Information sharing and the stability of cooperation in research joint ventures*

The model studies information sharing and the stability of cooperation in cost reducing Research Joint Ventures (RJVs). In a three-stage game-theoretic framework, firms decide on participation in a RJV, information sharing along with R&D expenditures, and output. An important feature of the model is that voluntary information sharing between cooperating firms increases information leakage from the RJV to outsiders. It is found that RJVs representing a larger portion of firms in the industry are more likely to share information. It is also found that when sharing information is costless, firms generally don't choose intermediate levels of information sharing: they share all the information or none at all. The size of the RJV is found to depend on three effects: a coordination effect, an information sharing effect, and a competition effect. Depending on the relative magnitudes of these effects, the size of the RJV may increase or decrease with spillovers. In response to an increase in leakages, RJV members reduce their R&D spending. In addition, they either increase the RJV size while maintaining information sharing unchanged (when leakages are low), or they reduce both information sharing and RJV size (when leakages are high).     

Viable allocations of information in financial markets

We study, in the context of a financial market, allocations of information that are consistent with endogenous information acquisition. We focus on whether information is concentrated within a fraction of the market or is diffuse. The aggregation of information in prices tends to make signals more complementary than they would be if considered in isolation, favoring concentration of information. However, the ability to use some signals together with prices to predict other signals may increase the degree of substitutability among signals. We present conditions under which each of these effects is particularly strong.     

THE ALLOCATION OF RESOURCES TO COOPERATIVE AND NONCOOPERATIVE R&D*

The precompetitive R&D literature has viewed cooperative and noncooperative R&D as substitutes. In this paper a more realistic approach is taken, where both cooperative and noncooperative R&D are performed in parallel. In the first stage, firms determine the optimal investments in both types of R&D and in the second stage they compete in output. It is found that information sharing between cooperating firms contributes not only to cooperative R&D, but also to noncooperative R&D. The two types of R&D reinforce each other. The level of cooperative R&D may be higher or lower than noncooperative R&D. In a Cournot duopoly, the share of cooperative R&D lies between 20% and 80% of total R&D and this share increases with spillovers and information sharing. It is always optimal to subsidize half the costs of cooperative R&D, while the subsidy to noncooperative R&D is unchanged from the standard model. Consumers prefer intermediate levels of spillovers and information sharing, while firms prefer higher levels of spillovers, which entail lower levels of information sharing.     

On Monopolistic Licensing Strategies under Asymmetric Information

Consider a research lab that owns a patent on a new technology but cannot develop a marketable final product based on the new technology. There are two downstream firms that might successfully develop the new product. If the downstream firms' benefits from being the sole supplier of the new product are private information, the research lab will sometimes sell two licenses, even though under complete information it would have sold one exclusive license. This is in contrast to the standard result that a monopolist will sometimes serve fewer, but never more buyers when there is private information. Journal of Economic Literature Classification Numbers: L12, D45, D82     

Determinants of International R&D Outsourcing: The Role of Trade

This paper investigates the determinants of international R&D outsourcing, in particular the role of trade. We sketch a monopolistic competition model with heterogeneous firms where outsourcing increases a firm's fixed transaction costs as well as its productivity. Financial constraints affect the decision to outsource R&D more to nonexporters than to exporters. In contrast, exporters are more sensitive to a lack of information because they have higher losses when there is technology leakage. We test these predictions using a panel database of Spanish companies. The results highlight the relevance of information in competitive markets, and the role of trade to induce companies to engage in other globalization strategies.     

On the Interplay of Hidden Action and Hidden Information in Simple Bilateral Trading Problems

A buyer and a seller can exchange one unit of an indivisible good. While producing the good, the seller can exert unobservable effort (hidden action). Then the buyer realizes whether his or her valuation is high or low, which stochastically depends upon the seller's effort level (hidden information). The parties are risk neutral—they can rule out renegotiation and write complete contracts. It is shown that the first best cannot be achieved whenever the ex post efficient trade decision is trivial. The second-best contract is characterized and an application of the model to the choice of risky projects is briefly discussed. Journal of Economic Literature Classification Numbers: C72, C78, D23, D82.     

An experimental study of bidding in contests of incomplete information

In many contest situations, such as R&D competition and rent seeking, participants’ costs are private information. We report the results of an experimental study of bidding in contests under different information and symmetry conditions about players’ costs of effort. The theory predicts qualitatively different comparative statics between bids under complete and incomplete information in contests of two and more than two players. We use a 2×3 experimental design, (n=2, n=4)×(symmetric complete information, asymmetric complete information, incomplete information), to test the theoretical predictions. We find the comparative statics of bids across the information and symmetry conditions, and the qualitative differences in comparative statics across group sizes, in partial agreement with the theory.     

Convergence Results for Unanimous Voting

This paper derives a necessary condition for unanimous voting to converge to the perfect information outcome when voters are only imperfectly informed about the alternatives. Under some continuity assumptions, the condition is also sufficient for the existence of a sequence of equilibria that exhibits convergence. The requirement is equivalent to that found by Milgrom [1979, Econometrica47, 679-688] for information aggregation in single-prize auctions. An example illustrates that convergence may be reasonably fast for small committees. However, if voters have common preferences, unanimity is not the optimal voting rule. Unanimity rule makes sense only as a way to ensure minority views are respected. Journal of Economic Literature Classification Numbers: D72, D82, D44.     

同群效应与公司研发*——来自中国的证据

本文研究了“同群公司”的研发支出对公司自身研发行为的影响。研究发现，同群公司研发支出越多，公司自身研发支出也越多。进一步研究发现，在公司与同群公司地理距离较近或同群公司分析师覆盖程度较高情况下，同群公司研发支出与公司自身研发支出的正相关关系更强。此外，同群公司研发支出会提高公司自身研发支出与未来业绩的正相关程度。研究表明，公司会学习同群公司的研发决策，进而改变其自身研发决策，呈现显著的研发支出同群效应；且公司信息解读成本较低时，研发支出同群效应更为显著。本文不仅丰富了关于研发支出影响因素的研究，还拓展了对研发溢出效应的研究。本文的研究结论对公司制定研发决策具有重要指导意义。     

Status Quo Bias in Bargaining: An Extension of the Myerson-Satterthwaite Theorem with an Application to the Coase Theorem

We generalize the Myerson-Satterthwaite theorem to study inefficiencies in bilateral bargaining over a divisible good, with two-sided private information on the valuations. For concave quasi-linear preferences, the ex ante most efficient Bayes equilibrium of any mechanism always exhibits a bias toward the status quo. If utility functions are quadratic every Bayes equilibrium is ex post inefficient, with the expected amount of trade biased toward the disagreement point. In other words, for the class of preferences we study, there is a strategic advantage to property rights in the Coase bargaining setup in the presence of incomplete information. Journal of Economic Literature Classification Numbers: C78, D23, D62, D82.     

Endogenous information and stochastic contracts

A growing literature analyzes revenue-maximizing contracts for situations in which agents can acquire private information before they decide whether to join the contract. It is conjectured that the results also apply to the more natural scenario where information can be acquired either before or after signing. This paper shows that, in fact, the latter scenario is more favorable for the principal. Using stochastic contracts, she can induce information acquisition with some probability and yet appropriate the generated surplus.     

Campaign Spending with Office-Seeking Politicians, Rational Voters, and Multiple Lobbies

I introduce a microfounded model of campaign finance with office-seeking politicians, a continuum of voters, and a large number of heterogeneous lobbies. Lobbies make contributions to politicians according to a common agency framework. Politicians use contributions to finance their electoral expenditures. Voters are not fooled by electoral expenditures: they are influenced in a way that is consistent with the equilibrium behavior of lobbies and politicians. The model is used to: (i) determine the relation between campaign spending and the deviation from the median voter's preferred policy; (ii) show the informational value of lobbies' contributions; (iii) evaluate the welfare implications of restricting campaign spending; and (iv) interpret the empirical finding that campaign expenditures have a very low effect on election outcome. Although in equilibrium advertising provides voters with useful information, under reasonable parameter values, a ban on campaign contributions makes the median voter better off. Journal of Economic Literature Classification Numbers: D72, D82, M37.     

INFORMATION AND THE DEMAND FOR CLEAN AIR

This paper examines the relationship between the relocating household's reaction to air quality and its information on environmental quality. The results suggest households exposed to public information on the environment are more responsive to air quality differences if they also are knowledgeable about local environmental conditions. (JEL Q510, R230, D830)     

Technology variation vs. R&D uncertainty: What matters most for energy patent success?

R&D is an uncertain activity with highly skewed outcomes. Nonetheless, most recent empirical studies and modeling estimates of the potential of technological change focus on the average returns to research and development (R&D) for a composite technology and contain little or no information about the distribution of returns to R&D – which could be important for capturing the range of costs associated with climate change mitigation policies – by individual technologies. Through an empirical study of patent citation data, this paper adds to the literature on the outcomes of energy R&D by focusing on the behavior of the most successful innovations for six energy technologies, allowing us to determine whether uncertainty or differences in technologies matter most for success. We highlight two key results. First, we compare the results from an aggregate analysis of six energy technologies to technology-by-technology results. Our results show that existing work that assumes diminishing returns but assumes one generic technology is too simplistic and misses important differences between more successful and less successful technologies. Second, we use quantile regression techniques to learn more about patents that have a high positive error term in our regressions – that is, patents that receive many more citations than predicted based on observable characteristics. We find that differences across technologies, rather than differences across quantiles within technologies, are more important. The value of successful technologies persists longer than those of less successful technologies, providing evidence that success is the culmination of several advances building upon one another, rather than resulting from one single breakthrough. Diminishing returns to research activities appear most problematic during rapid increases of research investment, such as experienced by solar energy in the 1970s.     

Technology variation vs. R&D uncertainty: What matters most for energy patent success?

R&D is an uncertain activity with highly skewed outcomes. Nonetheless, most recent empirical studies and modeling estimates of the potential of technological change focus on the average returns to research and development (R&D) for a composite technology and contain little or no information about the distribution of returns to R&D – which could be important for capturing the range of costs associated with climate change mitigation policies – by individual technologies. Through an empirical study of patent citation data, this paper adds to the literature on the outcomes of energy R&D by focusing on the behavior of the most successful innovations for six energy technologies, allowing us to determine whether uncertainty or differences in technologies matter most for success. We highlight two key results. First, we compare the results from an aggregate analysis of six energy technologies to technology-by-technology results. Our results show that existing work that assumes diminishing returns but assumes one generic technology is too simplistic and misses important differences between more successful and less successful technologies. Second, we use quantile regression techniques to learn more about patents that have a high positive error term in our regressions – that is, patents that receive many more citations than predicted based on observable characteristics. We find that differences across technologies, rather than differences across quantiles within technologies, are more important. The value of successful technologies persists longer than those of less successful technologies, providing evidence that success is the culmination of several advances building upon one another, rather than resulting from one single breakthrough. Diminishing returns to research activities appear most problematic during rapid increases of research investment, such as experienced by solar energy in the 1970s.     

Influential listeners: An experiment on persuasion bias in social networks

This paper presents an experimental investigation of persuasion bias, a form of bounded rationality whereby agents communicating through a social network are unable to account for repetitions in the information they receive. We find that, after repeated communication within a social network, social influence depends not only on being listened to by many others, but also on listening to many others. We show that persuasion bias can be viewed as an extreme case of a generalized boundedly rational updating rule in which agents receive more or less attention depending on how many other agents they listen to. The results indicate that behavior in the experiment is consistent with an updating rule according to which agents' social influence is proportional to their indegree.     

Privacy concerns,voluntary disclosure of information,and unraveling: An experiment

We study the voluntary revelation of private information in a labor-market experiment where workers can reveal their productivity at a cost. While rational revelation improves a worker׳s payoff, it imposes a negative externality on others and may trigger further revelation. Such unraveling can be observed frequently in our data although less often than predicted. Equilibrium play is more likely when subjects are predicted to conceal their productivity than when they should reveal. This tendency of under-revelation, especially of low-productivity workers, is consistent with the level-k model. A loaded frame where the private information concerns the workers׳ health status leads to less revelation than a neutral frame.     

Garbling of signals and outcome equivalence

In a game with incomplete information players receive stochastic signals about the state of nature. The distribution of the signals given the state of nature is determined by the information structure. Different information structures may induce different equilibria.Two information structures are equivalent from the perspective of a modeler, if they induce the same equilibrium outcomes. We characterize the situations in which two information structures are equivalent in terms of natural transformations, called garblings, from one structure to another. We study the notion of ‘being equivalent to’ in relation with three equilibrium concepts: Nash equilibrium, agent normal-form correlated equilibrium and the belief invariant Bayesian solution.     

Evidence on the impact of R&D and ICT investments on innovation and productivity in Italian firms

Both research and development (R&D) and information and communication technology (ICT) investment have been identified as sources of relative innovation underperformance in Europe vis-à-vis the USA. In this article, we investigate the R&D and ICT investment at the firm level in an effort to assess their relative importance and to what extent they are complements or substitutes. We use data on a large unbalanced panel data sample of Italian manufacturing firms constructed from four consecutive waves of a survey of manufacturing firms, to estimate a version of the CDM model of R&D, innovation, and productivity [Crépon–Duguet–Mairesse 1998. Research, innovation and productivity: An econometric analysis at the firm level. Economics of Innovation and New Technology 7, no. 2: 115–58] that has been modified to include ICT investment and R&D as the two main inputs into innovation and productivity. We find that R&D and ICT are both strongly associated with innovation and productivity, with R&D being more important for innovation, and ICT investment being more important for productivity. For the median firm, rates of return to both investments are so high that they suggest considerably underinvestment in both these activities. We explore the possible complementarity between R&D and ICT in innovation and production, but find none, although we do find complementarity between R&D and worker skill in innovation.     

What do you want to know? Information acquisition and learning in experimental Cournot games

This paper presents an experiment designed to study firms’ behavior and market dynamics, when information about the market structure and opponents’ actions is difficult to acquire and process. Our experimental software controls the information acquisition process of the subjects. Paying attention not only to what players do, but also to what they know, it is possible to better understand the cognitive processes guiding their choices and, consequently, the impact of the informational structure on their behavior. According to our results, Best-Response Dynamics is the main component of subjects’ learning process. We also find that, when subjects look at the strategies individually adopted by their competitors, they tend to imitate the most successful behavior, which drives the market towards a more competitive outcome.