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Author:Wang, Zhu 

Briefing
Innovation, Diffusion and Intellectual Property Rights

Our recent working paper studies innovation and diffusion of technology along an industry's evolution and characterizes how diffusion affects the incentives to innovate. In our analysis, firms participate in a competitive industry and face production capacity constraints. The entry of imitators thus increases industry supply and is socially beneficial to a degree. We show that, from the social welfare point of view, innovators should be compensated for intellectual property rights to internalize their knowledge spillovers to imitators. However, such compensation should be only partial due to ...
Richmond Fed Economic Brief , Volume 23 , Issue 23

Working Paper
Idea Diffusion and Property Rights

We study the innovation and diffusion of technology at the industry level. We derive the full dynamic paths of an industry’s evolution, from birth to its maturity, and we characterize the impact of diffusion on the incentive to innovate. The model implies that protection of innovators should be only partial due to the congestion externality in meetings in which idea transfers take place. We fit the model to the early experiences of the automobile and personal computer industries both of which show an S-shaped growth of the number of firms.
Working Paper , Paper 20-11

Briefing
Real Estate Commissions and Home Search Efficiency

In the U.S. residential housing market, homebuyers' agents typically offer free house showings and collect a commission equal to 3 percent of the price of the home bought by their clients. Our analysis shows that, by deviating from cost basis, this compensation structure may lead to elevated home prices, overused agent services and prolonged home searches. We explain that shifting to a simple a la carte compensation structure may improve home search efficiency and social welfare.
Richmond Fed Economic Brief , Volume 24 , Issue 08

Working Paper
Why Do Payment Card Networks Charge Proportional Feeds?

This paper explains why payment card companies charge consumers and merchants fees which are proportional to the transaction values instead of charging a fixed per-transaction fee. Our theory shows that, even in the absence of any cost considerations, card companies earn much higher profit when they charge proportional fees. It is also shown that competition among merchants reduces card companies' gains from using proportional fees relative to a fixed per-transaction fee. Merchants are found to be the losers from proportional fees whereas consumer and social welfare are invariant with respect ...
Research Working Paper , Paper RWP 08-13

Working Paper
Internet banking: an exploration in technology diffusion and impact

This paper studies the diffusion and impact of a cost-saving technological innovation?Internet banking. Our theory characterizes the process through which the innovation is adopted sequentially by large and small banks, and how the adoption affects bank size distribution. Applying the theory to an empirical study of Internet banking diffusion among banks across 50 U.S. states, we examine the technological, economic and institutional factors governing the process. The empirical findings allow us to disentangle the interrelationship between Internet banking adoption and change in average bank ...
Working Paper , Paper 13-10

Briefing
Why Is the U.S. Lagging in Adopting Mobile Payments?

Richmond Fed Economic Brief , Volume 21 , Issue 21

Briefing
Explaining the car industry cluster: the case of U.S. car makers from 1895-1969

The geographic clustering of companies within an industry is often attributed to several agglomeration economies: intra-industry spillovers (benefits from proximity to firms in the same industry), inter-industry spillovers (benefits from proximity to firms in related industries), and spinoffs (firms established by former employees of a company in the same industry). Analysis of data on the U.S. auto industry in its first 75 years sheds light on the relative importance of those forces to the clustering of car makers
Richmond Fed Economic Brief , Issue Oct

Working Paper
Spin-offs: theory and evidence from the early U.S. automobile industry

We develop "passive learning" model of firm entry by spin-off : firm employees leave their employer and create a new firm when (a) they learn they are good entrepreneurs (type I spin-offs) or (b) they learn their employer's prospects are bad (type II spin-offs). Our theory predicts a high correlation between spin-offs and parent exit, especially when the parent is a low-productivity firm. This correlation may correspond to two types of causality: spin-off causes firm exit (type I spin-offs) and firm exit causes spin-offs (type II spin-offs). We test and confirm this and other model ...
Research Working Paper , Paper RWP 08-15

Briefing
Should the Fed Issue Digital Currency?

The United States might benefit from eventually replacing most physical cash with central bank digital currency (CBCD), but first the Federal Reserve must resolve several key policy and implementation issues, such as establishing comparative advantage over private issuers and ensuring safety and soundness.
Richmond Fed Economic Brief , Volume 21 , Issue 10

Journal Article
Opinion: Artificial Intelligence: Potentials and Prospects

We are at the dawn of a new technological revolution. The recent development of artificial intelligence (AI), especially the emergence of generative AI, has offered a plausible future in which machines will eventually free humans from a wide range of cognitive tasks, unleashing vast creativity and productivity gains.
Econ Focus , Volume 24 , Issue 3Q , Pages 32

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