Candidate quality

We analyze the topical question of how the compensation of elected politicians affects the set of citizens choosing to run. To this end, we develop a sparse and tractable citizen-candidate model of representative democracy with ability differences, informative campaigning and political parties. Our results suggest that primaries, campaign costs and rewards have previously overlooked interactions that should be studied in a unified framework. Surprisingly, increasing the reward may lower the average candidate quality when the campaigning costs are sufficiently high. JEL Classification D70 · D72 · D79     

Notes on terminology

Notes on terminology     

Effect of Business Education on Women and Men Students’ Attitudes on Corporate Responsibility in Society

This article describes a survey among Finnish business students to find answers to the following questions: How do business students define a well-run company? What are their attitudes on the responsibilities of business in society? Do the attitudes of women students differ from those of men? What is the influence of business education on these attitudes? Our sample comprised 217 students pursuing a master’s degree in business studies at two Finnish universities. The results show that, as a whole, students valued the stakeholder model of the company more than the shareholder model. However, attitudes differed according to gender: women students were more in favor of the stakeholder model and placed more weight on corporate ethical, environmental, and societal responsibilities than their men counterparts – both at the beginning and at the end of their studies. Thus, no gender socialization effect of business school education could be observed in this sense. Business school education was found to shape women and men students’ attitudes in two ways. Firstly, valuation of the shareholder model increased and, secondly, the importance of equal-opportunity employment decreased in the course of education. This raises the question whether the educational context is creating an undesirable tendency among future business professionals. The results further suggest that the sociocultural context can make a difference in how corporate social responsibility is perceived. The article also discusses possible ways to influence the attitudes of business students.     

The Gates Hillman prediction market

The Gates Hillman prediction market (GHPM) was an internet prediction market designed to predict the opening day of the Gates and Hillman Centers, the new computer science complex at Carnegie Mellon University. Unlike a traditional continuous double auction format, the GHPM was mediated by an automated market maker, a central agent responsible for pricing transactions with traders over the possible opening days. The GHPM’s event partition was, at the time, the largest ever elicited in any prediction market by an order of magnitude, and dealing with the market’s size required new advances, including a novel span-based elicitation interface that simplified interactions with the market maker. We use the large set of identity-linked trades generated by the GHPM to examine issues of trader performance and market microstructure, including how the market both reacted to and anticipated official news releases about the building’s opening day.     

Secrecy versus patenting

We develop an equilibrium search model of innovation with the possibility of multiple independent discovery. We distinguish innovations from ideas, and we view patents as probabilistic property rights that are constrained by the innovators' option to keep the innovation secret. We find that the patent system can simultaneously stimulate innovation, information disclosure and welfare. An optimal patent may provide more or less protection than secrecy, and in many cases, it provides less, suggesting that its main function is information spreading rather than rewarding the costs of the innovative activity.     

The relationship between regional value-added and public capital in Finland: what do the new panel econometric techniques tell us?

This article applies recently developed panel estimation techniques to estimate the elasticity of private production with respect to public capital in a regional framework. We use the widely applied production function approach and regional data from Finland for the 1975–2004 period. In contrast to many previous studies about the productivity of public capital, we focus especially on panel estimation techniques, showing that the results from commonly applied fixed effects OLS are probably biased and sensitive to a change of estimator. To get more reliable results, we use the panel DOLS and panel DSUR estimators. The results suggest that public capital has had a positive impact on private production.     

Incomplete contracting in an R&D project: the Micronas case

Systematic empirical evidence on the consequences of incomplete contracts is meagre, because contracts are often classified as business secrets, and are accordingly difficult to obtain for research purposes. In this study we employ the extensive information from the life of a Finnish research joint venture, Micronas, during 1980–1992 to cast light on this issue. Of particular interest is the principal-agent relationship between the owners and the management of the research joint venture. Our investigation confirms the strong message of the incomplete contract theory. Hold-up problems are pervasive in R&D projects, and the allocation of power and ownership is important to the success of the projects.     

New complexity results about Nash equilibria

We provide a single reduction that demonstrates that in normal-form games: (1) it is -complete to determine whether Nash equilibria with certain natural properties exist (these results are similar to those obtained by Gilboa and Zemel [Gilboa, I., Zemel, E., 1989. Nash and correlated equilibria: Some complexity considerations. Games Econ. Behav. 1, 80–93]), (2) more significantly, the problems of maximizing certain properties of a Nash equilibrium are inapproximable (unless ), and (3) it is -hard to count the Nash equilibria. We also show that determining whether a pure-strategy Bayes–Nash equilibrium exists in a Bayesian game is -complete, and that determining whether a pure-strategy Nash equilibrium exists in a Markov (stochastic) game is -hard even if the game is unobserved (and that this remains -hard if the game has finite length). All of our hardness results hold even if there are only two players and the game is symmetric.     

Market failures and the additionality effects of public support to private R&D: Theory and empirical implications

We extend the theoretical basis of the empirical literature on the effects of R&D subsidies by providing an estimable model of strategic interaction among subsidy applicants, and public and private sector R&D financiers. Our model incorporates fixed R&D cost and a cost of external finance. We derive the optimal support rule. At the intensive (extensive) margin the costs of external funding reduce (increase) the optimal subsidy rate. We also establish necessary and sufficient conditions for the existence of additionality. It turns out that additionality at the intensive margin is less likely with higher spillovers. Our results suggest that the relationship between additionality and welfare may not be straightforward.