Estimating Arbitrator's Hidden Judgement in Final Offer Arbitration

In Final Offer Arbitration the arbitrator has to choose between two prices – salary offer a and demand b, presented by two negotiating sides. This situation is common e.g., in Major League Baseball since 1974, for players with at least three years experience. We model the arbitrator's decision process as follows. First, the arbitrator chooses an appropriate sum Z. Then he selects the one among a and b which is closer to the ‘proper sum’Z. The final amount selected is Y . Based on the history of n cases, the information available is the triplets {(Y _i, a _i, b _i) : i= 1, 2, . . . n}(the {Z _i} are hidden). It is assumed that the {Z _i} are random variables with a distribution which depends on an unknown parameter q and the challenge is to estimate q. Furthermore, since each case had different merits and characteristics, the resulting distribution is case-specific. Thus, our model allows the inclusion of explanatory variables. The statistical algorithm which we shall use is the Expectation-Maximization(EM) algorithm. In the paper, the statistical model is introduced in detail and the application of the EM algorithm to the available data is explained. Two numerical examples illustrate the use of the EM algorithm in estimating the arbitrator's hidden judgements.     

A model of decision-making incorporating ethical values

A model is presented which describes the process decision-makers follow when faced with problems containing ethical dimensions. The model, based upon the empirical literature, is designed to provide guidance to researchers studying ethical behavior in business. The model portrays the decision-maker with a set of personal values which are mediated by elements of the organization's culture. The combination of personal values and organizational influences yields decisions which may be significantly different from those made based upon personal values alone. Inclusion of the personal values of the decision-maker as the dominant individual input and an explicit discussion of the ethical decision process make this model more comprehensive than other recent ethics models. David J. Fritzsche is Visiting Professor in the Department of Managing and Organization at the University of Washington. His articles have appeared in numerous journals and books. He is also a co-author of the Business Policy Game, a strategic management simulation.     

Small firms,business dynamics and differential development of economic well-being

In recent years a growing stream of research has examined the relationships between structural characteristics of regions and their levels of new firm formation. This empirical study aims at supplementing such findings with analyses that include other forms of business dynamics, and also the possible well-being effects of such dynamics. From a unique and comprehensive data set that tracks all births, deaths, expansions, and contractions of commercial business establishments in Sweden 1985–89, six groups of regions with different patterns of dynamics are extracted by means of cluster analysis. The clusters' structural characteristics and their development of economic well-being are also compared. The results suggesta) that the patterns of business dynamics are contingent on the structural characteristics of regions,b) that high formation and turnover of establishments are associated with a relative increase in economic well-being, andc) that small, autonomous firms have a vital role in this process.     

Equilibrium solutions for resource dilemmas

Considered in this article is a class of resource dilemma games designed to study interactive decision behavior in the face of both strategic and environmental uncertainty. Groups of n members are asked to share a common resource pool whose exact size, x, is not known. Rather, x is sampled randomly from a uniform probability distribution which is common knowledge. Each group member j(j=1,...,n) requests r _j units from the random resource pool. Individual decisions are made independently and anonymously. Preplay communication is prohibited. If (r ₁+r ₂+...+r _n ) x, each member j is granted his/her request; otherwise, group members get nothing. We derive the Nash equilibrium solution for this resource dilemma game, and compare it to an expected utility model originally proposed by Suleiman and Rapoport (1988). We then show that the equilibrium solution accounts for the major qualitative features of experimental results reported in two previous studies.     

On automated e‐business negotiations: Goal,policy, strategy,and plans of decision and action

In recent years, there has been increasing interest in automated e‐business negotiations. The automation of negotiation requires a decision model to capture the negotiation knowledge of policymakers and negotiation experts so that the decision‐making process can be carried out automatically. Current research on automated e‐business negotiations has focused on defining low‐level tactics (or negotiation rules) so that automated negotiation systems can carry out automated negotiation processes. These low‐level tactics are usually defined from a technical perspective, not from a business perspective. There is a gap between high‐level business negotiation goals and low‐level tactics. In this article, we distinguish the concepts of negotiation context, negotiation goals, negotiation strategy, and negotiation tactics and introduce a formal decision model to show the relations among these concepts. We show how high‐level negotiation goals can be formally mapped to low‐level tactics that can be used to affect the behavior of a negotiation system during the negotiation process. In business, a business organization faces different negotiation situations (or contexts) and determines different sets of goals for different negotiation contexts. In our decision model, a business policymaker sets negotiation goals from different perspectives, which are called goal dimensions. A negotiation policy is a functional mapping from a negotiation context to some quantitative measures (or goal values) for the goal dimensions to express how competitive the policymaker wants to reach that set of goals. A negotiation expert who has the experience and expertise to conduct negotiations would define the negotiation strategies needed for reaching the negotiation goals. Formally, a negotiation strategy is a functional mapping from a set of goal values to a set of decision‐action rules that implement negotiation tactics. The selected decision‐action rules can then be used to control the execution of an automated negotiation system, which conducts a negotiation on behalf of a business organization.     

The indirect effects of advertisements designed to change product attribute beliefs

This study investigated the dynamics of attitude change by examining indirect effects of an ad designed to change a belief. Results showed that an ad had indirect effects on unmentioned beliefs, which were a function of (1) the manner in which beliefs are organized internally in ad recipients' cognitive structure and (2) retrieval cues provided externally in the ad. Also, the ad had indirect effects on evaluations (a_i) of the intended attribute; these effects were observed especially when the belief was directly attacked by the ad and the ad recipients' beliefs were held with high confidence.     

Building consensus in strategic decision making: System dynamics as a group support system

System dynamics was originally founded as a method for modeling and simulating the behavior of industrial systems. In recent years it is increasingly employed as a Group Support System for strategic decision-making groups. The model is constructed in direct interaction with a management team, and the procedure is generally referred to as group model-building. The model can be conceptual (qualitative) or a full-blown (quantitative) computer simulation model. In this article, a case is described in which a qualitative system dynamics model was built to support strategic decision making in a Dutch government agency.Since people from different departments held strongly opposite viewpoints on the strategy, the agency had discussed its strategic problem for more than a year, but was obviously not able to reach consensus. The application of group model-building was successful in integrating opposite points of view, as well as in fostering consensus and creating commitment.The purpose of the article is twofold: first, to illustrate the process of group model-building with system dynamics; second, to evaluate why it was successful. Evaluation results reveal the importance of both systemic thinking through model-building and the role of the facilitator in catalyzing the strategic decision-making process.     

Defining Respectful Leadership: What It Is,How It Can Be Measured,and Another Glimpse at What It Is Related to

Research on work values shows that respectful leadership is highly desired by employees. On the applied side, however, the extant research does not offer many insights as to which concrete leadership behaviors are perceived by employees as indications of respectful leadership. Thus, to offer such insights, we collected and content analyzed employees’ narrations of encounters with respectful leadership (N ₁ = 426). The coding process resulted in 19 categories of respectful leadership spanning 149 leadership behaviors. Furthermore, to also harness this comprehensive repertoire for quantitative organizational research, we undertook two more studies (N _2a = 228; N _2b = 412) to empirically derive a feasible item-based measurement of respectful leadership and assess its psychometric qualities. In these studies, we additionally investigated the relationships between respectful leadership as assessed with this new measurement and employees’ vertical and contextual followership as assessed via subordinates’ identification with their leaders, their appraisal respect for their leaders, their feeling of self-determination, and their job satisfaction.     

A Dynamic Model of Size Distribution of Firms Applied to U.S. Biotechnology and Trucking Industries

The present paper attempts to contribute to the existing literature on industry dynamics by proposing a tractable structure for the analysis of the dynamic process governing the size distribution of firms. An analytical model is proposed which describes the density of the cross-sectional distribution of firm size within an industry. The model is based on the theory of diffusion processes, and the method illustrates how information on the time-evolution of size distribution of firms over an extended period of time can be used to make inferences about an underlying process. An empirical application to the evolution of size distribution of population of firms in (i) the U.S. biotechnology industry, and (ii) the U.S. interstate for-hire trucking industry illustrates the applicability of the proposed model in industry studies.     

Smoking Behavior,Information Sources,and Consumption Values of Teenagers: Implications for Public Policy and Other Intervention Failures

This paper uses a hierarchical decision process model, uses of information, and a theory of consumption values as a strategic framework for evaluating the general failure of intervention strategies for teenage smoking initiation. Extremely high smoking consideration-to-trial rates and rapid cessation by occasional smokers provide narrow but unused strategic opportunities for intervention. Use of information sources varies by stage of model with interpersonal sources dominating consideration, trial, and cessation stages and mass media showing only a slightly increasing use in cessation compared to the earlier stages. The decision process model and consumption values are necessary for planning strategic interventions. Existing intervention programs are not appropriately targeted in the decision process. Programs should be developed to reduce the smoking consideration to trial rates in younger children and to encourage rapid cessation in older teenagers. The use of either print or broadcast mass media intervention programs is not supported.     

Exploring the Dynamics of Business Values: A Self-affirmation Perspective

In this paper our aim is to augment the value-congruency literature by demonstrating the dynamics of business value structures. The relationship between cognitive discomforts and value restructuring is examined by applying self-affirmation theory. Subjects (N = 115) were randomly assigned either to the treatment group (n = 69) or control group (n = 46). Those subjects in the treatment group were tasked with deciding between two different organizational re-structuring options that involved downsizing. The values of job-entitlement, and obligations to the disadvantaged shifted in emphasis in a direction that legitimated and justified the lay-off decision. The value of economic nationalism remained unchanged. Implications for research and practice are discussed.     

The Role for Long‐run Target Values of the Exchange Rate in the Bank of Japan's Policy Reaction Function

This paper analyses whether the Bank of Japan (BoJ) had fundamental concepts in mind when carrying out interventions in the foreign exchange market. We start by considering different long‐run fundamental target values based on a monetary exchange rate model and compare them with more ad hoc targets. Based on these findings, we explain the intervention probability for the BoJ after 1991 based on an ordered probit model by accounting for subperiods and asymmetric effects. It turns out that estimated fundamentally based values for the exchange rate provide additional information for the decision to intervene, in particular after 1995. However, short‐run ad hoc targets seem to be very important, in particular from 1991 until 1995, while medium‐run ad hoc targets gain importance at the end of the 1990s. Overall, we find a ‘leaning against the wind’ strategy in the event of overvaluation relies on ad hoc targets while intervention in cases of undervaluation seems to be guided more strongly by deviations from fundamental values.     

DYNAMIC CDO TERM STRUCTURE MODELING

This paper provides a unifying approach for valuing contingent claims on a portfolio of credits, such as collateralized debt obligations (CDOs). We introduce the defaultable (T, x) ‐bonds, which pay one if the aggregated loss process in the underlying pool of the CDO has not exceeded x at maturity T, and zero else. Necessary and sufficient conditions on the stochastic term structure movements for the absence of arbitrage are given. Background market risk as well as feedback contagion effects of the loss process are taken into account. Moreover, we show that any exogenous specification of the volatility and contagion parameters actually yields a unique consistent loss process and thus an arbitrage‐free family of (T, x) ‐bond prices. For the sake of analytical and computational efficiency we then develop a tractable class of doubly stochastic affine term structure models.     

Unravelling the ethical decision-making process: Clues from an empirical study comparingFortune 1 000 executives and MBA students

Using a nationwide survey, this study compared the ethical values and decision processes ofFortune executives and MBA students. Statistically significant differences in ethical values were found by class of respondent, gender, and professed decision approach. MBAs were also found to process ethical decisions differently than business professionals.James R. Harris is Associate Professor of Marketing at Auburn University. He has published in theJournal of Business Ethics, Journal of Marketing Research, Journal of Retailing, Business and Professional Ethics Journal, and elsewhere. He has taught the Legal and Social Environment course at the graduate level for a number of years.Charlotte D. Sutton is Assistant Dean for Graduate Programs at the College of Business, Auburn University. Her research on such topics as women in management, stress and interpersonal communication has been cited in such places as ABC News, Good Morning America,Wall Street Journal, Newsweek, andBusiness Week.     

Coercion,Guidance and Mercifulness: The Different Influences of Ethics Programs on Decision-Making

The development of an ethics program is a method frequently used for organising responsible behaviour within organisations. For such a program, certain preconditions have to be created in the structure, culture and strategy. In this organisational context, managers have to take their decisions in a responsible way. This process of decision-making, embedded in an ethics program, is the main focus of this article. Ethics programs often influence decision-making in a formal way; certain norms and types of behaviour are formalised and controlled within the organisation. Subsequently, individual managers have to infer the meaning of responsible behaviour from the demands laid down in the ethics program. Such a formal ethics program has some important advantages but the dangers of such an approach are often ignored. This article discusses both the advantages and disadvantages of a formal ethics program and adds two alternative ways of stimulating responsible behaviour in the organisation. In a monological approach the reflections of the decision makers on their own values are central in differentiating between right and wrong. In a dialogical approach, the communications between decision makers and other stakeholders involved are the foundations for determining a responsible solution. Because each approach is appropriate for certain issues, a well-chosen combination is justified. Such an ethics program should be strict on certain issues but leave room for reflection and interaction on other issues.     

‘BAUMOL'S DISEASE’, PRODUCTION EXTERNALITIES AND PRODUCTIVITY EFFECTS OF INTERSECTORAL TRANSFERS

This paper presents a model that introduces in an unbalanced growth framework à la Baumol the hypothesis of an endogenous productivity growth due to a positive externality of the service sector on manufacturing productivity and a learning‐by‐doing process inside both sectors. The model shows that a policy aimed at keeping the ratio between outputs in the two sectors constant in real terms may improve the aggregate productivity performance of the economy, depending on the parameters' values. Then the model derives the dynamics of the intersectoral transfer which is necessary to keep the ratio between outputs constant, and verifies that the amount of the transfer turns out to be always lower than the output of the manufacturing sector, and only asymptotically approaches it.     

Personal Values’ Influence on the Ethical Dimension of Decision Making

Personal values have long been associated with individual decision behavior. The role played by personal values in decision making within an organization is less clear. Past research has found that managers tend to respond to ethical dilemmas situationally. This study examines the relationship between personal values and the ethical dimension of decision making using Partial Least Squares (PLS) analysis. The study examines personal values as they relate to five types of ethical dilemmas. We found a significant positive contribution of altruistic values to ethical decision making and a significant negative contribution of self-enhancement values to ethical decision making. Dr. David J. Fritzsche is a retired Professor of Management and Organization at The Pennsylvania State University, Great Valley. Among the numerous journals in which he published are Journal of Business Ethics, Academy of Management Journal, Journal of Macromarketing, and Simulation & Games. He is the co-author of the Business Policy Game: A Strategic Management Simulation. He authoured the book Business Ethics: A Global and Managerial Perspective (McGraw-Hill, 1997). Dr. Effy Oz is a Professor of Management Science and Information Systems at The Pennsylvania State University, Great Valley, where he teaches courses on IT management, ethical issues in IT, and business-stakeholder relations. He has authored several textbooks including five editions of Management Information Systems (Course Technology Inc., 1998–2006), Foundations of E-Commerce (Prentice-Hall, 2002) and, Ethics for the Information Age (McGraw-Hill, 1994), and a practitioner’s book (The Manager’s Bible, Ivy League Publishing, 1998). He has also published research articles in academic and professional journals, among which are MIS Quarterly, Communications of the ACM, Information & Management, Decisions Sciences, OMEGA, Journal of Business Ethics, and Journal of Computer Information Systems. Dr. Oz is a member of the editorial boards of Encyclopaedia of Information Systems, Information & Management, and Journal of Global Information Technology Management. He is a frequent speaker at IT conferences, has conducted research on a number of IT topics, and has been quoted in numerous media including Computerworld, MSNBC, and the Los Angeles Times. He was awarded the 1997 Notable Contribution to the Information Systems Literature Award by the Information Systems Section of the American Accounting Association, the 1999-2000 Distinguished Faculty Research Award at Penn State Great Valley, and Best Paper Award at the Annual Global Information Technology Conference of 2004.     

Cultural and Ethical Effects on Managerial Decisions: Examined in a Throughput Model

Financial and cost accounting information is processed by decision-makers guided by their particular need to support decisions. Recent technological advances impacting on information as well as organizations such as the European Community mandating financial reporting requirements for many countries is rapidly changing the landscape for decision making using accounting information. Hence, the importance of individuals' decision making is more important than it was previously. These decisions are also influenced by individuals' ethical beliefs. The Throughput Modeling approach to cultural and ethical concerns provides a way of dealing with accounting information processed through various pathways by decision-makers. This modeling approach captures different philosophical perspectives from which to understand what is involved in "thinking scientifically." In the Throughput Modeling approach, pathways highlight the importance of how different philosophical perspectives may be used by individuals in arriving at a decision. This paper highlights key concepts involved in rethinking the basis of moral decision making in terms of an underlying process, rather than focusing on the application of principles or the development of a virtuous character. Examples are provided from both English and Spanish settings to help emphasize the importance of modeling ethical decision making globally.     

Understanding the Development of IOS-Based Trading Partner Relationships: A Structural Model with Empirical Validation

This study develops a research model that explains the interorganizational system (IOS) network development process in the buyer-supplier relationship. Particular attention is paid to the antecedents and consequences of two types of influence strategies— exercising power and offering IOS support—that a buyer firm often uses in increasing IOS usage with its suppliers. The research model is empirically tested with data obtained through a field survey from a sample of 233 suppliers, each exchanging electronic data interchange (EDI) documents with a nationally known retailing buyer in the United States. We find that the buyer's decision to offer EDI-related support to a supplier is negatively associated with the transaction volume with the supplier but positively with the supplier's IT capabilities as well as the supplier's transaction-specific investments made toward the relationship with the buyer. On the other hand, the buyer's decision to exercise power to a supplier is found to be negatively associated with the transaction volume between the trading partners. Our findings also indicate that offering EDI support, rather than exercising power, is more effectual in inducing greater EDI usage between the trading partners. Finally, the buyer's EDI support is found to be positively associated with suppliers' perceived benefits of using EDI in the relationship that, in turn contributes to more voluntary use of EDI with the buyer.     

The role of channel quality in customer equity management

Maximization of customer equity is a core objective of customer–company relationship management. We present an extended model of customer equity for determining the optimal allocation of marketing resources across acquisition and retention activities. Focusing on the negative relationship between acquisition and retention, we motivate channel quality as a relevant decision variable, explicate its role in the model, and demonstrate the existence of an optimal value. In addition, rather than making concavity assumptions about acquisition and retention rate response curves, we use the flexible ADBUDG model (Little, JDC, Models and Managers: the Concept of a Decision Calculus. Manag Sci 1970; 16(8): 466–484.), which allows for both S-shaped and strictly-concave relationships, and parameterize it using decision calculus. We show how to estimate and apply the model and then provide sensitivity analyses with respect to changes in the true values of model parameters as well as inaccuracy in managerial inputs. We conclude by comparing our model with extant models and discussing the implications of our research.