Pub Date : 2026-01-10DOI: 10.1016/j.rie.2026.101113
Benhur Ruqsana
The primary objective of this paper is to explore strategic behaviour in public goods allocation models under incomplete information with an exogenously given network. In order to do so, a game-theoretical framework is developed by incorporating beliefs about an uncertain state of the world. The equilibrium behaviour of individuals in public goods allocation is then characterized, with a particular focus on how the network structure and belief distribution influence these outcomes. Additionally, the impact of free-riding behaviour on welfare is examined, highlighting the role of network topology in determining efficiency. Finally, to ensure robustness, the model is tested under varying conditions.
{"title":"Public goods in a network: A Bayesian approach","authors":"Benhur Ruqsana","doi":"10.1016/j.rie.2026.101113","DOIUrl":"10.1016/j.rie.2026.101113","url":null,"abstract":"<div><div>The primary objective of this paper is to explore strategic behaviour in public goods allocation models under incomplete information with an exogenously given network. In order to do so, a game-theoretical framework is developed by incorporating beliefs about an uncertain state of the world. The equilibrium behaviour of individuals in public goods allocation is then characterized, with a particular focus on how the network structure and belief distribution influence these outcomes. Additionally, the impact of free-riding behaviour on welfare is examined, highlighting the role of network topology in determining efficiency. Finally, to ensure robustness, the model is tested under varying conditions.</div></div>","PeriodicalId":46094,"journal":{"name":"Research in Economics","volume":"80 1","pages":"Article 101113"},"PeriodicalIF":1.3,"publicationDate":"2026-01-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145977124","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-10DOI: 10.1016/j.rie.2026.101112
Uchechukwu Jarrett , Sujata Saha
We investigate the growth effects of practices that either emphasize or de-emphasize the accumulation of imported capital goods compared to domestically produced capital goods. We find that an increased reliance on imported capital goods yielded lower aggregate growth, when compared to complementing practices where neither capital good source is prioritized and practices that increased reliance on domestic capital goods. Further investigation reveals a preference for complementing practices over a reliance on domestic capital goods only in low-income countries but the superiority of an increased reliance on domestic capital goods prevails everywhere else.
{"title":"Trading capital goods: Is it better to prioritize domestic capital goods production?","authors":"Uchechukwu Jarrett , Sujata Saha","doi":"10.1016/j.rie.2026.101112","DOIUrl":"10.1016/j.rie.2026.101112","url":null,"abstract":"<div><div>We investigate the growth effects of practices that either emphasize or de-emphasize the accumulation of imported capital goods compared to domestically produced capital goods. We find that an increased reliance on imported capital goods yielded lower aggregate growth, when compared to complementing practices where neither capital good source is prioritized and practices that increased reliance on domestic capital goods. Further investigation reveals a preference for complementing practices over a reliance on domestic capital goods only in low-income countries but the superiority of an increased reliance on domestic capital goods prevails everywhere else.</div></div>","PeriodicalId":46094,"journal":{"name":"Research in Economics","volume":"80 1","pages":"Article 101112"},"PeriodicalIF":1.3,"publicationDate":"2026-01-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145977123","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-11-17DOI: 10.1016/j.rie.2025.101102
Juan Ignacio Martín-Legendre, Pablo Castellanos-García, José Manuel Sánchez-Santos
Different views on inequality and preferences in income redistribution are instrumental in shaping tax-and-transfers redistributive policies. While the Median Voter Theorem indicates that increasing inequality should lead to an expansion of redistributive policies, the vast differences between countries in this regard seem to reveal this as a much more issue. In order to explore it further, we examine trends in the World Values Survey, which provides a heterogeneous sample of 88 countries for the period 1990–2018. Applying estimation methods for panel data, our results point to each country economic development –measured as per capita income– and perceived rather than actual inequality, as well as cultural factors associated with a country's geographical region, as the main determinants to explain redistribution preferences.
{"title":"Inequality and redistributive preferences: Comparative analysis with panel data from the World Values Survey (1990–2018)","authors":"Juan Ignacio Martín-Legendre, Pablo Castellanos-García, José Manuel Sánchez-Santos","doi":"10.1016/j.rie.2025.101102","DOIUrl":"10.1016/j.rie.2025.101102","url":null,"abstract":"<div><div>Different views on inequality and preferences in income redistribution are instrumental in shaping tax-and-transfers redistributive policies. While the Median Voter Theorem indicates that increasing inequality should lead to an expansion of redistributive policies, the vast differences between countries in this regard seem to reveal this as a much more issue. In order to explore it further, we examine trends in the World Values Survey, which provides a heterogeneous sample of 88 countries for the period 1990–2018. Applying estimation methods for panel data, our results point to each country economic development –measured as per capita income– and perceived rather than actual inequality, as well as cultural factors associated with a country's geographical region, as the main determinants to explain redistribution preferences.</div></div>","PeriodicalId":46094,"journal":{"name":"Research in Economics","volume":"80 1","pages":"Article 101102"},"PeriodicalIF":1.3,"publicationDate":"2025-11-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145580445","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-11-05DOI: 10.1016/j.rie.2025.101101
María Jesús Delgado Rodríguez, Alfredo Cabezas Ares, Fernando Pinto Hernández
Non-communicable diseases (NCDs) are the leading cause of morbidity and mortality in Spain, imposing a significant economic burden through healthcare expenditures and productivity losses. Despite existing national strategies, a gap persists between public health knowledge and enacted policy, particularly concerning harm reduction, which is inconsistently applied across risk factors such as tobacco use, diet, and alcohol consumption. This study provides the first integrated quantitative assessment of the systematic application of harm reduction strategies across these areas in Spain. This analysis applies the Preventable Risk Integrated ModEl (PRIME) model, a comparative risk-assessment framework, parameterized with nationally representative Spanish data from the Global Burden of Disease study, health surveys, and dietary research- which were adjusted for underreporting biases. Counterfactual scenarios were developed by modelling the replacement of alcohol, conventional tobacco, and foods high in salt and saturated fat with existing, commercially available lower-risk alternatives. Our analysis estimates that the adoption of these harm reduction strategies could prevent approximately 1.23 million NCD cases annually. The projected economic gains total €18.32 billion, including €10.19 billion in direct healthcare expenditures and €8.13 billion from productivity gains. Tobacco-related risk reduction is associated with the greatest impact, preventing an estimated 0.53 million cases and yielding €5.59 billion in economic savings, followed by salt reduction at €4.10 billion. These findings offer novel empirical evidence that a pragmatic and consistent application of harm reduction, particularly in tobacco control, where it is currently resisted, could provide considerable health and economic benefits for Spain.
{"title":"Spain’s growing NCD burden: Can harm-reduction strategies turn the tide?","authors":"María Jesús Delgado Rodríguez, Alfredo Cabezas Ares, Fernando Pinto Hernández","doi":"10.1016/j.rie.2025.101101","DOIUrl":"10.1016/j.rie.2025.101101","url":null,"abstract":"<div><div>Non-communicable diseases (NCDs) are the leading cause of morbidity and mortality in Spain, imposing a significant economic burden through healthcare expenditures and productivity losses. Despite existing national strategies, a gap persists between public health knowledge and enacted policy, particularly concerning harm reduction, which is inconsistently applied across risk factors such as tobacco use, diet, and alcohol consumption. This study provides the first integrated quantitative assessment of the systematic application of harm reduction strategies across these areas in Spain. This analysis applies the Preventable Risk Integrated ModEl (PRIME) model, a comparative risk-assessment framework, parameterized with nationally representative Spanish data from the Global Burden of Disease study, health surveys, and dietary research- which were adjusted for underreporting biases. Counterfactual scenarios were developed by modelling the replacement of alcohol, conventional tobacco, and foods high in salt and saturated fat with existing, commercially available lower-risk alternatives. Our analysis estimates that the adoption of these harm reduction strategies could prevent approximately 1.23 million NCD cases annually. The projected economic gains total €18.32 billion, including €10.19 billion in direct healthcare expenditures and €8.13 billion from productivity gains. Tobacco-related risk reduction is associated with the greatest impact, preventing an estimated 0.53 million cases and yielding €5.59 billion in economic savings, followed by salt reduction at €4.10 billion. These findings offer novel empirical evidence that a pragmatic and consistent application of harm reduction, particularly in tobacco control, where it is currently resisted, could provide considerable health and economic benefits for Spain.</div></div>","PeriodicalId":46094,"journal":{"name":"Research in Economics","volume":"79 4","pages":"Article 101101"},"PeriodicalIF":1.3,"publicationDate":"2025-11-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145519417","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-20DOI: 10.1016/j.rie.2025.101095
Klaus Kultti , Teemu Pekkarinen
We study the price competition between two firms that have to advertise to reach buyers. We show that differences in advertising strategies can result in price-increasing competition. Advertising can be either informative or persuasive; the former informs buyers about the price of the standard good, and the latter increases buyers’ willingness to pay of the branded good. We show that when firms engage in different advertising methods, the pricing is in pure strategies, and if branding is effective, the firm using persuasive advertising asks a price that is higher than the monopoly price of the branded good (and, a fortiori, higher than the monopoly price of the standard good).
{"title":"Price-increasing competition by heterogeneous marketing strategies","authors":"Klaus Kultti , Teemu Pekkarinen","doi":"10.1016/j.rie.2025.101095","DOIUrl":"10.1016/j.rie.2025.101095","url":null,"abstract":"<div><div>We study the price competition between two firms that have to advertise to reach buyers. We show that differences in advertising strategies can result in price-increasing competition. Advertising can be either informative or persuasive; the former informs buyers about the price of the standard good, and the latter increases buyers’ willingness to pay of the branded good. We show that when firms engage in different advertising methods, the pricing is in pure strategies, and if branding is effective, the firm using persuasive advertising asks a price that is higher than the monopoly price of the branded good (and, a fortiori, higher than the monopoly price of the standard good).</div></div>","PeriodicalId":46094,"journal":{"name":"Research in Economics","volume":"79 4","pages":"Article 101095"},"PeriodicalIF":1.3,"publicationDate":"2025-10-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145415605","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-17DOI: 10.1016/j.rie.2025.101092
Robert E. Hall , Marianna Kudlyak
We propose that the natural rate of unemployment may have an active role in the business cycle, in contrast to a widespread view that the rate is fairly smooth and at most only weakly cyclical. We demonstrate that the tendency to treat the natural rate as near-constant would explain the surprisingly low slope of the Phillips curve. We observe that evidence is weak about this basic point—the evidence neither comes close to rejecting the conventional view nor does it reject a very different view in which fluctuations in the natural rate are associated with a substantial fraction of cyclical volatility. We show that the natural rate may have closely tracked the actual rate during the long recovery that began in 2009 and ended in 2019. We explain how the common finding of research in the Phillips-curve framework of low — often extremely low — response of inflation to unemployment could be the result of fairly close tracking of the natural rate and the actual rate in recoveries. Our interpretation of the data contrasts to that of many Phillips-curve studies, that conclude that inflation has little relation to unemployment.
{"title":"The active role of the natural rate of unemployment","authors":"Robert E. Hall , Marianna Kudlyak","doi":"10.1016/j.rie.2025.101092","DOIUrl":"10.1016/j.rie.2025.101092","url":null,"abstract":"<div><div>We propose that the natural rate of unemployment may have an active role in the business cycle, in contrast to a widespread view that the rate is fairly smooth and at most only weakly cyclical. We demonstrate that the tendency to treat the natural rate as near-constant would explain the surprisingly low slope of the Phillips curve. We observe that evidence is weak about this basic point—the evidence neither comes close to rejecting the conventional view nor does it reject a very different view in which fluctuations in the natural rate are associated with a substantial fraction of cyclical volatility. We show that the natural rate may have closely tracked the actual rate during the long recovery that began in 2009 and ended in 2019. We explain how the common finding of research in the Phillips-curve framework of low — often extremely low — response of inflation to unemployment could be the result of fairly close tracking of the natural rate and the actual rate in recoveries. Our interpretation of the data contrasts to that of many Phillips-curve studies, that conclude that inflation has little relation to unemployment.</div></div>","PeriodicalId":46094,"journal":{"name":"Research in Economics","volume":"79 4","pages":"Article 101092"},"PeriodicalIF":1.3,"publicationDate":"2025-09-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145094591","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-10DOI: 10.1016/j.rie.2025.101094
Maged Ali
Egyptians face a daily struggle, with rising inflation and high poverty rates. Beyond the economic pressures, many live under the threat of crime, including terrorism, trafficking, and organized violence. Illicit trade fuels these crimes by providing criminal networks with financial means and infrastructure. It also spreads lawbreaking and violence, and weakens the state's capacity to act. As a result, illicit trade harms ordinary Egyptians. Reducing illicit trade will weaken criminal networks and improve Egyptians’ safety. To reduce illicit trade, enforcement is needed at both entry points and within markets. New technologies such as big data and AI can render enforcement faster, smarter, and more effective. However, enforcement alone risks failing to effectively reduce illicit trade. As long as consumers continue buying smuggled goods, smugglers will find new ways to move them. Offering legal, affordable alternatives is therefore key to reduce demand for illicit goods.
{"title":"The price of illicit trade in Egypt: Illicit trade empowers criminals at the expense of ordinary people","authors":"Maged Ali","doi":"10.1016/j.rie.2025.101094","DOIUrl":"10.1016/j.rie.2025.101094","url":null,"abstract":"<div><div>Egyptians face a daily struggle, with rising inflation and high poverty rates. Beyond the economic pressures, many live under the threat of crime, including terrorism, trafficking, and organized violence. Illicit trade fuels these crimes by providing criminal networks with financial means and infrastructure. It also spreads lawbreaking and violence, and weakens the state's capacity to act. As a result, illicit trade harms ordinary Egyptians. Reducing illicit trade will weaken criminal networks and improve Egyptians’ safety. To reduce illicit trade, enforcement is needed at both entry points and within markets. New technologies such as big data and AI can render enforcement faster, smarter, and more effective. However, enforcement alone risks failing to effectively reduce illicit trade. As long as consumers continue buying smuggled goods, smugglers will find new ways to move them. Offering legal, affordable alternatives is therefore key to reduce demand for illicit goods.</div></div>","PeriodicalId":46094,"journal":{"name":"Research in Economics","volume":"79 4","pages":"Article 101094"},"PeriodicalIF":1.3,"publicationDate":"2025-09-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145465993","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-04DOI: 10.1016/j.rie.2025.101077
Marco Vinicio Monge-Mora , Juan Andrés Robalino-Herrera
Depending on consumption complementarity, the partial equilibrium effect of taxes and subsidies in the price of a commodity underestimates or overestimates the general equilibrium effect. We formalize this theoretical issue relating it to a practical problem: if we use a tax-free market as a counterfactual to see the price consequences of taxing another market, our estimates will be biased because the Stable Unit Treatment Value Assumption (SUTVA) is violated. In this manuscript, we present a general formula for the relative size of this bias, which we will call “the bias of consumption-interdependent markets”. Our results lead to methodological warnings and recommendations about how tax-free markets can be used as controls to study the treatment effect of a tax on the price of a particular market: the treated market and the control should have a low degree of substitution/complementarity; but, even so, the relative size of the bias we study depends not only on the degree of substitution/complementarity between treated and control, but also on the degree of substitution/complementarity of treated and control with any other commodity.
{"title":"The bias of consumption-interdependent markets","authors":"Marco Vinicio Monge-Mora , Juan Andrés Robalino-Herrera","doi":"10.1016/j.rie.2025.101077","DOIUrl":"10.1016/j.rie.2025.101077","url":null,"abstract":"<div><div>Depending on consumption complementarity, the partial equilibrium effect of taxes and subsidies in the price of a commodity underestimates or overestimates the general equilibrium effect. We formalize this theoretical issue relating it to a practical problem: if we use a tax-free market as a counterfactual to see the price consequences of taxing another market, our estimates will be biased because the Stable Unit Treatment Value Assumption (SUTVA) is violated. In this manuscript, we present a general formula for the relative size of this bias, which we will call “the bias of consumption-interdependent markets”. Our results lead to methodological warnings and recommendations about how tax-free markets can be used as controls to study the treatment effect of a tax on the price of a particular market: the treated market and the control should have a low degree of substitution/complementarity; but, even so, the relative size of the bias we study depends not only on the degree of substitution/complementarity between treated and control, but also on the degree of substitution/complementarity of treated and control with any other commodity.</div></div>","PeriodicalId":46094,"journal":{"name":"Research in Economics","volume":"79 4","pages":"Article 101077"},"PeriodicalIF":1.3,"publicationDate":"2025-09-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145018538","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-02DOI: 10.1016/j.rie.2025.101084
Joan E. Madia
The United Kingdom aims to be smoke-free by 2030, and in pursuit of this goal, has proposed a Generational Sales Ban (GSB). While somewhat innovative, the GSB exclusively targets future generations, potentially overlooking the immediate health burdens and illicit market risks associated with current smokers. This study argues for a Cap-and-Levy scheme as a more comprehensive and efficient alternative. By directly addressing supply, consumption, and state tax revenues, a Cap-and-Levy approach offers a broader impact on smoking prevalence including existing smokers, while potentially mitigating the unintended consequences of a sales ban, such as fuelling the illicit trade and reducing tax revenues. This analysis suggests that a Cap-and-Levy mechanism warrants consideration as a policy instrument that could outperform the GSB in achieving significant and immediate reductions in smoking-related harm, without the unintended consequences that the GSB would produce.
{"title":"Rethinking tobacco policy: Why a Cap-and-Levy scheme can outperform the UK’s sales ban","authors":"Joan E. Madia","doi":"10.1016/j.rie.2025.101084","DOIUrl":"10.1016/j.rie.2025.101084","url":null,"abstract":"<div><div>The United Kingdom aims to be smoke-free by 2030, and in pursuit of this goal, has proposed a Generational Sales Ban (GSB). While somewhat innovative, the GSB exclusively targets future generations, potentially overlooking the immediate health burdens and illicit market risks associated with current smokers. This study argues for a Cap-and-Levy scheme as a more comprehensive and efficient alternative. By directly addressing supply, consumption, and state tax revenues, a Cap-and-Levy approach offers a broader impact on smoking prevalence including existing smokers, while potentially mitigating the unintended consequences of a sales ban, such as fuelling the illicit trade and reducing tax revenues. This analysis suggests that a Cap-and-Levy mechanism warrants consideration as a policy instrument that could outperform the GSB in achieving significant and immediate reductions in smoking-related harm, without the unintended consequences that the GSB would produce.</div></div>","PeriodicalId":46094,"journal":{"name":"Research in Economics","volume":"79 4","pages":"Article 101084"},"PeriodicalIF":1.3,"publicationDate":"2025-09-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145048382","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-08-05DOI: 10.1016/j.rie.2025.101080
Yutaka Suzuki
Introducing the dynamic accumulation of “capability assets”, we extend the base model of Aghion = Tirole (1994), which applied the property rights approach of Grossman=Hart=Moore (1986,1990) to innovation management, into the two-period version, and analyze how “changes in firm boundaries” affect innovation and how “firm boundaries” regarding innovation are determined from a long-term perspective. In our two-period model (with organizational capability asset), it is optimal to allocate property rights to those with higher marginal efficiency of investment including dynamic effects (direct effects and strategic effects). If the dynamic marginal efficiency of investment of the research firm is sufficiently large, Non-integration (R-Ownership) regime will be chosen and “Open Innovation” will emerge. If the dynamic marginal efficiency of investment of the production firm is sufficiently large, Integration (P-Ownership) regime will be chosen and “Closed Innovation” by large firms will emerge. If the dynamic marginal efficiency of investment of the production firm is not so high, even when it is optimal to “integrate” in a static game, it can be optimal in a dynamic framework to remain “non-integrated” and keep the partnership relationship between independent firms to induce investment incentives from both sides. An extension to longer-periods and the discussion on Cash Constraints are also presented.
{"title":"An incomplete contract analysis of innovation management: “Open vs. closed” innovation in a dynamic framework","authors":"Yutaka Suzuki","doi":"10.1016/j.rie.2025.101080","DOIUrl":"10.1016/j.rie.2025.101080","url":null,"abstract":"<div><div>Introducing the dynamic accumulation of “capability assets”, we extend the base model of Aghion = Tirole (1994), which applied the property rights approach of Grossman=Hart=Moore (1986,1990) to innovation management, into the two-period version, and analyze how “changes in firm boundaries” affect innovation and how “firm boundaries” regarding innovation are determined from a long-term perspective. In our two-period model (with organizational capability asset), it is optimal to allocate property rights to those with higher marginal efficiency of investment including dynamic effects (direct effects and strategic effects). If the dynamic marginal efficiency of investment of the research firm is sufficiently large, Non-integration (R-Ownership) regime will be chosen and “Open Innovation” will emerge. If the dynamic marginal efficiency of investment of the production firm is sufficiently large, Integration (P-Ownership) regime will be chosen and “Closed Innovation” by large firms will emerge. If the dynamic marginal efficiency of investment of the production firm is not so high, even when it is optimal to “integrate” in a static game, it can be optimal in a dynamic framework to remain “non-integrated” and keep the partnership relationship between independent firms to induce investment incentives from both sides. An extension to longer-periods and the discussion on Cash Constraints are also presented.</div></div>","PeriodicalId":46094,"journal":{"name":"Research in Economics","volume":"79 4","pages":"Article 101080"},"PeriodicalIF":1.3,"publicationDate":"2025-08-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144852474","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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