Preferences, Property Rights, and Anonymity in Bargaining Games

Research on ultimatum and dictator games has found that because of "fairness" first movers in such games offer more than noncooperative game theory predicts. We find that if the right to be the first mover is "earned" by scoring high on a general knowledge quiz, then first movers behave in a more self-regarding manner. We also conducted dictator double blind experiments, in which the experimenter could not identify the decision maker. The results yielded by far our largest observed incidence of self-regarding offers, suggesting that offers are due to strategic and expectation considerations. Journal of Economic Literature Classification Numbers: C78, C91.     

Technology transfer to the U.S.S.R and the shape of the production function

Summary In this paper we argue that previous studies of the impact of imports of Western capital to the Soviet Union have erred by emphasizing the direct contribution of such capital to output. To our view, a more important consequence of such imports is a catalytic effect on the productivity of indigenous capital and labor cooperating with Western machinery. Estimates of production functions for Soviet industry and several subsectors indicate that Western capital imports do improve the productivity of indigenous inputs and make the production process more capital intensive.     

Discount Point Concessions and the Value of Homes with Conventional versus Nonconventional Mortgage Financing

This is an empirical investigation on the impacts of certain seller concessions on home prices. Specifically, we examine the impacts of two seller concessions: discount point concessions (DPCs) and closing cost concessions (CCCs) on home prices. Using hedonic analysis, we find that DPCs are capitalized into home prices. We do not find that CCCs produce capitalization effects. DPCs appear to work in a manner similar to other creative financing techniques such as a buydown mortgage. DPCs enhance affordability by lowering interest costs and debt service payments. DPCs thus lead to increases in effective demand. CCCs will reduce out of pocket expenses but will not necessarily enhance long-term affordability, thus their price effects are less certain. We show that these price premiums are prevalent only when conventional mortgage financing is used. When FHA and VA loans are used, premiums disappear. Of course, governmental insured/guaranteed loans are much more subject to regulation than conventional loans, which may prevent homesellers from price premium maximization. The study establishes the relative significance of discount points versus closing costs as marketing incentives. It appears that the use of discount points as a marketing incentive produces more capitalization effects. The presence of such capitalization effects is consistent with results found in other creative financing studies.     

Case study. Does this company need a union?

No doubt about it, the top managers in this fictitious case study agree, Wellington Associates is a great place to work. Analysts at the high-tech consulting firm enjoy some of the best pay in the industry. And their benefits are extensive: flextime, liberal educational opportunities, comprehensive medical and dental coverage, generous vacation leave, and even on-site day care. So it came as something of a shock to CEO Jane Wellington and her top executives when HR chief Elvin Cusack started out the weekly senior-management meeting by declaring that the United Office Workers Union had begun organizing the support staff. Turns out, Cusack explained, that the company looks very different from the support staff's point of view. Although their starting salaries are indeed competitive, raises average a mere 2% to 3%, and promotions to professional ranks are rare. Medical and dental coverage take a greater chunk out of clerical pay than out of the larger professional salaries, and the cost of the day care center is pretty much out of reach for the support staff. Flextime is impractical for workers who need to be in the office to answer phones and to file papers. Worse, the support staff is expected to accommodate the analysts' flexible schedules; if an analyst decides to work late to finish a project, the secretary has to stay as well. What to do? Suggestions ranged from "fire 'em" to "say nothing before calling in legal counsel." Five commentators examine Wellington's options and its legal obligations.     

Managerial Tenure and Recovery Following M-Form Reorganization in Diversified Firms

We identify two factors that affect how quickly highly interdependent diversified firms recover from the performance disruptions that typically accompany M-form reorganizations: (1) organizational tenure and (2) the tenure of top management teams. We find that top management teams with a rare combination of long organizational tenure and relatively short team tenure are associated with faster performance recovery in diversified firms with extensive business unit interdependencies. The effects of managerial tenure on recovery time were found to be inconsequential in unrelated diversified firms where the reorganization task is less complex.     

The importance of fit between individual values and organisational culture in the greening of industry

Individual and societal values with respect to environmental protection have been shown to have grown significantly in the past decade and can be expected to continue to grow. As a result, companies that do not materially adopt environmental values into their corporate value systems will find their culture to be incongruent with the personal values of their employees. Under such circumstances, these employees will face the choice of three sub-optimal options: (1) dissatisfied compliance with the corporate values; (2) resolution to change the corporate values; or (3) resignation from the organization. Those companies that are able to achieve a congruent fit between individual and organizational values will benefit from higher worker satisfaction, longer tenure and greater loyalty.     

MANAGERIAL REMUNERATION AND ACCOUNTING FOR RECURRING EXTRAORDINARY ITEMS

The Australian standard on income statements (AAS 1) was recently amended to require that extraordinary items be non-recurring. Although the amendment applies from 1990, the Corporations Law requires that comparative financial statements for 1989, complying with the new rule, be included with the 1990 financial statements. Comparison of these with actual financial statements for 1989 indicates how the statements would have differed in 1989 if the standard had then required extraordinary items to be non-recurring. The differences are investigated to partially explain cross sectional differences in firms' classification criteria. Results imply that managers who are remunerated highly (relative to the magnitude of the earnings of the firm) prefer to classify gains as operating and losses as extraordinary.     

Rational expectations and monetary models of exchange rate determination: An empirical examination

One asset model of exchange rate determination that has received substantial attention in the literature is the monetary model. As with other asset models, expectations of future exchange rates play a key role. Usually these expectations are assumed to be formed rationally. However, to date there has been no attempt to empirically estimate a complete monetary model with rational expectations. In this paper, such a model is estimated and the restrictions implicity imposed by the rational expectation hypothesis tested. The results suggest that both the parameter constraints associated with the monetary model and those implied by the REH are consistent with recent exchange rate behavior.