shrinking but there are also fundamental problems in designing programmes of poverty alleviation maximum effectiveness would seem to suggest that transfers ought to be targeted as precisely as possible at those who most need them unfortunately this is socially costly for two reasons first means based transfers imply that the poor face a very high marginal tax rate sometimes in excess of 100 which is a major disincentive to work effort the second difficulty is the stigma attached to means testing and the low take up rate this may induce this article presents the salient features of the us and uk poverty programmes discusses the principles behind poverty alleviation and considers various reform proposals among the alternatives is the idea of shifting even further away from means testing towards contingent benefits making transfers dependent on the characteristics most often associated with poverty the author argues that the present programmes reflect some essential considerations on which it is possible to build and that wholesale reform would be inappropriate nor is it clear that public support exists for a major extension of transfers to the poor indeed existing inefficiencies may be part of the price of public acceptance of the transfer programmes already in place

a stochastic competitive r d race where winner takes all the paper considers a race among multiple firms that compete over the development of a product the first firm to complete the development gains a reward whereas the other firms gain nothing each firm decides how much to invest in developing the product and the time it completes the development is a random variable that depends on the investment level the paper provides a method for explicitly computing a unique nash equilibrium parametrically in the interest rate for a given interest rate the nash equilibrium is determined in time that is linear in the number of firms the structure of the solution yields insights about the behavior of the participants furthermore an explicit expression for a unique globally optimal solution is obtained and compared to the unique nash equilibrium

production experiences and market structure in r d competition abstract in the rd and ii the likelihood of persistent leadership increases with the value of being the winner and the value of being a loser but decreases with expected waiting time of r d innovation and the flow of monopoly profits however destructive innovations may still occur even when production experiences are allowed to play an important role in the r d competition

defending against rival innovation we analyze how an incumbent defends its competitive advantage with a focus on the under examined methods of actively defending against the threats posed by rival innovation we describe delineate and analyze the set of such defenses and their likely effects the set of such defenses differs substantially from many standard defenses such as those aimed at defeating the threat of imitation the further study of these pre emptive innovation defenses is important because these defenses are different and because they can substantially affect the sustainability of firm profits and the pace of different of types of innovation

preemption games with private information preemption games are widely used to model economic problems such as patent races we introduce private information into these games and allow for this information to stochastically change over time this reflects e g how r d competitors improve their innovations over time and keep these innovations secret before patenting them the analysis initially appears intractable because of the complexity of the equilibrium updating of beliefs on opponents information however we demonstrate the existence of a class of equilibria and calculate these equilibria in closed form we find that the expected durations in these equilibria are longer than when players information is public but in some cases shorter than in the collusive outcome hence r d secrecy slows down innovation disclosure

developing real option game models by mixing concepts from both game theoretic analysis and real options theory an investment decision in a competitive market can be seen as a game between firms as firms implicitly take into account other firms reactions to their own investment actions we review two decades of real option game models suggesting which critical problems have been solved by considering game theory and which significant problems have not been yet adequately addressed we provide some insights on the plausible empirical applications or shortfalls in applications to date and suggest some promising avenues for future research

value and risk dynamics over the innovation cycle this paper studies investment in intellectual capital and corresponding value and risk dynamics over the innovation cycle we assume that the innovation cycle consists of three phases r d trial and market introduction phases we use a real option investment model to characterize firm value and risk dynamics over the innovation cycle and find that firm value is the sum of the value of assets in place and non linear option values related to breakthrough exit and market introduction options firm risk over the innovation cycle is highly non linear and quite distinct in different phases during the r d phase risk is high as the firm faces high operating leverage originating from r d fixed costs together with technological uncertainty during the trial phase risk is significantly lower and dominated by option risk to launch the product in the market while after the introduction of the product in the market risk is equivalent to the asset risk of the company our model is consistent with the view that positive excess returns of r d intensive firms are a compensation for risk based on this insight we derive several testable predictions

patent rights and innovation disclosure this article studies optimal patents with respect to the timing of innovation disclosure in a simple model we identify forces that lead firms to either suboptimally patent too early or too late in equilibrium and we determine conditions so that stronger patents induce earlier or later equilibrium disclosure then by solving an infinite multistage patent game with a more explicit structure we describe innovation growth and derive detailed predictions that can be used for policy experiments as an application we calibrate our multistage game using summary statistics from the seeds breeding industry we find that weaker patent rights may result in welfare gains of 46 relative to the status quo the gains are achieved because weaker patents reduce competition thus leading firms to postpone patenting

innovation and competition the role of the product market abstract we study how competition impacts innovation and welfare when firms compete both in the product market and in innovation development this relationship is complex and may lead to scenarios in which a lessening of competition increases r d and consumer welfare in the long run we provide conditions for when competition increases or decreases industry innovation and welfare these conditions are based on properties of the product market payoffs implications for applied work and policy are discussed

foreign exchange trading models and market behavior abstract the contributions of this paper are twofold first the performance of a widely used commercial real time trading model is compared with a simple exponential moving average model second the trading models are used as diagnostic tools to evaluate the statistical properties of foreign exchange rates the results presented in this paper have a general message to the standard paradigm in econometrics it is not sufficient to develop sophisticated statistical processes and choose an arbitrary data frequency e g one week one month annual etc claiming afterwards that this particular process does a good job of capturing the dynamics of the data generating process in financial markets the data generating process is a complex network of layers where each layer corresponds to a particular frequency a successful characterization of such data generating processes should be estimated with models whose parameters are functions of intra and inter frequency dynamics in other fields such as in signal processing paradigms of this sort are already in place our understanding of financial markets would be increased with the incorporation of such paradigms into financial econometrics our trading models within this perspective help to observe this subtle structure as a diagnostic tool

a dynamic game of r and d patent protection and competitive behavior a theory of dynamic optimal resource allocation to r and d in an n firm industry is developed using differential games this technique represents a synthesis of the analytic methods previously applied to the problem static game theory and optimal control the use of particular functional forms allows the computation and detailed discussion of the nash equilibrium in investment rules this paper addresses the problem of resource allocation to research and development among the important issues that a firm engaging in r and d must evaluate are uncertainty regarding the feasibility and profitability of a particular innovation the possibility of a protracted development period the possibility that a rival firm may innovate first capturing either a patent or a significant share of the new market the possibility that a rival firm may imitate the innovation and appropriate some of the profits in the new market in what follows we will develop a theory of optimal resource allocation to research and development which incorporates the aspects of r and d enumerated above we will use a dynamic game theoretic analysis determining the nash equilibrium strategies for n identical firms the availability of perfect patent protection is shown to accelerate development of the innovation and the effect of increasing rivalry is addressed the impact of increasing rivalry on nash equilibrium investment in r and d depends upon the degree of appropriability of rewards if patent protection is perfect then increasing the number of nash rivals results in increased r and d effort however when imitation is rewarded the opposite may be true finally some notions of competitive and perfectly competitive equilibrium are examined in the context of the model developed below

competitive experimentation with private information the survivor s curse we study a winner take all r d race between two firms that are privately informed about the arrival rate of an invention over time each firm only observes whether the opponent left the race or not the equilibrium displays a strong herding effect that we call a survivor s curse unlike in the case of symmetric information the two firms may quit the race nearly simultaneously even when their costs and benefits for research differ significantly