Environmental self-auditing: setting the proper incentives for discovery and correction of environmental harm

Many firms conduct 'environmental audits' to test compliancewith a complex array of environmental regulations. Commentatorssuggest, however, that self-auditing is not as common as itshould be, because firms fear that what they find will be usedagainst them. This article analyzes self-auditing as a two-tieredincentive problem involving incentives both to test for andto effect compliance. After demonstrating the inadequacy ofconventional remedies, we show that incentives can be properlyaligned by conditioning fines on firms' investigative effort.In practice, however, the regulator may not be able to observesuch effort. Accordingly, we propose and evaluate the use ofthree observable proxies for self-investigation: the mannerin which the regulator detected the violation; the firm's owndisclosure of violations; and the firm's observed correctiveactions. Each method has its own efficiency benefits and informationalrequirements, and each is distinct from EPA's current auditpolicy.     

The α-beauty contest: Choosing numbers, thinking intervals

We present a model for the α-beauty contest that explains common patterns in experimental data of one-shot and iterative games. The approach is based on two basic assumptions. First, players iteratively update their recent guesses. Second, players estimate intervals rather than exact numbers to cope with incomplete knowledge of other players' rationality. Under these assumptions we extend the cognitive hierarchy model of Camerer et al. [Camerer, C., Ho, T., Chong, J., 2003b. A cognitive hierarchy model of one-shot games. Quart. J. Econ. 119, 861–898]. The extended model is estimated on experimental data from a newspaper experiment.     

Risk aversion, liquidity, and endogenous short horizons

We analyze a competitive model in which different informationsignals get reflected in value at different points in time.If investors are sufficiently risk averse, we obtain an equilibriumin which all investors focus exclusively on the short term.In addition, we show that increasing the variance of informationlesstrading increases market depth but causes a greater proportionof investors to focus on the short-term signal, which decreasesthe informativeness of prices about the long run. Finally, wealso explore parameter spaces under which long-term informedagents wish to voluntarily disclose their information.     

Novel versus familiar brands: An analysis of neurophysiology, response latency, and choice

Two experiments were conducted to analyze neurophysiological activation, response latency, and actual brand choice concerning novel and familiar brands. The results show that (1) the choice of novel brands (compared to the choice of familiar brands) is preceded by increased activation of both the cingulate gyrus and the ventromedial prefrontal cortex, as measured by a functional magnetic resonance imaging (fMRI) study; (2) novel brands are associated with longer choice response latency than familiar brands; and (3) positive mood enhances response latency of choosing novel brands compared to familiar brands.     

Rationality in supplier selection decisions: The effect of the buyer's national task environment

Our study sheds light on two fundamental questions in supply management: First, does adherence to highly rational decision processes help buyers make better supplier selection decisions? Second, is the influence of procedural rationality on decision effectiveness moderated by buyers’ (differently dynamic) task environments? We empirically test these questions using a sample of 150 supplier selection decisions taken in China and 150 decisions taken in Germany, countries that expose buyers to dynamic decision environments and stable decision environments, respectively. Our findings suggest that the influence of decision process rationality is stable across decision makers’ task environments. Both in China and in Germany, such process rationality is positively related with higher decision quality, and no significant differences in relationship strengths emerge between the two country samples.     

Neuroökonomie: Grundverständnis,Methoden und betriebswirtschaftliche Anwendungsfelder

At present, economic and business research is increasingly applying insights and methods from neuroscience in order to describe and explain certain conditions and processes within the “black box” human brain prior to, during, and after economic decision making in greater detail. This article aims at clarifying the fundamentals of the emerging field of neuroeconomics, at characterizing the applied methods, at describing neuroeconomic progress in business research, and at discussing the present state of the field. In doing so, the objective is to make neuroeconomics accessible to a greater number of business researchers.     

Competition and regulation in the UK gas industry

The decade since privatization has seen gas change from an integratedmonopoly with no competition and without the structure necessaryto encourage it, to an industry moving rapidly towards fullcompetition. British Gas was privatized as an integrated monopoly;it had no regulation in the bulk market, and light regulationin the tariff market. Within 10 years it has lost more thanhalf its bulk market, has voluntarily 'demerged' into a transportationand supply arm, and is leading the way in liberalization ofthe residential market. Some of these changes have been assistedby the particular circumstances of the gas market, especiallythe contracts which the incumbent has inherited. The Regulatoris relying increasingly on prevention of undue discriminationfor control of the dominant supplier, and this principle hasbeen discussed and applied in a number of cases within the industry.Liberalization also raises important distributional issues,especially in the residential market.