patent pools as a solution to efficient licensing of complementary patents some experimental evidence production requiring licensing groups of complementary patents implements a coordination game among patent holders who can price patents by choosing among combinations of fixed and royalty fees summed across patents these fees become the total producer cost of the package of patents royalties because they function as excise taxes add to marginal costs resulting in higher prices and reduced quantities of the downstream product and lower payoffs to the patent holders using fixed fees eliminates this inefficiency but yields a more complex coordination game in which there are multiple equilibria which are very fragile in that small mistakes can lead the downstream firm to not license the technology resulting in inefficient outcomes we report on a laboratory market investigation of the efficiency effects of coordinated pricing of patents in a patent pool we find that pool like pricing agreements can yield fewer coordination failures in the pricing of complementary patents

collateral damage for r d manufacturers how patent sharks operate in markets for technology patent sharks small firms that exploit information asymmetries in markets for technology to gain patent based competitive advantages challenge established theory by which i markets for technology benefit large firms and ii intellectual property rights systems strictly support markets for technology empirically linking the sharks different assault strategies to the patents they deploy we illustrate that patent sharks will likely be an enduring phenomenon in markets for technology we discuss policy and strategy implications copyright 2010 the author 2010 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

standard essential patents a major policy issue in standard setting is that patents that are ex ante not that important by being included into a standard may become standard essential patents in an attempt to curb the monopoly power that they create most standard setting organizations require the owners of patents covered by the standard to make a loose commitment to grant licenses on reasonable terms such commitments unsurprisingly are conducive to litigation this paper builds a framework for the analysis of these patents identifies several types of inefficiencies attached to the lack of price commitments and shows how structured price commitments restore competition and why such commitments may not arise spontaneously in the marketplace

credible spatial preemption it is often argued that incumbent firms may deter entry by preemptive investment in new goods we show that these conclusions are reversed when multiproduct incumbentfirms may exit in response to entry once entrants are in an industry an incumbent will often want to withdraw some goods to prevent competition with the entrant from reducing profits on other goods such a reaction makes entry more attractive to a potential entrant the equilibrium industry structure is less likely to be monopolistic as the goods are better substitutes as exit costs are low and as the competition between producers of the same good is more intense

tastes and technology in a two country model of the business cycle explaining international trade on international financial markets allows people to insure country specific risk and smooth consumption intertemporally equilibrium models of business cycles with trade on global financial markets typically yield international consumption correlations near one and excessive volatility of investment the authors incorporate nontraded goods in the model and find that the implications for aggregate consumption investment and the trade balance are consistent with business cycle properties of industrialized countries however the model driven by technology shocks alone yields counterfactual implications for comovements between consumption and prices at the sectoral level taste shocks produce price quantity relationships more consistent with the data copyright 1995 by american economic association

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

commodity trade and international risk sharing how much do financial markets matter abstract this paper evaluates the social gains from international risk sharing in some simple general equilibrium models with output uncertainty a simulation model calibrated to selected moments of u s and japanese data estimates the incremental loss from a ban on international portfolio diversification to be on the order of 0 20 percent of output per year even the theoretical gains from asset trade may disappear under alternative sets of assumptions on preferences and technology the paper argues that the small magnitude of potential trade gains may help explain the apparently inconsistent findings of empirical studies on the degree of international capital mobility

dynamic equilibrium with liquidity constraints this article studies an intertemporal economy with liquidity constrained and unconstrained individuals we use a stopping time approach to solve the finite horizonconstrained consumption portfolio problem with constant relative risk aversion and to examine the structure of equilibrium the impact of the constraint on the optimal consumption and the financing portfolio is assessed the equilibrium state price density is related to the exercise boundary of an american style contingent claim with nonlinear payoff this stopping time characterization enables us to prove the existence of an equilibrium and can be implemented numerically properties of equilibrium bond and stock returns are examined copyright 2003 oxford university press

determinants of environmental investments testing the structural model abstract the main purpose of this study is to provide the needed additional quantitative evidence regarding the introduction of environmental technologies and to increase the possibility for generalization and thus policy application of conclusions to achieve that purpose a conceptual model is developed and then tested on a large database of firms from various industries with the use of structural equation modeling the results show that policy measures past environmental investments the importance of environmental technologies for customers and the firm performance have a positive effect on environmental investments furthermore the results show that policy measures are a second order three factor construct

innovation policy for directing technical change in the power sector this paper discusses policy instruments for redirecting technical change within the electricity sector to mitigate climate change first we unravel the mechanism behind directed technical change explaining why markets may underprovide innovations in expensive renewable technologies in comparison to innovations in energy efficient fossil fuel generators subsequently we characterize technical change in electricity generation technologies stressing the heterogeneity of knowledge spillovers both within and between clean electricity generation technologies we argue that there exists a rationale for a portfolio approach to innovation in the electricity sector i e optimal innovation policies are neither fully generic nor fully specific and they need to be adapted in response to new information learned by the government the existing innovation literature does not however provide a clear cut answer for designing such a policy we compare policy instruments and argue that public r d support to clean technologies either in the form of subsidies or prizes seems to be the prime candidate for implementing non generic innovation policy

financial integration and the wealth effect of exchange rate fluctuations abstract recent years have witnessed a large increase in international financial integration in the form of largely offsetting cross holdings across countries we assess how such financial leverage affects the international transmission of monetary shocks and find that it leads to sizable welfare differentials that far exceed the impact due to nominal rigidities we document the relevance of the exact nature of holdings with bond holdings associated with larger effects than equity holdings the impact of financial leverage on welfare is also sensitive to the extent of exchange rate pass through and the substitutability between goods produced in different countries

the role of portfolio constraints in the international propagation of shocks we study the comovement among stock prices and exchange rates in a three good three country centre periphery dynamic equilibrium model in which the centre s agents face portfolio constraints we characterize equilibrium in closed form for a broad class of portfolio constraints solving for stock prices terms of trade and portfolio holdings we show that portfolio constraints generate wealth transfers between the periphery countries and the centre which increase the comovement of the stock prices across the periphery we associate this excess comovement caused by portfolio constraints with the phenomenon known as contagion the model generates predictions consistent with other important empirical results such as amplification and flight to quality effects copyright 2008 wiley blackwell

licensing policy and technology adoption in standard setting organizations the standard setting organizations decisions on licensing policy and standard s technological specification and the ensuing implications for social welfare are analyzed the author finds the conditions under which a licensing rule that grants monopoly power to the licensors whose technology is adopted in the standard can be employed by the members of the consortium ex post licensing moreover it is shown that the adoption of ex post licensing might lead to the inefficient exclusion of an efficient stand alone licensor finally the author discusses the conditions under which a policy of ex ante licensing can be less efficient than ex post licensing jel k21 l15 l24 l42

efficient patent pools the paper builds a tractable model of patent pools agreements among patent owners to license sets of their patents it provides a necessary and sufficient condition for patent pools to enhance welfare and shows that requiring pool members to be able to independently license patents matters if and only if the pool is otherwise welfare reducing the paper allows patents to differ in importance asymmetric blocking patterns and licensors to also be licensees we undertake some initial exploration of the impact of pools on innovation the analysis has broader applicability than pools being relevant to a number of co marketing arrangements

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

an asset pricing view of external adjustment abstract recent literature has argued that conventional measures of external sustainability the trade balance and current account are misleading because they omit capital gains on net foreign asset positions we adjust the definition of the current account to include the capital gains and discuss how this may affect our thinking about external adjustment and sustainability we do so in the context of a two country macro finance model of pavlova and rigobon 2008a that allows exploration of the interconnections between equilibrium portfolios and external accounts dynamics we calibrate the model and find that it generates several testable implications some of which have already been validated empirically first we establish dynamic properties of the capital gains adjusted current account and show that they are fundamentally different from those of the conventional current account second we find that capital gains have a stabilizing effect on the trade balance and the current account finally we demonstrate that in response to a shock the conventional and the capital gains adjusted current accounts may move in opposite directions

international portfolios capital accumulation and foreign assets dynamics despite the liberalization of capital ows among oecd countries equity home bias remains sizable we depart from the two familiar explanations of equity home bias transaction costs that impede international diversi cation and terms of trade responses to supply shocks that provide risk sharing so that there is little incentive to hold diversi ed portfolios we show that the interaction of the following ingredients generates a realistic equity home bias capital accumulation shocks to the e ciency of physical investment as well as international trade in stocks and bonds in our model domestic stocks are used to hedge uctuations in local wage income terms of trade risk is hedged using bonds denominated in local goods and in foreign goods in contrast to related models the low level of international diversi cation does not depend on strongly countercyclical terms of trade the model also reproduces the cyclical dynamics of foreign asset positions and of international capital ows

asset prices and exchange rates in this paper we study the implications of introducing demand shocks and trade in goods into an otherwise standard international asset pricing model trade in goods gives rise to an additional channel of international propagation through the terms of trade absent in traditional single good asset pricing models the inclusion of demand shocks helps overturn many unrealistic implications of existing international flnance models in which productivity shocks are the sole source of uncertainty our model generates a rich set of implications on how stock bond and foreign exchange markets co move we solve the model in closed form which yields a system of equations that can be readily estimated empirically our estimation validates the main predictions of the theory

international business cycles with endogenous incomplete markets backus kehoe and kydland 1992 baxter and crucini 1995 and stockman and tesar 1995 find two major discrepancies between standard international business cycle models with complete markets and the data in the models cross country correlations are much higher for consumption than for output while in the data the opposite is true and cross country correlations of employment and investment are negative while in the data they are positive this paper introduces a friction into a standard model that helps resolve these anomalies the friction is that international loans are imperfectly enforceable any country can renege on its debts and suffer the consequences for future borrowing to solve for equilibrium in this economy with endogenous incomplete markets the methods of marcet and marimon 1999 are extended incorporating the friction helps resolve the anomalies more than does exogenously restricting the assets that can be traded

emerging ways to address the reemerging conflict between patenting and technological standardization the relationship between standards and intellectual property rights iprs is a complementary but troubled one the way it is managed affects the way stakeholders contribute to standards and may ultimately affect the way some technologies and even industries evolve a spate of recent legal controversies has been accompanied by the emergence of new mechanisms to help govern the risk of conflict here this article provides an empirical analysis of these attempts to reconcile the aims of these regimes

patent pool formation and scope of patents basic innovations are often fundamental to the development of applications that may be developed by other innovators in this setting we investigate whether patent pools can rectify the lack of incentives for a developer to invest in an application following green and scotchmer 1995 we also wonder whether broad basic patents are necessary in order to provide enough incentives for basic innovators we show that patent pools are more likely

diffusion as time dependent result of technological evolution competition and policies the case of cleaner iron and steel technologies abstract the typical focus of diffusion analysis on one new technology and patterns of its evolution in time tends to neglect important features of technological evolution such as the dynamics of technological competition and the importance of the institutional framework this is particularly so for cleaner technologies which have to compete with well established technologies and of which diffusion dynamics are related to environmental policy too in this paper a new conceptual approach to innovation diffusion building on insights of evolutionary economic theory is proposed and applied to a case study on the diffusion of a cleaner ironmaking technology

cross licensing and competition we study bilateral cross licensing agreements between n 2 firms that engage in competition after the licensing phase it is shown that the most collusive cross licensing royalty i e the one that allows the industry to achieve the monopoly profit is sustainable as the outcome of bilaterally efficient agreements in a symmetric setting if the terms of the cross licensing agreements are not observable to third parties the monopoly royalty is the unique symmetric bilaterally efficient royalty however when the terms of the agreements are public the most competitive royalty i e zero can also be bilaterally efficient policy implications regarding the antitrust treatment of cross licensing agreements are derived from these results

home bias in open economy financial macroeconomics standard theory would predict that investors hold a well diversified portfolio of equities across the world but despite the process of financial globalization investors still hold a disproportionate share of local equities in their portfolio the equity home bias french and poterba 1991 we review the various explanations of this puzzling phenomenon in the context of recent developments in macroeconomic modelling that have allowed to incorporate sophisticated international portfolio choices in standard two country general equilibrium models we refer to this literature as open economy financial macroeconomics we focus on three broad classes of explanations i hedging motives in frictionless financial markets real exchange rate and non tradable income risk ii asset trade costs in international financial markets such as transaction costs differences in tax treatments between national and foreign assets iii informational frictions and behavioural biases these recent developments raise the need for new portfolio facts beyond the equity home bias and we will present some new evidence on cross border asset holdings across different types of assets equities bonds and bank lending we also present some new micro data on institutional holdings of equity at the fund level these data should inform macroeconomic modelling of the open economy and a growing literature of models of delegated investment

portfolio and welfare consequences of debt market dominance the ability to issue debt that pays in units of the domestic good leads a country to accumulate a large and negative net foreign asset position while maintaining a positive position in equity this debt market advantage also helps to explain the weak relationship between the real exchange rate and relative consumption our stylized model matches the key facts about the u s international portfolio the u s real exchange rate and explains nearly 50 of the observed variation in the valuation effects we find that taxing bond market transactions increases the volatility of the exchange rate capital flows and allocations in contrast taxing equity positions stabilizes the exchange rate and capital flows while having little impact on the allocation lastly the paper describes a global solution method for portfolio problems under incomplete markets

cross border returns differentials were the u s to persistently earn substantially more on its foreign investments u s claims than foreigners earn on their u s investments u s liabilities the likelihood that the current environment of sizeable global imbalances will evolve in a benign manner increases however we find that the returns differential of u s claims over u s liabilities is far smaller than previously reported and importantly is near zero for portfolio equity and debt securities for portfolio securities we confirm our finding using a separate dataset on the actual foreign equity and bond portfolios of u s investors and the u s equity and bond portfolios of foreign investors in the context of equity and bond portfolios we find no evidence that the u s can count on earning more on its claims than it pays on its liabilities finally we reconcile our finding of a near zero returns differential with observed patterns of cumulated current account deficits the net international investment position and the net income balance jel codes f3

patents and cumulative innovation causal evidence from the courts cumulative innovation is central to economic growth do patent rights facilitate or impede such follow on innovation this paper studies the effect of removing patent protection through court invalidation on the subsequent research related to the focal patent as measured by later citations we exploit random allocation of judges at the u s court of appeal for the federal circuit to control for the endogeneity of patent invalidation we find that patent invalidation leads to a 50 percent increase in subsequent citations to the focal patent on average but the impact is highly heterogeneous patent rights appear to block follow on innovation only in the technology fields of computers electronics and medical instruments moreover the effect is entirely driven by invalidation of patents owned by large patentees that triggers entry of small innovators suggesting that patents may impede the democratization of innovation

the new patent intermediaries platforms defensive aggregators and super aggregators some assets are traded in liquid markets at transparent prices with the help ome assets are traded in liquid markets at transparent prices with the help of many thriving intermediaries houses and apartments stocks and other of many thriving intermediaries houses and apartments stocks and other fi nancial products books dvds electronics and all sorts of collectibles fi nancial products books dvds electronics and all sorts of collectibles

patent pools and cross licensing in the shadow of patent litigation this paper develops a framework to analyze the incentives to form a patent pool or engage in cross licensing arrangements in the presence of uncertainty about the validity and coverage of patents that makes disputes inevitable it analyzes the private incentives to litigate and compares them with the social incentives it shows that pooling arrangements can have the effect of sheltering invalid patents from challenges this result has an antitrust implication that patent pools should not be permitted until after patentees have challenged the validity of each other s patents if litigation costs are not too large

tying foreclosure and exclusion in recent years the leverage theory of tied good sales has faced heavy and influential criticism in an important sense though the models used by its critics are actually incapable of addressing the leverage theory s central concerns here the author reconsiders the leverage hypothesis and argues that tying can indeed serve as a mechanism for leveraging market power the mechanism through which this leverage occurs its profitability and its welfare implications are discussed in detail copyright 1990 by american economic association

general wisdom concerning the factors affecting the adoption of cleaner technologies a survey 1990 2007 abstract cleaner technologies ct have recently received much attention in diverse media and policy agendas this comes out of the clear role they play in environmental protection and sustainability and the large potential to contribute to economic growth and competitiveness the realization of both potentials depends on the level diffusion and exploitation achieved today very low this article presents a selective survey of papers that today represent the general wisdom concerning the factors affecting adoption as a primary condition to diffusion and exploitation of ct the paper helps to clarify the challenges facing diffusion modelers and policy makers when dealing with policy design assessing the levels of diffusion achieved as well as the factors affecting diffusion of a particular technology the paper ends outlining further research need in the field

contributing to differentiated technology policy making on the promotion of energy efficiency technologies in heavy industrial sector a case study of china abstract promoting energy efficiency technologies eets in heavy industrial sector is a crucial approach for energy conservation worldwide due to the existence of various barriers the diffusion of eets is often slow and is largely influenced by policy incentives insufficient consideration of the heterogeneity of eets makes the one size fits all policy design scheme ineffective and inefficient in practice therefore this paper analyzes the design of differentiated technology policies to accelerate the promotion of eets the analysis is based on technology classification results from a bottom up technology evaluation system technical attributes were qualitatively analyzed and the 130 total technologies were divided into three segments 76 main production process technologies pp 39 process integrated resource and energy recycling technologies rer and 15 pollution control technologies pc then the 115 pp and rer technologies were quantitatively analyzed by calculating benefit cost ratio investment payback time and technical penetration the evaluation results proved that eets had marked differences in economic efficiency and technical maturity with dynamic investment payback time ranging from 0 3 to 11 years and penetrations ranging from 1 to 80 graphing investment payback time on a vertical axis and technical penetration on a horizontal axis the 115 technologies were classified into four quadrants features and policy support demands of those three types of technologies in the four quadrants were discussed and corresponding technology policies were proposed the thorough technical investigations in this study also provided a complete technological database for policy making which was freely offered on the website of china s ministry of industry and information technology

financial intermediation international risk sharing and reserve currencies abstract i model the equilibrium risk sharing between countries with varying financial development the most financially developed country takes greater risks because its financial intermediaries deal with funding problems better in good times the more financially developed country consumes more and runs a trade deficit financed by the higher financial income that it earns as compensation for taking greater risk during global crises it suffers heavier losses its currency emerges as the reserve currency because it appreciates during crises thus providing a good hedge i provide evidence that financial net worth plays a crucial role in understanding this asymmetric risk sharing jel e44 f14 f32 g01 g15 g21

optimal cross licensing arrangements collusion versus entry deterrence this paper analyzes optimal cross licensing arrangements between incumbent firms in the presence of potential entrants the optimal cross licensing royalty rate trades off incentives to sustain a collusive outcome vis a vis incentives to deter entry with the threat of patent litigation we show that a positive cross licensing royalty rate which would otherwise relax competition and sustain a collusive outcome dulls incentives to litigate against entrants our analysis can shed light on the puzzling practice of royalty free cross licensing arrangements between competing firms in the same industry as such arrangements enhance incentives to litigate against any potential entrants and can be used as entry deterrence mechanism

equilibrium asset prices and exchange rates abstract in a two country two good world we construct an intertemporal international general equilibrium for two logarithmic representative agents financial markets are fully integrated and independently incomplete the equilibrium expected rate of change of the exchange rate increases with the differential of interest rates and the volatility of the domestic equity markets and decreases with the covariance between domestic and foreign equity markets the equilibrium volatility of the exchange rate is the sum of the volatilities due to idiosyncratic factors in the financial markets and a term that represents the difference of weights in the common international factor

the price effects of international airline alliances abstract this paper provides evidence on the effect of international airline alliances on fares the main finding is that alliance partners charge interline fares that are approximately 25 percent below those charged by nonallied carriers according to our theoretical model the main source of this fare reduction is the internalization of a negative externality that arises from the uncoordinated choice of interline sub fares in the absence of an alliance the paper also looks for evidence of an anti competitive alliance effect in the gateway to gateway markets while the point estimates show that an alliance between two previously competitive carriers would raise fares by about 5 percent this effect is not statistically significant

international capital flows abstract the surge in international asset trade since the early 1990s has lead to renewed interest in models with international portfolio choice we develop the implications of portfolio choice for both gross and net international capital flows in the context of a simple two country dynamic stochastic general equilibrium dsge model we focus on the time variation in portfolio allocation following shocks and resulting capital flows endogenous time variation in expected returns and risk which are the key determinants of portfolio choice affect capital flows in often subtle ways the model is consistent with a broad range of empirical evidence an additional contribution of the paper is to overcome the technical difficulty of solving dsge models with portfolio choice by developing a broadly applicable solution method

the risk premium and long run global imbalances this study proposes that heterogeneous household portfolio choices within a country and across countries offer an explanation for global imbalances we construct a stochastic growth multi country model in which heterogeneous agents face the following restrictions on asset trade first the degree of us equity market participation is higher than that of the rest of the world second a fraction of households in each country maintains a fixed share of equity in its portfolios in our calibrated model which matches the us net foreign asset position and the equity premium the average us household loads up more aggregate risk than the average foreign household by investing in risky assets abroad and issuing risk free assets as a result the us is compensated by a high risk premium and runs trade deficits even as a debtor country the long run average trade deficit in our model accounts for 50 of the observed us trade deficit

factors influencing the diffusion of electric arc furnace steelmaking technology in this paper the adoption of electric arc furnace steelmaking technology is examined within a growth model of technological diffusion the results indicate that the trend rate of adoption of electric are furnace technology is well represented by the s shaped growth curve further results indicate that the trend rate of adoption is for the most part stable with respect to locally changing factors to production such as input prices and activity levels it appears that inertial aspects have an overwhelming influence on the diffusion process

differentiated standards and patent pools we consider patent pool formation by owners of essential patents for differentiated standards that may be complements or substitutes in use pooling improves coordination in terms of royalty setting within a standard but provokes a strategic response from licensors in the competing standard we characterise the incentives to form and defect from pools within standards and show how pool formation and stability depend on competition between standards we also examine strategic patent pool formation by consortium standards and show that policies promoting compatibility of standards may increase or decrease welfare depending on the effects on the incentives to form pools

trade and environment an empirical analysis of the technology effect in the steel industry abstract the objective of this paper is to study the impact of free trade on global environmental quality by focusing on the technology effect that is the relationship between trade openness and the adoption diffusion of clean technologies the paper attempts to empirically verify the existence of the technology effect by looking at the relationship between trade policy regime or openness and the speed of clean technology diffusion in the steel industry focusing on a cleaner steel technology the electric arc furnace eaf in 30 steel producing countries over 25 years the results show that eaf technology is diffused faster in countries that have more open trade policy regimes thereby supporting the existence of the technology effect for the industry considered

the external wealth of nations measures of foreign assets and liabilities for industrial and developing countries abstract although capital flows are closely monitored surprisingly little is known about the accumulated stocks of foreign assets and liabilities held by various countries especially in the developing world this paper constructs estimates of foreign assets and liabilities and their equity and debt subcomponents for a sample of 67 industrial and developing countries it characterizes the stylized facts of international balance sheets and asks whether there are trends in net foreign asset positions and shifts in debt equity ratios over time finally it explores the sensitivity of estimated stock positions to the treatment of valuation effects not captured in balance of payments data

collaborative promotion of technology standards and the impact on innovation industry structure and organizational capabilities evidence from modern patent pools this study explores the impact of modern patent pools inter organizational collaborative arrangements for promoting the adoption of technology standards on the rate of follow on innovations based on pooled technologies the vertical structure of associated industries and organizational capabilities of noncollaborating firms on one hand the formation of modern pools can boost follow on innovation by lowering the search negotiation and licensing costs associated with pooled standards on the other hand modern pools may decrease the incentives to invest in follow on innovations because of cannibalization risks and grant back provisions to the extent that modern pools succeed in establishing a dominant standard their collaborative nature and their reliance on markets for technology can reduce technological uncertainty and appropriation hazards hence triggering vertical disintegration in related industries moreover by establishing a dominant standard modern pools can effectively diminish the relati

patents and innovation evidence from economic history abstract what is the optimal system of intellectual property rights to encourage innovation empirical evidence from economic history can help to inform important policy questions that have been di

patent pools and innovation in substitute technologies evidence from the 19th century sewing machine industry patent pools which combine complementary patents of competing firms are expected to increase overall welfare but potentially discourage innovation in substitutes for the pool technology this article exploits a new historical data set on changes in patenting and firm entry for a clearly defined pool technology and substitutes in the 19th century sewing machine industry this analysis reveals a substantial increase in innovation for an albeit technologically inferior substitute technology historical evidence suggests that the creation of a pool diverted innovation toward an inferior substitute technology by creating differential license fees and litigation risks

recent evolutionary theorizing about economic change this famous passage from marshall s principles of economics it first appeared in the fifth edition which came out in 1907 nicely brings out two issues which are as germane to economics today as they were when marshall wrote the first is the heavy reliance by economists in their formal theorizing on the notion of equilibrium the other is the appeal that biological conceptions3x201d have for many economists particularly when their focus is on economic change

current accounts in debtor and creditor countries the authors reexamine a classic question in international economics what is the current account response to a transitory income shock such as a temporary improvement in the terms of trade a transfer from abroad or unusually high production to answer this question they construct a world equilibrium model in which productivity varies across countries and international borrowing and lending take place to exploit good investment opportunities despite its conventional ingredients the model generates the novel prediction that favorable income shocks lead to current account deficits in debtor countries and current account surpluses in creditor countries evidence from thirteen oecd countries broadly supports this theoretical prediction

the role of patents in information and communication technologies a survey of the literature during the last few decades the number of patents in information and communication technologies has increased considerably an increasing number of patents and the associated fragmentation of ip rights have generated a series of potentially problematic consequences patent thickets royalty stacking the emergence of patent assertion entities increased patent litigation particularly around standard essential patents and the difficulties with defining fair reasonable and nondiscriminatory licensing terms are some of the most debated issues in the literature that we review in this paper we devote a specific section of our survey to patent quality currently one of the most debated issues surrounding the patent system in our analysis we mix theoretical and empirical arguments with a more policy oriented reasoning this allows us to better position the different issues in the relevant political and economic context

symmetric tragedies commons and anticommons an anticommons problem arises when there exist multiple rights to exclude in a lengthy law review paper michael a heller has examined the tragedy of the anticommons especially in regard to disappointing experiences with efforts to shift from socialist to market institutions in russia in an early footnote heller suggests that a formal economic model of the anticommons has not been developed this paper responds to heller s challenge we analyze the anticommons problem in which resources are inefficiently underutilized rather than overutilized as in the familiar commons setting the two problems are shown to be symmetrical in several respects we present an algebraic and geometric illustration and extend the discussion to several applications of greater importance we suggest that the construction is helpful in understanding the sources of major value wastage in modern regulatory bureaucracy the navigation of the danube is of very little use to the different states of bavaria austria and hungary in comparison of what it would be if any of them possessed the whole of its course till it falls into the black sea adam smith the wealth of nations 1776 bk 1 ch 3

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

consumption and portfolio policies with incomplete markets and short sale constraints the infinite dimensional case abstract we employ a martingale approach to study a dynamic consumption portfolio problem in continuous time with incomplete markets and short sale constraints we introduce a notion of minimax local martingale and transform the dynamic problem into a static problem of maximizing expected utility over the consumption bundles that satisfy a single budget constraint formed using that measure we establish the existence of and characterize the minimax local measure provide sufficient conditions for the dynamic consumption portfolio problem to have a solution and relate the optimal policies to the solution of quasi linear partial differential equation

why are exchange rates so smooth a household finance explanation abstract empirical moments of asset prices and exchange rates imply that pricing kernels are almost perfectly correlated across countries otherwise observed real exchange rates would be too smooth for high sharpe ratios however the cross country correlation among macro fundamentals is weak we reconcile these facts in a two country stochastic growth model with heterogeneous households and a home bias in consumption in our model only a small fraction of households trade domestic and foreign equities we show that this mechanism can quantitatively account for the smoothness of exchange rates in the presence of volatile pricing kernels and weakly correlated macro fundamentals

entry for buyout the possibility of buying out an entrant has an important effect on entry deterrence entrants can blackmail the incumbent by threatening to keep prices low and buyout can make entry profitable which otherwise would not be in particular the entry deterrence policy of excess capacity to reduce the post entry price can not only fail but work against the incumbent the presence of multiple oligopolistic incumbents or multiple potential entrants however can discourage entry for buyout the long literature on entry deterrence has always assumed that if entry is made unprofitable no entry will occur but as followers of professional football may have suspected a clearly unprofitable competitor might rationally enter a market in the hopes of selling out to the incumbent i will model such a situation and try to show what conditions facilitate entry for buyout in the simplest entry deterrence model the incumbent successfully maintains monopoly by threatening to expand output and cut price after other firms enter but he succeeds only because potential entrants believe the threat if entrants are rational this strategy fails price warfare hurts the incumbent as well as the entrant so the monopolist would let the entrant have a share of profits after entry potential entrants foreseeing the accommodating response ignore the threat deterred entry is a nash equilibrium but not a perfect nash equilibrium it is nash because the entrant chooses to stay out given the incumbent s strategy of cutting prices after entry and the incumbent does not mind committing himself to cutting prices given that entry never occurs a perfect nash equilibrium is a set of strategies that is a nash equilibrium for every proper subgame if the game is started at any of the nodes of the game tree including those off the equilibrium path the strategies the agents pick to maximize their objective function from that node onwards must be part of the equilibrium strategy for the entire game in the subgame which begins after entry has already occurred the incumbent would not choose to cut prices so cutting prices after entry is not part of a perfect equilibrium in the perfect equilibrium entry occurs and is accommodated

on trees and logs abstract in this paper we contrast the main workhorse model in asset pricing theory the lucas 1978 tree model lt model to a benchmark model in financial equilibrium theory the real assets model ra model it is commonly believed that the two models entail similar conclusions since the lt model is a special case of the ra model but this is simply wrong implications of these models can be strikingly at odds indeed under the widely used log linear specification of households preferences we show that for a large set of initial endowments the lt model even with potentially complete financial markets admits only peculiar financial equilibria in which the stock market is completely degenerate in that all stocks offer the same investment opportunity and yet allocation is pareto optimal we investigate why the lt model is so much at variance with the ra model and uncover new results on uniqueness of financial equilibria and introduction of portfolio constraints obtaining in the lt model but not in the ra model