BUSINESS AND FINANCIAL METHOD PATENTS, INNOVATION, AND POLICY

Court decisions in the 1990s are widely viewed as having opened the door to a flood of business method and financial patents at the US Patent and Trademark Office, and to have also impacted other patent offices around the world. A number of scholars, both legal and economic, have critiqued both the quality of these patents and the decisions themselves. This paper reviews the history of business method and financial patents briefly and then explores what economists know about the relationship between the patent system and innovation, in order to draw some tentative conclusions about their likely impact. It concludes by finding some consensus in the literature about the problems associated with this particular expansion of patentable subject matter, highlighting the remaining areas of disagreement, and reviewing the various policy recommendations.     

COMPETITION POLICY AND CARTEL SIZE

This article examines endogenous cartel formation in the presence of a competition authority. Competition policy is shown to make the most inclusive stable cartels less inclusive. In particular, small firms that might have been cartel members in the absence of a competition authority are no longer members. Regarding the least inclusive stable cartels, competition policy can either decrease or increase their size and, in the latter case, the collusive price can rise.     

AIRPORT PRIVATIZATION AND INTERNATIONAL COMPETITION

We provide a simple theoretical model to explain the mechanism whereby the privatization of international airports can improve welfare. The model consists of a downstream (airline) duopoly with two inputs (landings at two airports) and two types of consumers. The airline companies compete internationally. We show that the outcome in which both airports are privatized is always an equilibrium, whereas that in which no airport is privatized is an equilibrium only if the degree of product differentiation is large. We also discuss airport congestion problems within the model framework.     

THE DECISION TO HIRE MANAGERS IN MIXED MARKETS UNDER BERTRAND COMPETITION*

This paper analyses the decisions of firms as to whether or not to hire managers when there is a public firm competing with a private firm in the product market. It is shown that under Bertrand competition with heterogeneous goods both firms hire managers. This is in contrast with the result obtained under Cournot competition, where only the private firm hires a manager. Moreover, welfare is lower if both firms hire managers than if neither firm does. In contrast, under Cournot competition welfare is greater if both firms hire managers.     

FIRM SIZE AND PRICING POLICY

We relate pricing policy of firms to their size, where firm size is interpreted as the size of the clientele served by the concerned firm. We argue that a firm with a large clientele faces a more severe reputational backlash if it ‘reneges’, i.e., deviates from its earlier price offer. This allows the firm to effectively commit to its offers, leading to a unique equilibrium without delay. Interestingly, this equilibrium corresponds to the equilibrium of the related model that does not allow for reneging possibilities. For smaller firms, however, the reputational effects are much less intense, and consequently the equilibria may involve deviation possibilities. In this case, the equilibria are non‐unique and may involve delays as well.     

ON THE INEFFICACY OF TEMPORARY POLICY IN A DYNAMIC GENERAL EQUILIBRIUM WITH MONEY*

We construct a dynamic economy with many consumers with money in their utilities. Two main results—a turnpike theorem and inefficacy of temporary policy—are established in a dynamic general equilibrium framework in which price effects generated through markets are explicitly factored in. Turnpike, which is perfectly independent from wealth distribution among the heterogeneous consumers, will be globally attractive. Temporary policy is not effective not only for the future but for the current economy if the long‐run interest rate level is low. The inefficacy result coincides with an intuitive explanation by the standard permanent income hypothesis.     

INEFFICIENT LOCK‐IN AND SUBSIDY COMPETITION*

This article studies a subsidy game among two asymmetric regions in a new trade model. Capital can freely move among regions, but capital rewards are repatriated to the region of residence. The activity of the modern sector is associated with positive spillovers. We study subsidy competition, starting from an equilibrium where the industry core is inefficiently locked in to the smaller region. When regions weigh workers’ and capitalists’ welfare equally, subsidy competition results in a relocation of industry to the larger region, restoring an efficient allocation. When workers’ welfare is weighted more heavily, the smaller (core) region may pay subsidies that are high enough to prevent a relocation of industry.     

MIXED OWNERSHIP,MANAGERIAL INCENTIVES AND BANK COMPETITION

We consider deposit competition between two banks, where prior to competition one bank is subjected to a nationalization decision and the other bank chooses managerial incentives. The government who maximizes a modified form of social welfare (with greater weight on profit than depositor surplus) chooses only partial nationalization, which still hurts the rival private bank. But by offering deposit‐linked managerial incentives the private bank recovers its lost profit and induces even less nationalization, leaving social welfare unchanged. However, under interest rate competition for differentiated deposits the private bank offers profit‐linked managerial incentives while the other bank may be completely nationalized.     

R&D INCENTIVES UNDER BERTRAND COMPETITION: A DIFFERENTIAL GAME*

We investigate dynamic R&D for process innovation in an oligopoly where firms invest in cost‐reducing activities. We focus on the correlation between R&D intensity and market structure, proving that the industry R&D investment at equilibrium monotonically increases in the number of firms. This result contradicts the established wisdom acquired from static games on the same topic. We also prove that, if competition is sufficiently tough, any increase in product substitutability reduces R&D efforts.     

MACROECONOMIC POLICY AND ELECTIONS IN OECD DEMOCRACIES*

The purpose of this paper is to test for evidence of opportunistic “political business cycles” in a large sample of 18 OECD economies. Our results can be summarized as follows: 1) We find very little evidence of pre-electoral effects on economic outcomes, in particular, on GDP growth and unemployment; 2) We see some evidence of “political monetary cycles,” that is, expansionary monetary policy in election years; 3) We also observe indications of “political budget cycles,” or “loose” fiscal policy prior to elections; 4) Inflation exhibits a post-electoral jump, which could be explained by either the pre-electoral “loose” monetary and fiscal policies and/or by an opportunistic timing of increases in publicly controlled prices, or indirect taxes.     

西部大开发:重点、进展、政策与创新

实施西部大开发战略,关系全国发展的大局,关系民族团结和边疆稳定。西部大开发的政策适用范围,包括12个省、自治区、直辖市,3个少数民族自治州比照有关政策措施予以照顾。西部大开发有四项重点任务,选定了重点区域,实行重点开发。3年来西部大开发有了一个良好开端。国家实行重点支持西部大开发的政策措施,并已出台政策措施与规划。我国加入WTO和党的十六大召开,西部大开发还需要理论和政策创新,笔者尝试着提出了四点创新的思路。     

深圳建设国家创新型城市的发展战略与政策措施

深圳是建设国家创新型城市的试点。文章分析了我国提出建设创新型国家的背景,阐述深圳经济发展的三大转变及深圳自主创新经历的三个"台阶",指出高科技园区是创新型城市的重要载体,深圳区域创新体系有鲜明特色及建设创新型城市的发展目标与前景。     

PUBLIC GOODS,RENT DISSIPATION,AND CANDIDATE COMPETITION*

The early literature on rent seeking presumed that total expenditures in the rent-seeking process would equal the value of a contested prize. Subsequent analysis has shown, however, that a number of circumstances give rise to underdissipation of the contested rent—imperfectly discriminating contests, risk-aversion, or where individuals' valuations of the prize are not identical. This paper shows how underdissipation is associated with the public-good character of contested rents. In particular, total rent dissipation is demonstrated to be less than the average stake of the individual contenders. In addition to assessing rent dissipation in contests for public-good allocations, the paper also endogenizes the value of the prize by placing the rent-seeking contest in a setting of candidate competition.