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The purpose of this paper is to use a dynamic model of optimal patent design and, in the presence of information externalities, to study the evolution of technological progress in the context of a pharmaceutical industry.

A theoretical analysis approach is adopted to drive the paper’s findings.

Pharmaceutical firms with an active drug discovery program behave strategically in their R&D and in the product markets. It is shown that a firm holding an earlier-expiring patent only chooses to proceed with R&D activates when the patent it holds expires if the expected discounted payoff net of R&D costs yielded by this action is positive. The expected discounted payoff net of R&D costs obtained by this firm is then decreasing in R&D costs, increasing in the cumulative quality discovered in the past R&D activates, and decreasing in the number of past R&D activities, etc.

The preceding literature on the topic works with only one brand, the brand with the highest quality. As well, the demand is assumed to be completely inelastic. In the conventional models of patent design, the role of competitive fringe firms is discussed implicitly. The model presented in this research is a rigorous continuous in-time dynamic model. It considers several differentiated products. Furthermore, the demand for a brand is taken to be a function of income, its price, and the prices of other brands. The interaction of the fringe firm with other patent-holding firms is also explicitly considered under this framework.

The current paper aims to present a formal model illustrating how payoff imbalances among the members of a team of decision makers (DMs) who must undertake a project condition the final outcome obtained. This result builds on the fact that payoffs imbalances would lead to different performance levels among the employees and managers who compose a team. The analysis is applied to a strategic environment, where a project requiring coordination among the DMs within the team must be developed.

The intuition behind the strategic framework on which the results are based is twofold. The authors build on the literature on social comparisons and assume that employees and managers acquire information on the payoffs received by other members of the team while being affected by the resulting comparisons, and they follow the economic literature on firm boundaries determined via incomplete contracts. In this case, employees and managers may underperform if they feel aggrieved by the outcome of the contract giving place to deadweight losses when developing the project.

The authors illustrate how a team-based performance reward structure may lead to a coordinated equilibrium even when team managers and employees receive different payoffs and exhibit shading incentives based on the payoff differentials between them. The authors will also illustrate how identical shading intensities by both groups of DMs imply that shading by the managers imposes a lower cost on the profit structure of the firm because it leads to a lower decrease in the cooperation incentives of the other members of the team. Finally, the authors show how differences in shading intensity between both types of DMs trigger a strategic defect mechanism within the team that determines the outcome of the project.

The novel environment of team cooperation and defection through shading introduced in this paper is designed to deal with the strategic decisions taken by DMs when undertaking a project within a group. In particular, the intensity of shading applied by the DMs will be endogenously determined by the relative payoffs received, which allows to account for different scenarios, where relative payoff differentials among DMs determine the outcome of the project.

The payoff to schooling among the foreign born in the United States is only around one-half of the payoff for the native born. This paper examines whether this differential is related to the quality of the schooling immigrants acquired abroad. The paper uses the overeducation/required education/undereducation specification of the earnings equation to explore the transmission mechanism for the origin-country school-quality effects. It also assesses the empirical merits of two alternative measures of the quality of schooling undertaken abroad. The results suggest that a higher quality of schooling acquired abroad is associated with a higher payoff to schooling among immigrants in the US labor market. This higher payoff is associated with a higher payoff to correctly matched schooling in the United States, and a greater (in absolute value) penalty associated with years of undereducation. A set of predictions is presented to assess the relative importance of these channels, and the undereducation channel is shown to be the more influential factor. This channel is linked to greater positive selection in migration among those from countries with better quality schools. In other words, it is the impact of origin-country school quality on the immigrant selection process, rather than the quality of immigrants' schooling per se, that is the major driver of the lower payoff to schooling among immigrants in the United States.

Expectations ostensibly lead to the formation of hierarchies, and hierarchies are thought to improve coordination. A simulation model is introduced to determine whether expectations directly improve coordination.

Agent-based simulations of small group behavior are used to determine what rules for expectation formation best coordinate groups. Within groups of agents that have differing but unknown task abilities, pairs take turns playing a coordination game with one another. The group receives a positive payoff when one agent chooses to take a high-importance role (leader) and the other chooses a low-importance role (follower), where the payoff is proportional to the ability of the “leader.” When both individuals vie to be leader, a costly conflict gives the group information about which agent has a higher task-ability.

The rules governing individuals’ formation of expectations about one another often lead to coordination that is suboptimal: They do not capitalize on the differential abilities of group members. The rules do, however, minimize costly conflicts between individuals. Therefore, standard rules of expectation formation are only optimal when conflicts are costly or provide poor information.

Rules that govern the formation of expectations may have served an evolutionary purpose in guiding individuals towards coordination while minimizing conflict, but these psychologically hardwired rules lead to suboptimal hierarchies.

This paper looks at how well empirically observed expectation-generating rules lead to group coordination by adding a game theoretic conception of interaction to the e-state structuralism model of hierarchy formation.

We derive marginal conditions of optimality (i.e., Euler equations) for a general class of Dynamic Discrete Choice (DDC) structural models. These conditions can be used to estimate structural parameters in these models without having to solve for approximate value functions. This result extends to discrete choice models the GMM-Euler equation approach proposed by Hansen and Singleton (1982) for the estimation of dynamic continuous decision models. We first show that DDC models can be represented as models of continuous choice where the decision variable is a vector of choice probabilities. We then prove that the marginal conditions of optimality and the envelope conditions required to construct Euler equations are also satisfied in DDC models. The GMM estimation of these Euler equations avoids the curse of dimensionality associated to the computation of value functions and the explicit integration over the space of state variables. We present an empirical application and compare estimates using the GMM-Euler equations method with those from maximum likelihood and two-step methods.

The purpose of this paper is to investigate the impact of incentive contracts in multi-partner project teams (MPPTs) on the agents’ effort expenditure and project performance, analyze how the agents allocate their efforts between production and cooperation and offer suggestions for project managers on how to design incentive contracts.

The paper proposes a model of MPPT in which agents are inequity-averse and their effort expenditures are exogenously bounded. An extensive numerical example is presented in online Appendix 2 to illustrate the theoretical results.

The paper suggests that if the potential benefit of the agents’ cooperation in MPPT is high or if both agents exhibit inequity aversion and the efforts’ marginal costs are low, then group-based incentive contracts outperform individual-based incentive contracts. It also shows that the impact of the incentive contract on the agents’ effort expenditure and project team performance is correlated with several critical project attributes.

Fulfilling a need to study the design of incentive structures in MPPTs, the paper complements the existing literature in three ways. First, in contrast to single-partner project teams, it considers projects with multiple partners where cooperation between them enhances the project outcome. Second, rather than focusing on individual production problems, it considers multi-task projects with constrained efforts that must be allocated between production and cooperation. Third, it analyzes the effects of changes in the project attributes, incentive intensities and information transparency on the effectiveness of the contract.

This study investigates the role of race, family background and education in earnings inequality between whites and the African descendent population in Brazil. It uses quantile Mincer earnings regressions to go beyond the usual decomposition of average earnings gaps. Differences in human capital, including parental education and education quality, and in its returns, account for most but not all of the racial earnings gaps. There appears to be greater pay discrimination at the higher salary jobs for any skill level. Returns to education vary with the gradient of skin color. While returns are similar for white and mixed race workers at the top of the adjusted wage scale, mixed race workers at the bottom are rewarded similar to blacks. Thus, while equalizing access to quality education is key to reduce racial earnings inequality in Brazil, specific policies are also needed to facilitate equal access of non‐whites to good quality jobs.

Whatever happened to retail trade area analysis? Some may recall that through the late 1950s and middle 1960s, location scholars seemed to be organising and expanding an interesting body of literature. However in the recent past, the central thrust of economic analysis seems to have stalled, with research dispersing in numerous directions.

The purpose of this paper is to suggest that in the arena of human capital, risk-mitigation may overshadow risk-optimized decisions, and show how a more balanced approach can be achieved by understanding and applying frameworks from behavioral decision theory, as well as framing human capital risk using tools and frameworks that have a long history in other management arenas, such as finance.

Review risk-optimization frameworks in human resource and general management, distill key connections, suggest ways to enhance risk optimization for human capital, and offer suggestions for future research and practice.

For human capital, risk-mitigation may overshadow risk-optimization, a balanced approach can be achieved by applying behavioral decision theory and by using frameworks from other management arenas, such as finance.

Organizations must acknowledge and skillfully manage the connections between human capital and competitive strategy in this emerging arena of human capital risk, or they will miss key strategic opportunities.

Attention to human capital risk has largely emphasized minimizing or controlling unwanted outcomes, but the paper proposes that risk-optimization requires balanced attention to risk-taking as well.