The Minimum Safety Standard, Consumers’ Information, and Competition, February 2007

This paper explores the effects of a standard influencing care choice. Firm(s) may increase the probability of offering safe products by incurring a cost. Under duopoly, they compete either in prices or in quantities. Under perfect information about safety for consumers, the selected standard that corrects a safety underinvestment is always compatible with competition. Safety over investment only emerges under competition in quantities and relatively low values of the cost. Under imperfect information about safety for consumers, the standard leads to a monopoly situation. However, for relatively large values of the cost, a standard cannot impede the market failure coming from the lack of information.

Intellectual Property Rights and Crop-Improving R&D under Adaptive Destruction, June 2007

This paper studies how the strength of intellectual property rights (IPRs) affects investments in biological innovations when the value of an innovation is stochastically reduced to zero because of the evolution of pest resistance. We frame the problem as a research and development (R&D) investment game in a duopoly model of sequential innovation. We characterize the incentives to invest in R&D under two competing IPR regimes, which differ in their treatment of the follow-on innovations that become necessary because of pest adaptation. Depending on the magnitude of the R&D cost, ex ante firms might prefer an intellectual property regime with or without a “research exemption” provision. The study of the welfare function that also accounts for benefit spillovers to consumers—which is possible analytically under some parametric conditions, and numerically otherwise—shows that the ranking of the two IPR regimes depends critically on the extent of the R&D cost.