the economic complexity of technology and innovation the nature of technology what it is and how it evolves brian w arthur free press new york ny 2009 v 247 pp us 27 00 hbk isbn 978 1 4165 4405 0 technology has been a problematic and

lone inventors as sources of breakthroughs myth or reality are lone inventors more or less likely to invent breakthroughs recent research has attempted to resolve this question by considering the variance of creative outcome distributions it has implicitly assumed a symmetric thickening or thinning of both tails i e that a greater probability of breakthroughs comes at the cost of a greater probability of failures in contrast we propose that collaboration can have opposite effects at the two extremes it reduces the probability of very poor outcomes because of more rigorous selection processes while simultaneously increasing the probability of extremely successful outcomes because of greater recombinant opportunity in creative search analysis of over half a million patented inventions supports these arguments individuals working alone especially those without affiliation to organizations are less likely to achieve breakthroughs and more likely to invent particularly poor outcomes quantile regressions demonstrate that the effect is more than an upward mean shift we find partial mediation of the effect of collaboration on extreme outcomes by the diversity of technical experience of team members and by the size of team members external collaboration networks supporting our meta argument for the importance of examining each tail of the distribution separately experience diversity helps trim poor outcomes significantly more than it helps create breakthroughs relative to the effect of external networks

term limits and bounds on policy responsiveness in dynamic elections abstract i analyze equilibria of a dynamic political agency model of elections with a two period term limit in the presence of adverse selection and moral hazard in equilibrium office holders policy choices are ordered by type politicians exert positive effort in the first term of office and as politicians become highly office motivated the highest politician type mixes with positive probability between shirking and choosing arbitrarily high policies nevertheless the commitment problem of voters imposes a bound on equilibrium expected effort exerted by politicians that holds uniformly across the level of office benefit and the rate of time discounting in particular when politicians are highly office motivated voters are too demanding in equilibrium and voter welfare would increase if it were possible to commit to a lower cutoff for re election

technology as a complex adaptive system evidence from patent data this paper develops a theory of invention by drawing on complex adaptive systems theory we see invention as a process of recombinant search over technology landscapes this framing suggests that inventors might face a complexity catastrophe when they attempt to combine highly interdependent technologies our empirical analysis of patent citation rates supports this expectation our results also suggest however that the process of invention differs in important ways from biological evolution we discuss the implications of these findings for research on technological evolution industrial change and technology strategy 2001 elsevier science b v all rights reserved

media bias and influence evidence from newspaper endorsements this paper investigates the relationship between media bias and the inuence of the media on voting in the context of newspaper endorsements werst develop a simple econometric model in which voters choose candidates under uncertainty and rely on endorsements from better informed sources newspapers are potentially biased in favor of one of the candidates and voters thus rationally ac count for the credibility of any endorsements our primary empiricalnding is that endorsements are inuential in the sense that voters are more likely to support the recommended candidate after publication of the endorsement the degree of this inuence however depends upon the credibility of the endorsement in this way endorsements for the democratic candidate from left leaning news papers are less inuential than are endorsements from neutral or right leaning or newspapers and likewise for endorsements for the republican thesendings suggest that voters do rely on the media for information during campaigns but that the extent of this reliance depends upon the degree and direction of any bias

game theoretic modeling of increasing returns to scale abstract this paper surveys the analysis by means of cooperative game theory of economies in which there are increasing returns to scale in the first section necessary and sufficient conditions for the existence of a core of a general equilibrium economy are considered in the second section the partial equilibrium approach to increasing returns production which developed along with the natural monopoly literature is surveyed the close relationship between the general equilibrium and partial equilibrium approaches is emphasized

second best pricing and cooperation this article studies pricing for natural monopolies by using a cooperative game of joint production outputs are allocated by a price system we introduce the concept of the second best core which is a subset of the set of zero profit second best pareto optimal prices prices are such that no group of consumers subsidizes the purchase of another group we consider the relations among the second best core and sustainability supportability and natural monopoly for specific preferences and technology we demonstrate the existence of the second best core we design a market mechanism for franchise allocation which achieves second best pricing without price regulation

second best taxation as a game second best theory usually lies in the realm of normative analysis it focuses attention on the best solutions which still can be obtained in problems where constraints of various natures forbid the attainment of first best pareto optimal situations its central concern is the characterization of such second best solutions and a large part of the literature concentrates on the optimal design of taxes or of policies of public firms taking a second best problem we try in this paper to shift the emphasis from normative to positive considerations the solution we are interested in is not optimal with respect to some a priori given social welfare function embodying justice objectives but it is supposed to reflect the power of the different agents in a negotiation process clearly the conceptual tools required for such an analysis are to be found in game theory and it is actually a game theoretical approach that we follow here the model we are looking at is presented in section ii it formalizes one of the simplest second best problems that can be imagined we have a twogood economy with one private good and one public good agents have different wealth in private good and the public good is financed through a wealth tax this latter fiscal system is clearly not flexible enough to adjust contributions with marginal willingnesses to pay so that we actually face a second best situation there is one decision variable in the society the tax rate which determines the public good production about which the agents have conflicting desires to this problem we associate a game which provides a precise framework for the analysis of the power of the agents the positive outcomes of the negotiation process are supposed to belong to the core of this game sections iii and iv concentrate on the analysis of the core the results strongly contrast with those obtained in the classical studies of the core of 67 0022 053 l 81 040067 25 02 00 o

perfect competition and the core it is part of the conventional wisdom of economics that a mass market i e one with many relatively small participants will tend to be perfectly competitive one possible meaning of this is that it will behave as if prices were quoted and taken as given by the traders the final allocation of goods and services is then called walrasian there are at least two classical formal theories of perfect competition they can be associated with the names of cournot 1838 and edgeworth 1881 edgeworth s contribution has led to the modern theory of the core of a market see debreu scarf 1963 aumann 1964 and hildenbrand 1974 and his references its central result the core equivalence theorem states conditions under which in a mass economy competition in the sense of edgeworth yields at equilibrium walrasian allocations the extension to general equilibrium analysis of cournot s partial equilibrium model is currently being actively pursued gabzewicz vial 1972 hart 1979 1980 shubik 1973 novshek sonnenschein 1978 see also the april 1980 symposium issue of the journal of economic theory by now a variety of cournot equivalence theorems is available there is substantial but not complete overlap between the set of conditions identified as important by the edgeworth and the cournot type analysis by and large both approaches have proved to be useful tools for testing the competitiveness of some theoretical market situations for example differentiated commodities models have been analyzed in mas colell 1975 from the point of view of the core and in hart 1979 from the cournot perspective for yet another approach with a classical foundation to the theory of perfect competition see j ostroy 1980 it is probably fair to say that the economics profession at large thinks of perfect competition more in cournot s than in edgeworth s terms the purpose of this paper is to make the case for the core in the light of some of the issues raised by the recent cournot analysis we will try to argue that the edgeworth notion of competition yields a quite sensible concept and a very flexible tool and that not surprisingly edgeworth and cournot competition are close relatives once properly viewed by way of motivation it will be useful to begin by examining and commenting on four points of real or apparent contrast between the two approaches

a theoretical foundation for the undercut proof equilibrium abstract this paper develops a theoretical foundation for the undercut proof equilibrium see shy 1996 shy 2002 morgan and shy 2015 in a general spatial setting the set of undercut proof prices is equivalent to the core of a non transferable utility coalitional game played on the set of outcomes that are feasible in bertrand competition the result depends critically on two conditions first firms must have unlimited capacity and constant marginal costs second the goods produced by firms must only be differentiated by the spatial characteristics of the market an application to network markets shows how the undercut proof equilibrium can be used to describe stable price dispersion and persistent performance differences

information and strategic political polarisation we develop a model of electoral competition in which two opportunistic candidates select their policy position and invest in quality policy positions are observed and during the campaign the press reveals some information about quality we demonstrate that when information is imperfect the blackdowns median voter theorem fails to hold for intermediate information levels the unique equilibrium is such that candidates propose policies different from the median voter s bliss point by contrast convergence to the median occurs when quality is almost always or almost never revealed we also show that a profit maximising press may collect more information than socially optimal during the 1995 electoral campaign in belgium the vld a traditionally right wing

the case for responsible parties electoral platform convergence is perceived unfavorably by both the popular press and many academic scholars arguably to paraphrase it does not provide enough choice between candidates this article provides a formal account of the perceived negative effects of platform convergence we show that when parties do not know voters preferences precisely all voters ex ante prefer some platform divergence to convergence at the ex ante median after characterizing the unique symmetric equilibrium of competition between responsible policy motivated parties we conclude that all voters ex ante prefer responsible parties to opportunistic purely office motivated ones when parties are sufficiently ideologically polarized that platforms diverge but not so polarized that they diverge excessively however greater polarization increases the scope for office benefits as an instrument for institutional design we calculate the socially optimal level of platform divergence and show that office benefits can be used to achieve this first best outcome if parties are sufficiently ideologically polarized

a knowledge based theory of the firm the problem solving perspective in this paper we develop a knowledge based theory of the firm while existing knowledge based theory focuses on the efficiency of hierarchy in economizing on knowledge exchange we develop a theory of the firm that focuses on the efficiency of alternative organizational forms ingenerating knowledge or capability our theory begins with the problem as the basic unit of analysis arguing that a problem s complexity influences the optimal method of solution search and the optimal means of organizing that search the distinguishing feature that differentiates among organizational alternatives is the different way each resolves conflict over the selection of solution trials that is the way it chooses the path of search our theory predicts that efficiency demands that these governance alternatives be matched in a discriminating way to problems based on their associated benefits and costs in governing solution search thus our theory is among the first to simultaneously treat both the boundary choice i e internal versus external and the choice among alternative internal approaches to organizing

competence and ideology we develop a dynamic repeated election model in which citizen candidates are distinguished by both their ideology and valence voters observe an incumbent s valence and policy choices but only know the challenger s party our model provides a rich set of novel results in contrast to existing predictions from static models we prove that dynamic considerations make higher valence incumbents more likely to compromise and win re election even though they compromise to more extreme policies consequently we find that the correlation between valence and extremist policies rises with office holder seniority this result may help explain previous empirical findings despite this result we establish that the whole electorate gains from improvements in the distribution of valences in contrast fixing average valence the greater dispersion in valence associated with a high valence political elite always benefits the median voter but can harm a majority of voters when voters are sufficiently risk averse we then consider interest groups igs or activists who search for candidates with better skills we derive a complete theoretical explanation for the intuitive conjectures that policies are more extreme when igs and activists have more extreme ideologies and that such extremism reduces the welfare of all voters

extremism in revolutionary movements abstract a revolutionary entrepreneur strategically chooses the revolutionary agenda to maximize the likelihood of revolution citizens have different preferences and can contribute varying degrees of support we show 1 extremists exert a disproportionate influence over the revolutionary agenda 2 depending on the structure of repression more severe repression can moderate or radicalize the revolutionary agenda specifically increases in the minimum punishment marginal cost of revolutionary effort at its minimum radicalize the revolutionary agenda this presents the elite with a tradeoff between extreme but unlikely revolutions and moderate but likely ones 3 competition between revolutionary entrepreneurs can radicalize the revolutionary agenda

scale economies and existence of sustainable monopoly prices abstract the size of the firm relative to market demand is crucial to a determination of whether there exist sustainable monopoly prices in the one product case the size of the firm is its minimum efficient scale in the multiproduct case size is defined by a set of outputs at which cost complementarities are present the analysis shows that when the size of the firm is sufficiently large there exist anonymously equitable aumann shapley prices further at these prices natural monopoly is sustainable against rival entry the aumann shapley price are also shown to be quantity sustainable in the sense of brock and scheinkman

signaling character in electoral competition we study a one dimensional hotelling downs model of electoral competition with the following innovation a fraction of candidates have character and are exogenously committed to a campaign platform this is unobservable to voters character is desirable and a voter s utility is a convex combination of standard policy preferences and her assessment of a candidate s character this structure induces a signaling game between strategic candidates and voters since a policy platform affects voters utilities not only directly but also indirectly through inferences about a candidate s character the model generates a number of predictions starting with a failure of the median voter theorem jel d72 d82

candidates credibility and re election incentives i study elections between citizen candidates who cannot make binding policy commitments before taking office but who are accountable to voters due to the possibility of re election in each period a representative voter chooses among heterogeneous candidates with known policy preferences the elected candidate chooses the policy to implement and how much rent seeking to engage in when in office as the voter decides both which candidate to elect and subsequently whether the candidate is retained this framework integrates elements of electoral competition and electoral accountability i show that in the best stationary equilibrium when utility functions are concave over policy non median candidates are elected over candidates with policy preferences more closely aligned with the voter in this equilibrium there are two candidates who are elected at some history and the policies these candidates implement in office do not converge this divergence incentivizes candidates to engage in less rent seeking increasing voter welfare copyright 2013 oxford university press

optimal departures from marginal cost pricing focuses on departures from marginal cost pricing optimal allocation or resources level of tax revenue that will be collected by the government theorems developed for resource allocation ebsco

learning about challengers we examine a political agency problem in repeated elections where an incumbent runs against a challenger from the opposing party whose policy preferences are unknown by voters we first ask do voters benefit from attracting a pool of challengers with more moderate ideologies when voters and politicians are patient moderating the ideology distribution of centrist and moderate politicians those close to the median voter reduces voter welfare by reducing an extreme incumbent s incentives to compromise we then ask do voters benefit from informative signals about a challenger s true ideology we prove that giving voters informative but sufficiently noisy signals always harm voters because they make it harder for incumbents to secure re election