The innovation process as a complex structure with multilevel rules

Increasingly, innovation is conceived in a context of conventions or rules and complexity. However, there is a need for a theoretical basis that describes the innovation process based on complexity. In this essay, we propose a multilevel micro-meso-macro framework that aims to meet this need and further the discussion on complexity. In this framework, the rule is adopted as an analytical concept and used to establish a bridge between the several theories employed. Two gaps are identified in the innovation process: the first is related to the simplicity with which complexity is generally treated, and the second refers to a lack of focus on the rules embedded in the theories used in innovation. The goal of this theoretical essay is to propose a multilevel micro-meso-macro framework, based on the rules and principles of complexity, which can be used to analyze the innovation process. As a result, we propose a new framework in which the innovation rules and the interactions between those rules are detailed and based on principles of complexity.     

The role of optimal threats in auction design

This paper studies revenue-maximizing auctions when buyers' outside options depend on their private information and are endogenously chosen by the seller. We show that the revenue-maximizing assignment of the object can depend crucially on the outside options that the seller can choose as threats. Depending on the shape of outside options, sometimes an optimal mechanism allocates the object in an ex-post efficient way, and, other times, buyers obtain the object more often than is efficient.     

Estimating Demand for Local Telephone Service with Asymmetric Information and Optional Calling Plans

In this paper, I study the theoretical and econometric implications of agents' uncertainty concerning their future consumption when a monopolist offers them either a unique, mandatory nonlinear tariff or a choice in advance from a menu of optional two–part tariffs. Agents' uncertainty is resolved through individual and privately known shocks to their types. In such a situation the principal may screen agents according to their ex ante or ex post type, by offering either a menu of optional tariffs or a standard nonlinear schedule. The theoretical implications of the model are used to evaluate a tariff experiment run by South Central Bell in two cities in Kentucky in 1986. The empirical approach explicitly accounts for the existence of informational asymmetries between local telephone users and the monopolist, leading to different, nested, econometric specifications under symmetric and asymmetric information. The empirical evidence suggests that there exists a significant asymmetry of information between consumers and the monopolist under both tariff regimes. All expected welfare components failed to increase with the introduction of optional tariffs for the estimated value of the parameters.     

Testing for complementarity when strategies are dichotomous

We show that it is not possible to extend Arora (1996) reduced form test for the existence of complementarity to evaluate the relationship between a couple of dichotomous strategies as it leads to an incoherent simultaneous discrete response model.     

The Tax Paradox and Weak Tax Neutrality

We introduce the concept of weak tax neutrality that establishes that the relationship between the tax rate and the user cost of capital may be non-monotonic. We show that most existing corporate tax systems allow for weak neutrality. That is, given the tax allowances permitted by these systems, it is possible that neutrality may arise for at least one positive corporate tax rate. Moreover, we show the practical relevance of weak neutrality in realistic situations where there are several asset types and heterogeneous levels of firms' debt ratios.     

Screening consumers through alternative pricing mechanisms

This paper addresses the optimal design of optional nonlinear tariffs. Two particular solutions commonly used in telecommunications and other industries are fully characterized. These optimal outlay schedules illustrate how the tariff design is altered when there exists a time lag between tariff choice and consumption. In this model, consumers' uncertainty is resolved in the interim, between the tariff choice and the usage decision, through changes in their types. The paper studies whether the monopolist may profit from screening consumers according to different information sets, and it shows that expected profits are higher under an ex-post tariff if the variance of the ex-ante type distribution is large enough. The paper also shows that no results regarding social efficiency may be obtained in general. Welfare comparison of optional tariffs will be very sensitive to type distributions, how types enter demand specifications, and the relative variance of the type components.I wish to thank John Panzar for his guidance on the present research and, for his many suggestions over several endless discussions on this paper. I also thank Kyle Bagwell, Robert Porter, and Daniel Spulber for helpful comments and suggestions. Financial support from the Ministerio de Educación y Ciencia, Spain, is gratefully acknowledged.