ARE NASH BARGAINING WAGE AGREEMENTS UNIQUE? AN INVESTIGATION INTO BARGAINING SETS FOR FIRM-UNION NEGOTIATIONS

The shapes of the bargaining sets for firm-union negotiationsare rigorously analyzed in two cases, according to whether bargainingis over wages alone (with employment set according to the labourdemand schedule) or over both wages and employment. When bargainingconcerns wages only the bargaining set becomes a one-dimensionalcurve, and so the standard theory of the Nash bargaining solutiondoes not apply. Therefore existence and uniqueness conditionsare proved directly. The Kalai-Smorodinsky solution is alsoanalysed, and results are illustrated using a constant elasticityexample.     

Sovereign Debt without Default Penalties

We develop a theory of sovereign borrowing where default penalties are not implementable. We show that when debt is held by both domestic and foreign agents, the median voter might have an interest in serving it. Our theory has important practical implications regarding (a) the role of financial intermediaries in sovereign lending, (b) the effect of capital flows on price volatility including the possible overvaluation of debt to the point that the median voter is priced out of the market, and (c) debt restructuring where creditors are highly dispersed.     

Accrual Accounting,Informational Sufficiency,and Equity Valuation

This paper studies accrual accounting and equity valuation in the context of a firm that makes repeated and overlapping investments in productive capacity. The analysis identifies a particular accrual accounting (depreciation) rule that is termed replacement cost accounting because the book value of existing capacity assets is set equal to the value that such assets would have if a competitive market were to exist for used assets. It is shown that replacement cost accounting aggregates past investment decisions of the firm without a loss of value‐relevant information. The intrinsic value of the firm can then be expressed as a function of current accounting data and certain parameters of the firm’s operating environment. Further, it is shown that replacement cost accounting is essentially the only accounting rule with this informational sufficiency property.     

Investor Sentiment and Pre-IPO Markets

We examine whether irrational behavior among small (retail) investors drives post‐IPO prices. We use prices from the grey market (the when‐issued market that precedes European IPOs) to proxy for small investors' valuations. High grey market prices (indicating overoptimism) are a very good predictor of first‐day aftermarket prices, while low grey market prices (indicating excessive pessimism) are not. Moreover, we find long‐run price reversal only following high grey market prices. This asymmetry occurs because larger (institutional) investors can choose between keeping the shares they are allocated in the IPO, and reselling them when small investors are overoptimistic.     

Whom You Know Matters: Venture Capital Networks and Investment Performance

Many financial markets are characterized by strong relationships and networks, rather than arm's‐length, spot market transactions. We examine the performance consequences of this organizational structure in the context of relationships established when VCs syndicate portfolio company investments. We find that better‐networked VC firms experience significantly better fund performance, as measured by the proportion of investments that are successfully exited through an IPO or a sale to another company. Similarly, the portfolio companies of better‐networked VCs are significantly more likely to survive to subsequent financing and eventual exit. We also provide initial evidence on the evolution of VC networks.     

THE TRANSITION TO EUROPEAN MONETARY UNION AND THE EUROPEAN MONETARY INSTITUTE

The European Monetary Institute (EMI) will prepare a framework for European Monetary Union (EMU) monetary policy during the transition to the EMU. This involves a trade-off between deepening financial market integration and harmonizing central bank instruments, a choice between centralized and decentralized monetary strategies with significant welfare implications, and a trade-off between expected welfare and certainty of policy outcomes. As a result of being dominated by national central bankers and of the conflict between the core and the periphery of the European Community (EC), the EMI is biased toward an inefficient solution. Enlargement of the EC by the European Free Trade Area (EFTA) group would raise the probability of a more efficient, two-track EMU, which initially would involve only the core group.     

Nursing Turnover and Hospital Efficiency: An Organization-Level Analysis

This study tests the competing arguments that organization-level turnover is positively associated with organizational inefficiency or, alternatively, positively related to organizational inefficiency only in those organizations experiencing very high or very low turnover. Findings from multivariate analyses support the former argument: in a national sample of 333 hospitals, turnover among registered nurses was found to be associated in a positive linear fashion with both nonpersonnel operating and personnel costs per adjusted inpatient day.