Patent Quality and a Two‐Tiered Patent System

In this paper, we study the determinants of patent quality and volume of patent applications when inventors care about perceived patent quality. We analyze the effects of various policy reforms, specifically, a proposal to establish a two‐tiered patent system. In the two‐tiered system, applicants can choose between a regular patent and a more costly, possibly more thoroughly examined, ‘gold‐plate’ patent. Introducing a second patent‐tier can reduce patent applications, reduce the incidence of bad patents, and sometimes increase social welfare. The gold‐plate tier attracts inventors with high ex‐ante probability of validity, but not necessarily applicants with innovations of high economic value.     

Trade associations and collusion among many agents: evidence from physicians

We study a recent case where most gynecologists in one city formed a trade association to bargain for better rates with insurance companies. After unsuccessful negotiations, the physicians jointly terminated their insurer contracts and set a minimum price. We find that subsequent realized prices coincided with Nash-Bertrand prices, and that the minimum price was barely binding. We show that these actions ensured the association's stability and increased profits. Our findings shed light on the role of trade association in collusion among a large number of heterogeneous agents, and provide insights for the antitrust analysis of trade associations.     

Open Source Software: Competition with A Public Good

This paper looks at price and quality competition in software markets under two different forms of competition—one where two proprietary firms first choose quality and then engage in price competition, and second where a proprietary firm faces competition from an open source software (OSS) firm that allows its users to determine quality level and provides the software at zero price. We find that OSS competition never improves quality for consumers who value quality highly. However, it may provide greater quality to users with a low valuation for quality. In addition, we find that although OSS has a zero market price, the public good nature of OSS competition can lessen price competition, making the proprietary firm better-off with increased profit but leaving consumers worse-off with lower surplus.     

How does ownership structure affect capital structure and firm value?Recent evidence from East Asia1

The present paper examines the effects of ownership structures on capital structure and firm valuation. It argues that the effects of separation of control from cash flow rights on capital structure and firm value also depend on the separation of control from management as well as on legal rules and enforcement defining investors’ protection. We obtain firm‐level panel data (three stage least squares, 3SLS) estimates from four of the East Asian countries worst affected by the last crisis. There is evidence that the general wisdom that higher control than cash flow rights may lower firm value may be reversed among owner‐managed family firms in the sample countries.     

Managerial Decision-Making on Moral Issues and the Effects of Teaching Ethics

This study uses judgment and decision-making (JDM) perspective with the help of framing and schema literature from cognitive psychology to evaluate how managers behave when problems with unethical overtones are presented to them in a managerial frame rather than an ethical frame. In the proposed managerial model, moral judgment of the situation is one of the inputs to managerial judgment, among several other inputs regarding costs and benefits of various alternatives. Managerial judgment results in managerial intent leading to managerial action. The model and the effects of taking an ethics course on ethical and managerial judgment and managerial intent were then indirectly tested in this study, wherein subjects judged the ethical wrongness, managerial badness, and the managerial intent regarding decisions made in a case. Forty-nine MBA students analyzed a case involving budget-based bonuses and production, in which the ethical issue evolved over three stages. It appears from the Path-analysis results that managerial judgment mediated between moral judgment and the judgment of managerial intent as suggested by the proposed model, and that taking an ethics course directly affected managerial judgment but did not affect the moral judgment. Additionally, in the first stage of decision-making (early stage of a developing “ethical slippery slope”), moral judgment did not significantly influence managerial judgment. However, students with ethics course still were more inclined to judge the decision as managerially bad as compared to others, indicating that they were more aware or sensitive to the moral issues involved.     

Literacy traps: Society-wide education and individual skill premia

Using a model of an O-ring production function, the present paper demonstrates how certain communities can get caught in a low-literacy trap in which each individual finds that it is not worthwhile investing in higher skills because others are not high-skilled. The model sheds light on educational policy. It is shown that policy for promoting human capital has to take the form of a mechanism for solving the coordination failure in people's choice of educational strategy.