Suzanne Scotchmer's research while affiliated with University of California, Berkeley and other places

Publications (91)

Article
We consider group formation in markets with asymmetric information. Our model nests standard matching problems, including one-to-one, many-to-one, and many-to-many matching, as well as matching with salaries or contracts and matching with incomplete information. Prices for group positions and private goods as well as the groups that form are determ...
Article
The Bayh-Dole Act allows universities to exploit patents on their federally sponsored research. University laboratories therefore have two sources of funds: direct grants from sponsors and income from licensing. Tax credits for private R&D also contribute, because they increase the profitability of licensing. Because Bayh-Dole profits are a source...
Article
A defect of intellectual property as an incentive mechanism is that researchers must pay the costs of research long before receiving a reward. Self-finance is often not an option. For potential funders such as venture capitalists and public sponsors, the problem is to find the most promising researchers or projects, and to do so before the research...
Article
The Bayh-Dole Act allows universities to commercialize their research. University laboratories therefore have two sources of funds: direct grants from the government and funds from commercialization. In addition to giving direct subsidies to university laboratories, the government also subsidizes the commercial sector, for example, through tax cred...
Article
The open source movement evolved in the one industrial context where openness is not required by intellectual property law.1 Nevertheless, openness itself cannot be the driving force behind the open source movement. This is because openness can be achieved in many ways other than the GPL, for example, with proprietary licenses, or licenses that are...
Article
We consider group formation with asymmetric information. Agents have unverifiable characteristics as well as the verifiable qualifications required for memberships in groups. The characteristics can be chosen, such as strategies in games, or can be learned, such as skills required for jobs. They can also be innate, such as intelligence. We assume t...
Article
Emissions taxes and carbon caps can both lead to efficient production of energy, in the sense of controlling carbon emissions to the extent that is efficient with existing technologies. However, the regulatory policy has a second objective, which is to create incentives to develop lower-carbon technologies. With both objectives in mind, does one po...
Article
We investigate optimal rewards in an R&D model where substitute ideas for innovation arrive to random recipients at random times. By foregoing investment in a current idea, society as a whole preserves an option to invest in a better idea for the same market niche, but with delay. Because successive ideas may occur to different people, there is a c...
Article
In a labor market hierarchy, promotions are affected by the noisiness of information about the candidates. I study the hypothesis that males are more risk taking than females, and its implications for rates of promotion and abilities of survivors. I define promotion hierarchies with and without memory, where memory means that promotion depends on t...
Chapter
The word ‘club’ has a deceptively frivolous connotation, as does the word ‘game’. But, like game theory, club theory has wide reach. By ‘club’ economists mean a small group of people sharing an activity, often in a context where they care about each other’s characteristics. Such activities may include production of goods and services (firms), produ...
Article
This chapter provides a comprehensive survey of the burgeoning literature on the law and economics of intellectual property. It is organized around the two principal objectives of intellectual property law: promoting innovation and aesthetic creativity (focusing on patent, trade secret, and copyright protection) and protecting integrity of the comm...
Article
We consider a model of the innovative environment where there is a distinction between ideas for R\&D investments and the investments themselves. We investigate the optimal reward policy and how it depends on whether ideas are scarce or obvious. By foregoing investment in a current idea, society as a whole preserves an option to invest in a better...
Article
As it becomes cheaper to copy and share digital content, vendors are turning to technical protections such as encryption. We argue that if protection is nevertheless imperfect, this transition will generally lower the prices of content relative to perfect legal enforcement. However, the effect on prices depends on whether the content providers use...
Article
This chapter of the forthcoming Handbook of Law and Economics (A.M. Polinsky & S. Shavell (eds.)) provides a comprehensive survey of the burgeoning literature on the law and economics of intellectual property. It is organized around the two principal objectives of intellectual property law: promoting innovation and aesthetic creativity (focusing on...
Article
A premise of general equilibrium theory is that private goods are rival. Nevertheless, many private goods are shared, e.g., through borrowing, through co-ownership, or simply because one person’s consumption affects another person’s wellbeing. I analyze consumption externalities from the perspective of club theory, and argue that, provided consumpt...
Article
JEL Classifications: L41, K21 Abstract: When infringement of a patent dissipates profit relative to the licensing agreement that would otherwise occur, damages under the lost-profit rule deter infringement, and otherwise not. We develop this point in a general model and give two examples. However, joint profit might not be dissipated by infringemen...
Article
Full-text available
We show first that for wealth-constrained agents who may engage in an act twice the optimal sanctions are the offender's entire wealth for the first and zero for the second crime if the government can commit to sanctions. Then we ask the question whether this decreasing sanction scheme is subgame perfect when the government cannot commit, i.e., doe...
Book
Interest in intellectual property and other institutions that promote innovation exploded during the 1990s. Innovation and Incentives provides a clear and wide-ranging introduction to the economics of innovation, suitable for teaching at both the advanced undergraduate and graduate levels. It will also be useful to legal and economics professionals...
Article
Full-text available
Our objective in this paper is to review what economists have said about incentive schemes to promote R&D, including intellectual property. While we focus on environments in which other forms of protection are not available, we note that other protections can obviate the need for any formal reward system. In Section II, we compare intellectual prop...
Article
There is considerable evidence that males are more prone to take risks than females. This difference has implications for rates of promotion in hierarchies where promotion is based on random signals of ability. I explore the promotion consequences of three types of performance standards: gender-blind standards, standards designed to promote agents...
Article
I discuss recent contributions to the theory of group formation and the provision of jointly consumed public goods and services. I highlight the distinction between models of pure group formation, and models where the formation of groups and the sharing of public goods are constrained by a division of geographic space into jurisdictions. Much of th...
Article
Reverse engineering to extract knowledge about products has a long history as a lawful practice. A legal rule permitting reverse engineering is economically sound as long as this activity takes enough time or is costly enough that innovators can recoup their research and development costs. In recent years, several restrictions on reverse engineerin...
Article
In response to Wooders [Journal of Mathematical Economics 36 (2001) 295], I review the contributions of Engl and Scotchmer regarding the hedonic core and monotonicity [Journal of Mathematical Economics 26 (1996) 209], show how our contributions diverge from those previously in the literature, and highlight the importance of our assumptions by givin...
Article
Intellectual property treaties have two main types of provisions: national treatment of foreign inventors, and harmonization of protections. I characterize the circumstances in which countries would want to treat foreign inventors the same as national inventors. I then argue that national treatment of foreign inventors leads to stronger intellectua...
Article
Introduction 2. Clubs 2.1 Equilibrium Concepts 2.2 Nonanonymous Crowding 2.3 Trade in Private Goods 3. Free Mobility 4. Land, Location and Capitalization 4.1 Local Public Goods and Capitalization 4.2 Location 4.3 Bundling 5. The Public/Private Interface 6. Some New Ideas 1 I thank Alan Auerbach, Birgit Grodal, Dennis Epple, Richard Romano, William...
Article
The rules under which jurisdictions (nations, provinces) can deny immigration or expel residents are generally governed by a constitution, but there do not exist either positive or normative analyses to suggest what types of exclusion rules are best. We stylize this problem by suggesting four constitutional rules of admission: free mobility, admiss...
Article
We investigate how liability rules and property rules protect intellectual property. Infringement might not be deterred under any of the enforcement regimes available. However, counter-intuitively, a credible threat of infringement can actually benefit the patentholder. We compare the two doctrines of damages, lost profit (lost royalty) and unjust...
Article
The rules under which jurisdictions (nations, provinces) can deny immigration or expel residents are generally governed by a constitution, but there do not exist either positive or normative analyses to suggest what types of exclusion rules are best. We stylize this problem by suggesting four constitutional rules of admission: free mobility, admiss...
Article
Much of the literature on the endogenous generation of a city employs increasing returns to scale in order to obtain agglomeration. In contrast, the model considered here focuses on the role of marketplaces or trading centers in the agglomeration of population as cities. Gains to trade in combination with transportation and marketplace setup costs...
Article
We discuss economies with complementarities and/or crowding in production or consumption. We define a price system with the property that core states of the economy are the same as equilibrium states, provided the core has equal treatment. Prices for agents (wages in the production examples, or club admission fees in the club examples) internalize...
Article
: I investigate the problem of delegating an investment e#ort when it is not known in advance which #rm is most e#cient, or whether the investment should be made at all. The motivating problem is that of commissioning R&D instead of relying on patent incentives. Firms have di#erent private signals of a project's private #and social# value, and di#e...
Article
The patent system is mainly a renewal system: the patent life is chosen by the patentee in return for fees. I ask whether such a system can be justified by asymmetric information on costs and benefits of research. In such a model I show that renewal mechanisms (possibly with subsidies) are equivalent to direct revelation mechanisms and therefore ca...
Article
Firms reveal private information about the value of investment through their investment decisions. As a consequence they may have ex post regret once they see other firms' investments. We define a notion of rational expectations equilibrium for games which imposes a “no-regret” property. In this equilibrium, all firms make the same investment decis...
Article
Profit on proprietary research tools is determined partly by the remedies for infringement, such as damages and injunctions. We investigate how damages under a liability rule and the opportunity for injunctions under a property rule can affect the incentives to develop research tools. We show that the prevailing legal doctrine of damages under the...
Article
Full-text available
In the past several years, the seed industry worldwide has been dramatically restructured, mostly through mergers and acquisitions. We argue that the restructuring has been technologically driven, and has also resulted in the transformation of several chemical conglomerates into life-sciences firms. We discuss why the restructuring has mostly occur...
Article
In active investment climates where firms sequentially improve each other's products, a patent can terminate either because it expires or because a non-infringing innovation displaces its product in the market. We define the length of time until one of these happens as the effective patent life, and show how it depends on patent breadth. We disting...
Article
Competitive equilibrium in a coalition production economy or a club economy typically does not exist when there is free entry, for two reasons. First, there may be an “integer problem”, as is familiar from club theory with anonymous crowding. Second, “optimal” groups may have different compositions from the population, and then even if there is no...
Article
This paper defines a general equilibrium model with exchange and club formation. Agents trade multiple private goods widely in the market, can belong to several clubs, and care about the characteristics of the other members of thei r clubs. The space of agents and the number of possible club types are finite. It is shown that (i) approximate compet...
Article
In large games with transferable utility, core payoffs satisfy a comparative statics property: If the proportion of one type of player increases, then the core payoff to that type of player decreases (does not increase). Markets with transferable utility satisfy a similar property: if the aggregate supply of a commodity increases, its value relativ...
Article
Crime is not evenly distributed in the population. There are various explanations for this fact, each of which plays a role in the public debate about solutions. We point out that attempts to trace crime to exogenous factors in the environment or in the moral character of citizens may be doomed to disappointment. Crime is a mutually reinforcing act...
Article
We show that “exhaustion of blocking opportunities” is a sufficient condition such that every allocation in the core of a replicated club economy can be decentralized as a competitive equilibrium, and that a related condition “efficient scale” is necessary and—under an assumption on endowments—sufficient such that competitive equilibrium exists and...
Article
In large games with transferable utility, core payoffs satisfy a comparative statics property: If the proportion of one type of player increases, then the core payoff to that type of player decreases (does not increase). Markets with transferable utility satisfy a similar property: if the aggregate supply of a commodity increases, its value relativ...
Article
Full-text available
In a free mobility equilibrium with voting for pure public goods within jurisdictions and equal cost sharing, consumers will partition themselves such that high-demand jurisdictions are much larger than low demand jurisdictions. We compare the welfare implications of a change in the number of jurisdictions. We find in a fairly simple but natural mo...
Article
The research agendas of psychologists and economists now have several overlaps, with behavioural economics providing theoretical and experimental study of the relationship between behaviour and choice, and hedonic psychology discussing appropriate measures of outcomes of choice in terms of overall utility or life satisfaction. Here we model the rel...
Article
In the theory of economies with public goods one usually considers the case in which private goods are essential, i.e., each agent receives a fixed minimum level of utility if he consumes no private goods, irrespective of the public goods consumed. This paper develops the second welfare theorem for economies with public projects and possibly inesse...
Article
Incentives to develop basic technologies are greater if the patentholder profits from applications or other second-generation products. Assuming that such products infringe the basic patent and that there is not much delay between the innovations, I argue that (i) patents on second-generation products are not necessary to encourage their developmen...
Article
The paper shows that competitive forces in club economies lead to admission prices that can be decomposed as anonymous linear prices on externality-producing attributes, where each member pays the same amount per unit attribute contributed. The externalities prices are sufficient to cover the costs of services provided within the club. The latter c...
Chapter
The modem justification for granting patents is that patents give firms an incentive to invest in research and development (R&D). It therefore seems important to understand how patent law performs as an incentive system, and how it could be improved. Perhaps the most convincing investigation into the effectiveness of patent law would be an empirica...
Article
In markets with sequential innovation, inventors of derivative improvements might undermine the profit of initial innovators through competition. Profit erosion can be mitigated by broadening the first innovator's patent protection and/or by permitting cooperative agreements between initial innovators and later innovators. We investigate the policy...
Article
In active investment climates where firms sequentially improve each other's products, a patent can terminate either because it expires or because a noninfringing innovation displaces it in the market. The patent breadth and patent life together determine which of these occurs first. We distinguish "lagging" breadth, which protects against imitation...
Article
We test for Nash equilibrium in the results of a nationwide investment game, and show that, at a very high confidence level, the hypothesis of Nash equilibrium can be rejected. Either players did not respond to the considerable incentives to win, or they failed to reach an equilibrium.
Article
The task of juries is to dispense ex post justice. While justice requires convicting the guilty and acquitting the innocent, the evidence usually cannot distinguish with certainty. We argue that the jury will be more lenient in acquittals than is optimal for deterring crime whenever its subjective cost of wrongful convictions is at least as high as...
Article
[fre] Les implications de l'espace pour la concurrence. . L'intégration du facteur spatial aux modèles économiques a (au moins) deux conséquences majeures. En premier lieu, l'hypothèse de concurrence pure et parfaite devient intenable. En second lieu, la distinction entre biens privés et biens publics tend à devenir floue. Nous discutons les argume...
Article
[eng] The implications of space for competition Incorporating space in economic models bas two important consequences. First, the hypothesis of perfect competition becomes untenable and, second, the distinction between private and public goods becomes blurred. We review arguments that lead to these conclusions and summarize recent work pointing to...
Article
Incorporating space in economic models has two important consequences. First, the hypothesis of perfect competition becomes untenable, and second, the distinction between private and public goods becomes blurred. We review arguments that lead to these conclusions and summarize recent work pointing to other incentive systems that might lead to effic...
Article
The authors review the argument that incorporating space in economic models has two important consequences: first, the hypothesis of perfect competition becomes untenable, and second, the distinction between private and public goods becomes blurred. They summarize recent work pointing to alternative incentive systems that might lead to efficient lo...
Article
In a simple model, we show that a joint venture can implement the rates of investment that maximize joint profit when firms' research abilities are private information. This can be done with budget balance, even though there are participation constraints. There is no conflict between budget balance and participation constraints because firms' payof...
Article
Most innovators stand on the shoulders of giants, and never more so than in the current evolution of high technologies, where almost all technical progress builds on a foundation provided by earlier innovators. Most economics literature on patenting and patent races has looked at innovations in isolation, without focusing on the externalities or sp...
Article
Regulatory agencies charged with public health and safety typically promulgate uniform regulatory standards, which suggests the agencies are concerned mainly to reduce harmful externalities, with little concern for firms' costs. A focus on benefits, to the exclusion of costs, in standard-setting and enforcement leads to inefficiencies. We show that...
Article
The stringency of the novelty requirement in patent law affects the pace of innovation because it affects the amount of technical information that is disclosed among firms. It also affects ex ante profitability of research. We compare weak and strong novelty requirements from the standpoint of social efficiency. We ask how our answer depends on the...
Article
This edition includes four puzzles, all with answers given at the end.
Article
Government interventions in markets often distort prices. When the price consequences are uncertain, due to objective uncertainty in the economic environment, compensating and equivalent variation must be defined with respect to a cardinal indirect utility function that could be observed from consumer choices on lotteries of price vectors. I discus...
Article
When there is tax evasion, increased randomness about how much taxable income an auditor would assess generally leads to higher reported income and more revenue. When reducing randomness is costly, optimality requires some randomness in assessed taxable income. Even if reducing randomness is costless, taxpayers may prefer some randomness when the i...
Article
When taxpayers are uncertain of true taxable income, they must decide whether to resolve their uncertainty by seeking tax advice, and then decide how much taxable income to report. Since tax advisors must sign their advisees' tax returns, the audit policy can depend on whether tax advice was sought. In the optimal audit policy, some taxpayers will...
Article
A partnership is a coalition that divides its output equally. We show that when partnerships can form freely, a stable or “core” partition into partnerships always exists and is generically unique. When people differ in ability, the equal-sharing constraint inefficiently limits the size of partnerships. We give conditions under which partnerships c...
Article
In club economies with anonymous crowding, competitive equilibrium states of the economy are efficient and coincide with the core when there is only one private good. Anonymous admission prices permit consumers with different tastes to share facilities. Consumers might do so when their demands for facility size and crowding coincide, in which case...
Article
We study two Nash equilibria among a finite number of jurisdictions which maximize property values by providing public goods. In the first Nash equilibrium, the strategies are LPGs, financed by land taxes. We give conditions under which LPGs will be underprovided and show how this result is linked to price effects caused outside the jurisdiction. I...
Article
The social value of a nonmarginal improvement to amentities is not related to hedonic prices in a simple way. Furthermore, hedonic price data do not completely reveal preferences. In order to evaluate short-run benefits of an improvement, the rate of change of the hedonic price function must be normalized by a ratio of population densities. To calc...
Article
When there is market share inertia, there may exist an equilibrium in pure price strategies in a duopoly. But when the number of firms is greater than two, such an equilibrium never exists.
Article
We study a Nash equilibrium among profit-maximizing clubs which choose facility size and admission price. The number of clubs is endogenous. Entry is deterred whenever the symmetric Nash equilibrium with one additional firm would yield negative profit. Equilibrium exists with positive profit. The equilibrium price is higher than the congestion pric...
Article
Hedonic prices have been used to evaluate the willingness to pay for attributes. We reformulate the notion of hedonic price from a composite price on housing to a unit price on traded quantities, in conformity with long run competitive equilibrium theory. This formulation was suggested (but not developed) by Rosen (J. Polit. Econ.82, No. 1 (1974),...
Article
We explore how well the market will provide shared facilities which are subject to congestion. It is usually efficient to have multiple facilities because it is more efficient to spend resources on facilities than to endure crowding costs. We assume firms can charge a membership price and a visit price. We present a symmetric Nash equilibrium in th...

Citations

... Third, intellectual property rights also entail social costs. In particular, strong intellectual property protection generates a dynamic inefficiency since downstream creators would have fewer possibilities of reusing or building on previous content (Menell and Scotchmer, 2019). The legislator should also care about these social costs when regulating copyright filters. ...
... The opposite of public goods is private goods, which has the properties of rival consumption and excludability (Scotchmer, 2008). The excludability refers to that the owners have rights to prevent those who have not paid for it from consuming the goods, and the rivalry means consumption by one prevents others' consumption. ...
Citing chapter
... Excellent concise overviews are given by Posner, 2005;Shavell, 2004: 137ff.;Besen, 2002;Scotchmer, 2002;Menell, 2000;Merges, 1995;Kay, 1993. analysis of copyright and the economic conditions which apply to the creation and exploitation of intellectual and artistic works. ...
... Primero, si se toma como referente la localización, el centro se caracteriza por estar ubicado en una posición relativamente privilegiada con respecto a los demás territorios (por ejemplo, kilómetros, tiempo de acceso y costos de transporte) (Huriot & Perreur, 1990;Huriot, 1994;Huriot & Perreur, 1995). Segundo, si se toma como referente la concentración, en el centro se agrupa la población, la riqueza, las actividades económicas, los conocimientos, la cultura, la industria, la información, el poder y la dominación (Berry, 1967;Lefebvre, 1974;Fujita, 1988;Scotchmer & Thisse, 1993;Krugman, 2011). De hecho, este se caracteriza por la existencia de economías de escala, rendimientos crecientes y una mejor y mayor oferta salarial (Polydorides, 1983;Fujita & Krugman, 2004;Bertinat et al, 2012). ...
... As a partial explanation, however, it may be that tax agents, largely because of the conservative expectations of the majority of their clients, perceive their role fundamentally as that as an " enforcer " of the tax law. When acting as the expert intermediary between the client and the ATO they reduce taxpayer uncertainty through: the lodgement of " correct " returns, reducing the probability of audit, and increasing the client's probability of successfully defending adopted reporting positions/reducing taxpayer penalties (Scotchmer, 1989;Hite and McGill, 1992). In support of this view, the research of Collins, Milliron and Toy (1990) had found that approximately seventy percent of taxpayers surveyed had engaged tax preparers to file an accurate return, but only twenty five percent indicated that minimisation of tax was their primary goal. ...
... Journal compilation © 2007 Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Ltd environmental goods through the purchase of private goods necessary to travel (Scotchmer and Thisse 1999). Distance also affects the availability of information, and preferences are, to a certain degree, dependent on the available information (Beckmann 1999). ...
... The term reverse engineering refers to the process of extracting design knowledge from anything human-made, i.e., anything that has been engineered by a human being (Eilam, 2011;Friesinger & Herwig, 2014;Müller et al., 2000;Rekoff, 1985;Samuelson & Scotchmer, 2002). Reverse engineering starts from a finished object to produce design knowledge. ...
... In the classic economic literature, patent protection is regarded as an extremely powerful and sophisticated mechanism for providing incentives toward the creation of new ideas, products, inventions, and designs. Moreover, the current literature also identifies the significant impact of the administration of intellectual property law on the efficacy and innovation-spurring capacity of the overall system (Menell and Scotchmer, 2007;Moser and Voena, 2012;Baten et al., 2017). Arguably, administration should actually play the most significant role in patent law as it optimally provides protection for only the inventions judged by the patent examiner to satisfy the validity requirements (Menell and Scotchmer, 2007). ...
... Se trata, en todo caso, de una línea de investigación abierta. Reinganum & Wilde (1985), Scotchmer (1986) y Sánchez & Sobel (1993). También Border & Sobel (1987) y Mookherjee & Png (1989) suponen que la Agencia es capaz de comprometerse sobre la política de inspección, pero estudian simultáneamente la política de imposición y la de inspección. ...
... For example, all prices here have been conjectural, but the optimum can still be decentralized, and complementarity between merit and non-merit goods can still be possible. Yet this is a feature of the paper that, according to Diamantaras, Gilles and Scotchmer (1996), may not hold under different assumptions, unless at least the postulate about general complementarity is relaxed. Moreover, although our Walrasian equilibrium under general complementarity presupposes a largescale economy, having subsequently countrywide relevance, the optimal scale justified by a model setting differing from ours may be the local jurisdiction. ...