After 100 years of discussion, response bias remains a controversial topic in psychological measurement. The use of bias indicators in applied assessment is predicated on the assumptions that (a) response bias suppresses or moderates the criterion-related validity of substantive psychological indicators and (b) bias indicators are capable of detecting the presence of response bias. To test these assumptions, we reviewed literature comprising investigations in which bias indicators were evaluated as suppressors or moderators of the validity of other indicators. This review yielded only 41 studies across the contexts of personality assessment, workplace variables, emotional disorders, eligibility for disability, and forensic populations. In the first two contexts, there were enough studies to conclude that support for the use of bias indicators was weak. Evidence suggesting that random or careless responding may represent a biasing influence was noted, but this conclusion was based on a small set of studies. Several possible causes for failure to support the overall hypothesis were suggested, including poor validity of bias indicators, the extreme base rate of bias, and the adequacy of the criteria. In the other settings, the yield was too small to afford viable conclusions. Although the absence of a consensus could be used to justify continued use of bias indicators in such settings, false positives have their costs, including wasted effort and adverse impact. Despite many years of research, a sufficient justification for the use of bias indicators in applied settings remains elusive.

This paper presents a model of cumulative innovation where firms are heterogeneous in their research ability. We study the optimal reward policy when the quality of the ideas and their subsequent development effort are private information. The optimal assignment of property rights must counterbalance the incentives of current and future innovators. The resulting mechanism resembles a menu of patents that have infinite duration and fixed scope, where the latter increases in the value of the idea. Finally, we provide a way to implement this patent menu by using a simple buyout scheme: The innovator commits at the outset to a price ceiling at which he will sell his rights to a future inventor. By paying a larger fee initially, a higher price ceiling is obtained. Any subsequent innovator must pay this price and purchase its own buyout fee contract. * We thank Fernando Alvarez and Narayana Kocherlakota for helpful comments. The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System.

Conventional wisdom among legal scholars is that contractual restrictions on employee mobility affect turnover and led to the overtaking of Massachusetts' Route 128 by Silicon Valley. We study a model of employee mobility in the spirit of Pakes and Nitzan to see when this can be the case. We show that, in fact, with certain frictions taken into account, a model of employee mobility can not only replicate the overtaking by Silicon Valley, but it can also help to explain Route 128s early dominance. Further, the model explains the relative success of firms that start as, or generate, spin-outs.

Network externalities, Duopoly, Evolution of standards, Market power, L1, L5,

This paper presents a model of cumulative innovation where firms are heterogeneous in their research ability. We study the optimal reward policy when the quality of the ideas and their subsequent development effort are private information. The optimal assignment of property rights must counterbalance the incentives of current and future innovators. The resulting mechanism resembles a menu of patents that have infinite duration and fixed scope, where the latter increases in the value of the idea. Finally, we provide a way to implement this patent menu by using a simple buyout scheme: The innovator commits at the outset to a price ceiling at which he will sell his rights to a future inventor. By paying a larger fee initially, a higher price ceiling is obtained. Any subsequent innovator must pay this price and purchase its own buyout fee contract. * We thank Fernando Alvarez and Narayana Kocherlakota for helpful comments. The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System.