Working Paper Series

  • When to Use a CCT Versus a CT Approach?

    Alain de Janvry, Elisabeth Sadoulet

    Goldman School of Public Policy Working Paper (July 2006)

  • Open Source Software: The New IP Paradigm

    Suzanne Scotchmer, Stephen M. Maurer

    Goldman School of Public Policy Working Paper (April 2006)

    Open source methods for creating software rely on developers who voluntarily reveal code in the expectation that other developers will reciprocate. Open source incentives are distinct from earlier uses of intellectual property, leading to different types of inefficiencies and different biasesin R&D
    investment. Open source style of software development remedies a defect of intellectual property protection, namely, that it does not generally require or encourage disclosure of source code. We review a considerable body of survey evidence and theory that seeks to explain why developers participateinopensource collaborationsinsteadofkeepingtheir codeproprietary, andevaluatesthe extent to which open source may improve welfare compared to proprietary development.

  • The Theory and Practice of Public Good Selection: The Case of Legal Aid

    Lee Friedman, Robert Letzler

    Goldman School of Public Policy Working Paper (November 2005)

    We began this research with two overlapping objectives. The first, and of most general
    academic interest, is to gain insight about the following puzzle: why has there been
    essentially nil implementation of any of the institutional ideas in the economics literature
    for improving the efficiency of public goods decisions? These ideas have been proposed
    and refined in literally hundreds of academic articles over the past 30 years, many of
    them have undergone extensive laboratory testing, and we have an extensive network of
    public policy practitioners and academics that might be expected to help bring them into
    practice. The second objective is more specific and of immediate policy relevance: to
    understand if there are opportunities to increase the effectiveness of the federal Legal
    Services Corporation (LSC) by improving its decisions about its own internal public
    goods, largely the provision of information to attorneys that directly service the eligible
    low-income population. Providing these public goods requires locating, customizing,
    synthesizing, and creating documents and templates, doing research, leading training, and
    answering questions. We hope that our joint consideration of these two objectives might
    be beneficial to each: identifying practical implications of the public goods literature may
    benefit the LSC, and a case-study of LSC may identify general challenges that public
    goods mechanism literature should address.

  • Capitalizing Art Museum Collections: Awkward for Museums But Good for Art and for Society

    Michael O’Hare

    Goldman School of Public Policy Working Paper: GSPP08-005 (November 2005)

    Though standard accounting practice requires that all assets of a firm be manifest in accounts, an exception to this principle allows museums to omit their entire collections from their balance sheets. As the collection of any top-rank museum has more value than the rest of a typical museum's assets put together, this practice greatly obstructs good institutional decisionmaking. The practice is justified by an assertion common in the museum community that the collection is not a financial asset, neither available for sale nor obligation as a loan security, and by a variety of other assertions regarding the cost of assessing it. These assertions are shown to be choices with no fundamental support beyond museum management comfort, or to be erroneous. 

    The allocation of artistic patrimony across museums generates a return on investment below 1%, indicating that these assets are not being used efficiently to create the benefits museums (whether non-profit or public) are supposed to provide: no other organization would be allowed to control assets with such a low rate of return. Capitalizing collections is practical and would lead to a variety of beneficial changes in museum practice, on the criterion of inducing "more, better, engagement with more art by more people."

  • The Organization of Consumption, Production and Learning

    Suzanne Scotchmer, Bryan Ellickson, Birgit Grodal, William Zame

    Goldman School of Public Policy Working Paper (August 2005)

    This paper provides an extension of general equilibrium theory that incorporates the actions of individuals both as demanders and suppliers of goods
    and as members of ¯rms, schools, social groups, and contractual relationships. The central notion of the paper is a group: a collection of individuals associated with one another for some purpose. The model takes as primitive an exogenous set of group types, interpretable as (potential) ¯rms, schools, social groups, contracts etc. The types of schools and ¯rms that materialize in equilibrium, as well as the way that agents acquire skills, are determined endogenously in a competitive market, as are the contracts they enter into, and the production and consumption of private commodities. The model is
    well-founded (equilibrium exists) and passes a basic test of perfect competition (coincidence of the core with the set of equilibrium states). Examples
    and Applications illustrate the °exibility and power of the framework.

  • Digital Rights Management and the Pricing of Digital Products

    Suzanne Scotchmer, Yooki Park

    Goldman School of Public Policy Working Paper (July 2005)

    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 independent protection standards or a shared one, and if shared, on the governance of the system. Even if a shared system permits content providers to set their prices independently, the equilibrium prices will depend on how the vendors share the costs, and may be higher than with perfect legal protection. We show that demand-based cost sharing generally leads to higher prices than revenue-based cost sharing. Users, vendors and the antitrust authorities will typically have different views on what capabilities the DRM system should have. We argue that, when a DRM system is implemented as an industry standard, there is a potential for collusion through technology.

  • Do Consumers React to the Shape of the Supply?  Water Demand under Heterogeneous Price Structures

    Michael W. Hanemann, Sheila M. Olmstead, Robert N. Stavins

    Goldman School of Public Policy Working Paper (June 2005)

    Urban water pricing provides an opportunity to examine whether consumers react to the
    shape of supply functions. We carry out an empirical analysis of the influence of price and price
    structure on residential water demand, using the most price-diverse, detailed, household-level
    water demand data yet available for this purpose. We adapt the Hausman model of labor supply
    under progressive income taxation to estimate water demand under non-linear prices. Ours is the
    first analysis to address both the simultaneous determination of marginal price and water demand
    under block pricing and the possibility of endogenous price structures in the cross section. In
    order to examine the possibility that consumers facing block prices are more price-responsive, all
    else equal, we test for price elasticity differences across price structures. We find that
    households facing block prices are more sensitive to price increases than households facing
    uniform marginal prices. Tests for endogenous price structures cannot rule out a behavioral
    response to the shape of supply, but suggest that observed differences in price elasticity under
    supply curves of varying shapes may result, in part, from underlying heterogeneity among utility
    service areas.

  • Consumption Externalities, Rental Markets and Purchase Clubs

    Suzanne Scotchmer

    Goldman School of Public Policy Working Paper (May 2005)

    A premise of general equilibrium theory is that private goods are rival. Nevertheless, many private goods are shared, e.g., through borrowing, through coownership, 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 consumption externalities are limited in scope, they can be internalized through membership fees to groups. Two important applications are to rental markets and “purchase clubs,” in which members share the goods that they have individually purchased.