Essays on laws, norms, and innovation

Many issues faced by firms and consumers nowadays stem from a fundamental misalignment between laws and norms. In public policy - no matter whether governments aim to regulate innovation or information provision - this imbalance can impede evolution, causing regulation to become stale. The lack of dynamism in policy and questions around its feasibility are the common thread behind these three essay. Chapter 1 studies a dynamic information design problem in which a regulator can disclose unobserved quality information as the norms of a population evolve. Under moral hazard, the regulator sets a pass-fail standard ex-ante. Firms choose whether to produce and sell an asset to a population of consumers. Over time, consumers’ purchase decision depends on the signal, others’ buying behavior, and norm evolution. In equilibrium, targeted certification can eliminate bad norms and raise consumer welfare. Chapter 2 highlights the limitation of general-purpose language models in defining technological similarity within a specific industry. Using wine patents as a case study, I leverage five pre-trained embeddings to show how similarity compares across models and countries. I validate the results both internally and externally, showing large discrepancies in annual trends. These findings underscore the importance of selecting suitable models for market assessment, providing a valuable primer for both wine operators and technologists. Chapter 3 examines the impact of micro entity fees enacted under the America Invents Act on patent status and quality. Using small firms as controls, I use a difference-in-difference design to verify whether lower fees affected the outcome and quality of applications filed by the treated group. The evidence shows that, post-reform, micro entities significantly reduced the quality of their applications and were 37.4-percentage-point less likely to be granted a patent. Further analysis indicates that large universities and private firms were worst affected by the provision.