OPTIMAL RULES FOR PATENT RACES*

There are two important rules to patent races: minimal accomplishment necessary to receive the patent and the allocation of the innovation benefits. We study the optimal combination of these rules. A planner, who cannot distinguish between competing firms in a multistage innovation race, chooses the patent rules by maximizing either consumer or social surplus. We show that efficiency cost of prizes is a key consideration. Races are undesirable only when efficiency costs are low, firms are similar, and social surplus is maximized. Otherwise, the optimal policy involves a race of nontrivial duration to spur innovation and filter out inferior innovators.     

On the impossibility of achieving no regrets in repeated games

Regret-minimizing strategies for repeated games have been receiving increasing attention in the literature. These are simple adaptive behavior rules that lead to no regrets and, if followed by all players, exhibit nice convergence properties: the average play converges to correlated equilibrium, or even to Nash equilibrium in certain classes of games. However, the no-regret property relies on a strong assumption that each player treats her opponents as unresponsive and fully ignores the opponents’ possible reactions to her actions. We show that if at least one player is slightly responsive, it is impossible to achieve no regrets, and convergence results for regret minimization with responsive opponents are unknown.     

The impact of the euro crisis on Switzerland

The euro area crisis is the main external factor threatening the Swiss economy. In 2010 and 2011, the Swiss franc was rapidly appreciating against the euro, causing a drop in exports, losses for the tourism business and a rise in unemployment. This paper gives an overview of developments in the euro area and explains the reasons for the strength of the franc, the effects it had on the economy and the measures taken to curtail its appreciation.     

A Polarization Index for Overlapping Groups

The well‐known index of income bipolarization proposed by Wolfson (1994) requires two groups to be split according to the median income and, therefore, to be non‐overlapping. The aim of this paper is to propose a new polarization index in the spirit of the Wolfson index. It allows for any possible partition of the population in two or more (also overlapping) groups. The new index maintains the simplicity and immediate comprehension of the Wolfson index, though being much more flexible. An application is then provided for German and Italian income data.     

Musgrave’s vision of the public sector: the complex relationship between individual, society and state in public good theory

Richard Musgrave introduced the notion of a public good after reading an obscure publication by Lindahl in German in 1910. His great contribution to knowledge was to provide a clear and comprehensive structure for thinking about the process of achieving an “optimal” allocation of resources across public and private goods based individual preferences and the role of government in that process. A number of ambiguities and issues in Musgrave’s vision remain only partially resolved including the need to incorporate “higher laws” or community values into the allocation process.