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Creator: Chari, V. V. and Jones, Larry E. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 324 Abstract:
This paper examines the validity of one very special version of Coase's Theorem. The version we examine is that in any economy in which the property rights are fully allocated, competition will lead to efficient allocations. One repercussion of this result is that one way to "solve" the public goods problem would be to allocate property rights fully, transforming the economy to a private goods one and let markets do their work. This is particularly appealing due to its decentralized nature, but one must question the claim that the market will lead to efficient outcomes in this case. That is, the privatized economy created above is of a very special type which, as it turns out is highly susceptible to strategic behavior. We show that the "mechanism" suggested above is not likely to work well in economies with either pure public goods or "global" externalities. Basically, the free-rider problem manifests itself as one of monopoly power in this private goods setting. On the other hand, if the public goods or externalities are "local" in nature, there is reason to hope that this (and perhaps other) mechanism(s) will work well. The work is related to the recent literature on the foundations of Walrasian Equilibrium in that it points up a relationship between the appropriateness of Walrasian equilibrium as a solution concept, the incentives for strategic play, the aggregate level of complementarities in the economy and the problem of coordinating economic activity.
Palavra-chave: Competition, Coordinating economic activity, Property rights, Walrasian Equilibrium, and Coase's Theorem Sujeito: H41 - Public Goods
Creator: Chari, V. V. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 576 Abstract:
This chapter is an introductory essay to the volume Climate Change Economics: The Role of Uncertainty and Risk, edited by V. V. Chari and Robert Litterman. This volume consists of a collection of papers that were presented at "The Next Generation of Economic Models of Climate Change," a conference hosted by the Heller-Hurwicz Economics Institute at the University of Minnesota.
Palavra-chave: Externalities, Greenhouse gases, and Global warming Sujeito: G12 - Asset Pricing; Trading Volume; Bond Interest Rates and H41 - Public Goods
Creator: Hopenhayn, Hugo Andres, Llobet, Gerard, and Mitchell, Matt Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 273 Abstract:
This paper presents a model of cumulative innovation where firms are heterogeneous in their research ability. We study the optimal reward policy when the quality of the ideas and their subsequent development effort are private information. The optimal assignment of property rights must counterbalance the incentives of current and future innovators. The resulting mechanism resembles a menu of patents that have infinite duration and fixed scope, where the latter increases in the value of the idea. Finally, we provide a way to implement this patent menu by using a simple buyout scheme: The innovator commits at the outset to a price ceiling at which he will sell his rights to a future inventor. By paying a larger fee initially, a higher price ceiling is obtained. Any subsequent innovator must pay this price and purchase its own buyout fee contract.
Palavra-chave: Policy, Mechanism Design, Sequential Innovation, Innovation, Compulsory Licensing, Patents, and Asymmetric Information Sujeito: K23 - Regulated Industries and Administrative Law, D82 - Asymmetric and Private Information; Mechanism Design, D43 - Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection, O31 - Innovation and Invention: Processes and Incentives, H41 - Public Goods, L51 - Economics of Regulation, and L50 - Regulation and Industrial Policy: General