nep-ict New Economics Papers
on Information and Communication Technologies
Issue of 2007‒09‒24
three papers chosen by
Walter Frisch
University Vienna

  1. Transaction costs, trust, and the structuring of markets By Robertson, Paul
  2. Belief Free Incomplete Information Games By Dirk Bergemann; Stephen Morris
  3. Intellectual Property Protection and Technology Transfer: Evidence From US Multinationals By Sunil Kanwar

  1. By: Robertson, Paul (School of Economics and Finance, University of Tasmania)
    Abstract: This paper examines the institutional arrangements that develop when the risks of opportunism and other contributors to transaction costs are high but transactions are nevertheless necessary for economic efficiency. Williamson's famous distinction between markets and hierarchies is inadequate because under certain circumstances markets may be hierarchies that are deliberately managed to reduce levels of transaction costs and undertake strategic objectives to improve their competitiveness with other hierarchies, including other markets. As transaction costs are production costs for these markets, careful management increases the efficiency of the markets. As a result, some important markets are also hierarchies that are structured in ways that are analogous to firms precisely in order to reduce their costs of operation, including the transaction costs that arise from using them. This paper looks at the evolution of the membership rules of stock exchanges, a select but important group of markets that have been consciously constructed over long periods and with frequent modifications because of environmental change and learning by participants. Stock exchanges belong to a category that also includes insurance exchanges such as Lloyd's, and various markets involving shipping and world trade. These are markets in which the use of up-to-date information is especially important because conditions may alter quickly and in which risk, uncertainty, and the potential for opportunistic behaviour are factors that affect their operations in significant ways. Their productivity as markets is (or historically has been) so high that their replacement by hierarchies is virtually unthinkable because they allow for exchanges that could not otherwise be accomplished smoothly. As a result, when transaction and agency costs arise in such markets, responses have concentrated on finding mechanisms for reducing them to tolerable levels rather than on abandoning transactions altogether through the internalization of activities. The early sections of the paper are devoted to an examination of the logic of constructed markets, while the later sections examine how this logic worked out in the case of the London, New York and Sydney Stock Exchanges in the nineteenth and early twentieth centuries.
    Keywords: Transaction costs; markets; hierarchies; stock exchange; constructed markets
    Date: 2007–02
  2. By: Dirk Bergemann (Cowles Foundation, Yale University); Stephen Morris (Dept. of Economics, Princeton University)
    Abstract: We consider the following belief free solution concepts for games with incomplete information: (i) incomplete information rationalizability, (ii) incomplete information correlated equilibrium and (iii) ex post equilibrium. We present epistemic foundations for these solution concepts and establish relationships between them. The properties of these solution concepts are further developed in supermodular games and potential games.
    Keywords: Correlated equilibrium, Rationalizability, Ex post equilibrium, Belief free types, Payo types, Belief types, Supermodular games, Potential games
    JEL: C79 D82
    Date: 2007–09
  3. By: Sunil Kanwar (Department of Economics, UC San Diego)
    Abstract: This paper investigates wheter, in what direction, and to what extent one mode of technology transfer is influenced by the strength of intellectual property protection that host nations provide. Using data spanning the period 1977 - 1999, we find little support for the claim that strengthening intellectual property rights will have any sizable effect on the magnitude of overseas R&D investment by (US) multinationals. Any semblance of a positive relationship between these two variables vanishes the moment we introduce country fixed effects and time fixed effects into the regressions. One implication of our resutls is, that ceteris paribus, stronger intellectual property rights in the developing countries pursuant to the TRIPs agreement may not have any significant influence on technology transfer into thes countries via overseas R&D.
    Keywords: intellectual property, technology transfer, overseash r&d,
    Date: 2007–07–01

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