Issue 1

Volume 7 JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY
Spring 1998

Patent Breadth, Patent Life, and the Pace of Technological Progress

Ted O'Donoghue, Suzanne Scotchmer and Jacques-François Thisse
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.

Task Shifts vs. Termination as Devices for Eliciting Optimal Effort Supply

Pier Angelo Mori
This paper contrasts assignments to punitive tasks and terminations as alternative incentive devices. The basic question we ask here is: does the threat of assigning employees to a punitive task allow one to attain higher effort levels than termination threats? The answer critically depends on whether employers are able or not to commit themselves not to fire.

Oligopoly, Financial Structure, and Resolution of Uncertainty

John S. Hughes, Jennifer L. Kao and Arijit Mukherji
We characterize equilibria of a multistage game in which competing duopolists may acquire and share information in advance of choosing their financial structure which, in turn, precedes production. Given sufficient uncertainty, equilibria exist in which the efficiency and, possibly, coordination gains to acquiring and sharing perfect information are sufficient to break Brander and Lewis's (1986) result wherein both firms issue debt to their mutual disadvantage.

Competition for Managers and Product Market Efficiency

Fátima Barros and Inés Macho-Stadler
We investigate whether competition between two firms to hire managers with different abilities might affect efficiency in the product market, when a manager's effort is his/her private information. We conclude that competition for managers might lead to an improvement in efficiency in the market of the firm that attracts the most efficient manager. Competition for managers might even eliminate the productive efficiency loss due to the asymmetry of information in the firm-manager relationship.

Yardstick Competition and Investment Incentives

Dag Morten Dalen
This paper analyzes how firms' investment incentives are affected by yardstick competition in a situation in which the regulator is unable to commit himself to the regulatory contract before firms invest. Despite its rent-extracting property, yardstick competition does not necessarily reduce efficiency-improving investment.

Health-Care Payment Systems: Cost and Quality Incentives—Comment

Rajiv L. Sharma
This note analyzes the incentives for cost reduction that different payment policies provide to profit-maximizing health-care providers. Ching-to Albert Ma (1994) proposes a reimbursement mechanism that seeks to induce first-best cost reduction by using a combination of cost reimbursement and prospective payment in a model where higher effort on the part of the health-care provider reduces treatment costs.

Health-Care Payment Systems: Cost and Quality Incentives—Reply

Ching-to Albert Ma
I reconsider the implementation of efficient cost and quality efforts when health-care providers may refuse services to consumers, and introduce a mechanism that is a combination of prospective payment and cost reimbursement. Conditions are derived for the prospective payment level and the margin above cost reimbursement for the implementation of efficient efforts.