Patent Protection and Strategic Delays in Technology Development: Implications for Economic Growth

We present an endogenous growth model in which both the investment to develop a new technology—that upgrades the quality of machines—and entry of imitators are determined endogenously. According to the model, how soon the new‐technology machine is launched after the patent is granted is influenced by two factors: returns to scale in technology development and “strategic delays.” Strategic delays in technology development are most likely to occur when earlier dates of success enable imitators to enter an industry, that is, when imitation is swift and relatively cheap and/or patent protection is relatively lengthy. We then explore the link between the optimal patent length and economic growth and find that the equilibrium investment in technology development and thus the expected rate of technological progress exhibit an inverted U‐shape relationship with respect to the legal patent length.     

Credibility and Reputation Building in the Developmental State: A Model with East Asian Applications

We use a game-theoretic model to analyze the role of credibility, reputation and investment coordination in a developmental state. Our model focuses on why a “soft” state serving narrow social groups so often obtains in less-developed countries and under what conditions a “hard” or developmental state can emerge. The model highlights the dilemma that although state and private sector alike may want economic growth, both must simultaneously invest to achieve it. But the equilibrium outcome—analogous to the prisoner's dilemma—is investment by neither. Even when initial conditions are favorable and a state is potentially developmental with the genuine capability to elicit private sector investment, this may not materialize and an equilibrium of low, or no, investment will prevail. To avoid this deadlock and foster growth, the successful developmental state must demonstrate commitment by promoting its “developmental” credentials through a process of reputation building. A consequent incentive to act “tough” together with seeming advantages of authoritarianism in implementing the developmental state may help to explain why it is often associated with an authoritarian political system.     

Do Economists Recognize an Opportunity Cost When They See One? A Dismal Performance or an Arbitrary Concept?

2005 asked 199 professional economists a multiple‐choice question about opportunity cost. Given that only 21.6% answered “correctly,” they conclude that professional understanding of the concept is “dismal.” We challenge this critique of the profession. Specifically, we allow for alternative opportunity cost accounting methodologies—one of which is derived from the term's definition as found in Ferraro and Taylor— and rely on the conventional relationship between willingness to pay and substitute goods to demonstrate that every answer to the multiple‐choice question is defensible. The Ferraro and Taylor survey question suggests difficulties in framing an opportunity cost accounting question, as well as a lack of coordination in opportunity cost accounting methodology. In scope and logic, we conclude that the survey question does not, however, succeed in measuring professional understanding of opportunity cost. A discussion follows as to the concept's appropriate role in the classroom.     

Prostitutes,Pimps, and Brothels: Intermediaries,Information, and Market Structure in Prostitution Markets

Prostitution is a multi‐billion dollar, globally distributed, low‐concentration service industry that is receiving increasing attention in the economics literature. This article focuses on a widespread, but little studied, feature of this environment—the role of intermediaries (pimps or brothel owners) on market outcomes. Prostitution laws and markets are perhaps unique in that transactions between principals (prostitutes and johns) are legal in many countries, while intermediary activity (pimping) is illegal. After surveying the varying cross‐country legality of agents we develop a simple theoretical model to analyze how the presence or absence of intermediaries shifts the distribution of market surplus. We show that eliminating pimps and brothels may shift surplus in non‐obvious ways, depending on the precise function they perform and on whether equilibrium is pooling or separating across “high quality” and “low quality” market segments. The implications of alternative policy regimes (intermediaries legal or illegal) are considered.     

Legal Penalties and Audit Quality: An Experimental Investigation*

The purpose of this paper is to investigate the impact of legal penalties on audit quality under different legal regimes. We investigate whether audit quality is affected differentially due to the complexity inherent in legal regimes and the frequency of imposing legal penalties. Economic theory predicts that players adopt equilibrium strategies that reflect the expectation that a penalty will be incurred, but the actual occurrences of penalties, if consistent with this expectation, should not prompt an individual to modify his or her strategy. However, learning theory suggests that players' choices will be repeated in the future based on outcomes. We found that penalties triggered both increases and decreases in effort, and seemed to introduce a “shock” that increased the variability of effort. We also observed a “funnel” effect — that is. greater changes in effort closer to the imposition of penalties, and smaller changes as more periods go by without a penalty.     

Does Manufacturer Advertising Crowd‐in or Crowd‐out Retailer Advertising? An Application of an Endogenous Prize Contest with Asymmetric Players

When a manufacturer advertises, what is the impact on retailer advertising? I analyze a contest model of advertising where total advertising by the manufacturer and by retailers determines market size, and the relative level of advertising by each retailer determines market share. If retailers are symmetric I show that there is a crowding‐in effect so increased manufacturer advertising increases retail advertising. But if one retailer is stronger, then marginal increases in manufacturer advertising have a crowding‐out effect on retailer advertising, while sufficiently large increases have a crowding‐in effect by “jump‐starting” competition between retailers for the larger market. Furthermore, asymmetric abilities in such contests can lead the weaker player to effectively drop out of the contest, thereby undermining the ability of increased prizes to increase effort by intensifying competition.     

Dynamic relationship between China's inward and outward foreign direct investments

This paper studies the dynamic relationship of China's inward and outward foreign direct investments (FDI). It first identifies the key determinants of China's outward FDI (OFDI) in 172 host countries during 2003–2009 using a partial stock adjustment model. It finds strong evidence of dynamic adjustment in China's OFDI stock with an agglomeration effect. The dynamic adjustment and agglomeration effects are stronger in “high-tech” countries than in “low-tech” ones but indifferent in host country's resource endowments and income levels. The empirical results suggest that there exists a substantial adjustment cost in China's OFDI and that China's existing OFDI stock can gradually adjust toward its long-term equilibrium level, which is not only greater but also more volatile than the actual stock. Of particular interest is that we find a strong and positive relationship between lagged inward FDI (IFDI) and contemporaneous OFDI, implying that capital outflow from China has been partially induced by the countries which have invested in China.     

A model of optimal advertising expenditures in a dynamic duopoly

This paper develops a dynamic model of oligopolistic advertising competition. The model is general enough to include predatory advertising and informative advertising as particular cases. The analysis is conducted in a differential game framework and compares the open-loop and feedback equilibria to the efficient outcome. It is found that for the informative advertising competition game, advertising levels are closer to the collusive outcomes in a feedback equilibrium. In the case of predatory advertising, expenditures are inefficiently high in a feedback equilibrium and the open-loop solution is more efficient.     

Stopping deforestation in the Amazon: Trade-off between ecological and economic targets?

Stopping Deforestation in the Amazon: Trade-off between Ecological and Economic Targets? —Using a computable general equilibrium model the paper analyzes the regional, sectoral and macroeconomic dimension of Brazil’s “deforestation problem”. It is shown that macroeconomic reform is not in conflict with conservation policies. Therefore, there is no need for compensation payments but rather for improving the effectiveness of conservation policies by macroeconomic reform. The analysis also shows that regional conservation policies are generally superior to sectoral conservation policies.     

“Love for variety,” outside option and extensive margin of demand

The paper models a uniform-price Bertrand-price-competition in a differentiated product oligopoly market, where the buyers' preference shows “love for variety.” The buyers differ from each other in their valuation of the differentiated product with a common outside option available to all. The model endogenously determines both the extensive and intensive margin of demand and the equilibrium number of varieties in the differentiated product market. It shows that in such a framework complementarity exists at the extensive margin of demand even in the presence of demand substitutability between the varieties. The results apply to the competition between brick and mortar shops and malls.     

Free Riding in Noncooperative Entry Deterrence with Differentiated Products

We examine free riding and underinvestment in noncooperative entry deterrence in the Gilbert and Vives (1986) model with differentiated products. Our analysis proves that for products that are differentiated enough, when both entry allowing and entry deterring equilibria coexist, the symmetric entry deterring equilibrium may Pareto dominate the entry equilibrium. Hence, “coordination failure” underinvestment in entry prevention can occur. However, as claimed, the overinvestment result of Gilbert and Vives remains robust to moderate amounts of product differentiation. We also show that coordination failure underinvestment arises in a wide variety of entry deterrence models and does not rely on assumptions regarding strategic substitutability or complementarity of precommitments.     

广告影响需求下的新产品竞争性动态定价策略

文章在广告影响需求条件下,考虑了双寡头垄断企业竞争下的新产品动态定价问题,提出了一个竞争性动态定价策略。当顾客不仅考虑当前的价格和广告水平而且也考虑以往的交易价格和广告水平条件下,提出了一个具有"学习"功能的竞争性需求函数。运用多周期动态博弈理论给出了均衡的销售价格和广告水平,分析了三种情形下(竞争双方仅有价格竞争而广告竞争强度为0、竞争双方既有价格竞争又有广告竞争且广告竞争强度大于0小于1和竞争双方存在价格竞争而广告竞争强度为1)竞争双方的动态定价策略。结果发现企业可以选择五种定价策略——提高价格、降低     

广告影响需求下的新产品竞争性动态定价策略

文章在广告影响需求条件下,考虑了双寡头垄断企业竞争下的新产品动态定价问题,提出了一个竞争性动态定价策略。当顾客不仅考虑当前的价格和广告水平而且也考虑以往的交易价格和广告水平条件下,提出了一个具有“学习”功能的竞争性需求函数。运用多周期动态博弈理论给出了均衡的销售价格和广告水平,分析了三种情形下（竞争双方仅有价格竞争而广告竞争强度为0、竞争双方既有价格竞争又有广告竞争且广告竞争强度大于0小于．1和竞争双方存在价格竞争而广告竞争强度为1）竞争双方的动态定价策略。结果发现企业可以选择五种定价策略——提高价格、降低价格、维持原价、振荡收敛于常数和发散定价,这些定价策略在一定程度上受企业广告的成本系数和初始给定的价格及广告水平的影响。     

Does information technology raise Japan's productivity?

A standard growth accounting exercise indicates that, after Japan's “lost decade,” its overall total-factor-productivity (TFP) growth has increased notably since 2000. This productivity revival has been limited, however, to information technology (IT) production—has not been a broad-based productivity acceleration like that seen in the United States after the mid-1990s. This paper examines the relationship between IT and productivity gains by employing the “augmented” growth accounting framework for Japanese industry-level data from 1975 through 2005. In particular, we estimate “purified” technology change at industry level by accounting for cyclical mismeasurement of inputs. We find that the post-2000 increase in overall TFP growth does indeed appear to arise from an increase in technological change. Furthermore, the pickup in technology growth has occurred not only in the production of IT but also in the industries that use IT intensively. Our results suggest the possibility that stories of IT as a general purpose technology (GPT) could apply to Japan as well as to the United States.     

Mixed duopoly,location choice,and shadow cost of public funds

We examine the relationship between equilibrium and efficient levels of product differentiation in a mixed duopoly, where a welfare‐maximizing public enterprise competes with a profit‐maximizing private firm. We introduce shadow costs of public funding (i.e., the excess burden of taxation). The profits of public firms obtained by the government reduce these costs. We find that in a mixed duopoly, the level of product differentiation is too low for social welfare. This result is in sharp contrast to the private oligopoly, where the level of product differentiation is too high. Finally, we show that when the shadow cost is high, privatizing the public enterprise improves welfare.     

What about Mom? The Forgotten Beneficiary of the Medicaid Expansions

This paper contributes to evidence regarding the effectiveness of the Medicaid expansions by focusing on a key beneficiary—the mother—who has previously been overlooked. Using the Natality Detail Files for 1989-1996, we estimate the relationship between Medicaid eligibility and maternal health outcomes for several treatment groups and a control group. Potential biases caused by improved reporting are addressed by using a “straw man” maternal complication not preventable with prenatal care. Our results indicate that increased Medicaid eligibility may have led to fewer preventable maternal complications among women most likely to have benefited from the Medicaid expansions.     

An empirical analysis of China's aggregate import demand function

This study uses the cointegration concept to analyze the long-run relationship of China's aggregate import demand function for the period 1970–1999. The conventional specification for the import demand function reveals that the volume of imports demanded responds to domestic activity and relative prices. This study considers four definitions of domestic activity, namely gross domestic product (GDP), GDP minus exports [IMF Staff Pap. 45 (1998) 236], “national cash flow” [Econ. Lett. 74 (2002) 265], and final expenditure components [Appl. Econ. 21 (1989) 957]. The empirical results indicate a long-run equilibrium relationship between these measures of domestic activity and China's import demand. Overall, domestic activity and relative prices are inelastic in the long run. This study also highlights some policy implications.     

论“公正”重于“关护”———对中国就业弱势群体税收支持政策的哲学反思

随着我国就业弱势群体的出现,财政部和国家税务总局陆续出台了一系列促进就业的税收政策,但由于这些税收政策在“公正”与“关护”两个基本原则运用上存在侧重点的偏差,导致这些政策的作用效果并不明显。“公正”与“关护”同属人类伦理学理论资源中的两个基本道德诉求。在就业弱势群体税收支持政策制定中,两者缺一不可、互相关联,但从国家宏观就业指导方针、道德原则的稳定性、持久性以及普遍性的角度看,应该坚持“公正”重于“关护”。     

Can the Japanese agri-food producers survive under freer trade? A general equilibrium analysis with farm heterogeneity and product differentiation

The roles of firm heterogeneity and product differentiation in the manufacturing industries have attracted research attention on the “new new trade theory.” The agricultural sectors also produce new goods using product differentiation through breeding, branding, and other activities. In reaction to globalization, the Japanese Government has sought to revitalize its agri-food sectors by promoting exports of differentiated products. This computable general equilibrium study examines the relevance of this policy, focusing on five agri-food sectors other than grains. We simulate Japan’s three trade deals and a policy intervention that cuts fixed export costs to promote exports. We show that only a few agri-food sectors can increase exports and maintain domestic output under freer trade, and that export promotion would markedly increase entrants into export markets and increase exports of the vegetables and fruit, and processed food product sectors. In these trade deals, tariff and nontariff barriers have different impacts on trade, output, and farm/firm entry.     

The Logit Equilibrium: A Perspective on Intuitive Behavioral Anomalies

This paper considers a class of models in which rank-based payoffs are sensitive to “noise” in decision making. Examples include auctions, price competition, coordination, and location games. Observed laboratory behavior in these games is often responsive to the asymmetric costs associated with deviations from the Nash equilibrium. These payoff-asymmetry effects are incorporated in an approach that introduces noisy behavior via a logit probabilistic choice function. In the resulting logit equilibrium, behavior is characterized by a probability distribution that satisfies a “rational expectations” consistency condition: The beliefs that determine players' expected payoffs match the decision distributions that arise from applying the logit rule to those expected payoffs. We prove existence of a unique, symmetric logit equilibrium and derive comparative statics results. The paper provides a unified perspective on many recent laboratory studies of games in which Nash equilibrium predictions are inconsistent with both intuition and experimental evidence.