Privatization, insider control and managerial entrenchment in Russia

This paper provides new survey evidence on managerial entrenchment and the role of outsiders in the post-privatization restructuring of Russian enterprises. The major findings are that managers are hostile towards outside ownership, and they effectively collude with other employees to preserve insider control. The paper also provides empirical evidence that the gradual accumulation of shares by managers is not based only on a profit motive, but is also driven by their efforts to preserve insider control. The issues raised have relevance to other transition economies where the privatization process has encouraged insider control, such as Ukraine and Belarus.     

Moral hazard and incentives in a decentralized planning environment

The relationship between the center and the socialist manager in a decentralized planning environment is modeled in this article as one between principal and agent. A class of incentive contracts is examined in which, besides a sharing rule, the center stipulates an outcome target the manager must achieve; otherwise he will be paid a fixed payment. It is shown that the optimal incentive target is the lower bound of all feasible targets, while the optimal sharing rule is strictly locally convex at the optimal target.     

Stock vesting conditions,control benefits and managerial replacement

This article considers the effect of vesting conditions of stock‐based compensation on firms’ decisions to replace managers. I indicate that firms may excessively replace managers with both long‐ and short‐term vested stock‐based compensation, while excessive retention can be caused only by short‐term vested options. If the discount factor is sufficiently small, I also show that short‐term vested stock‐based compensation is the equilibrium contract. The study also has implications for regulations concerning mandatory deferral and clawback of executive pay.     

Comparable worth in a decentralized labour market: the case of Ontario

Abstract.  We document the application of pro‐active pay equity legislation to the private sector of the Canadian province of Ontario in the early 1990s. We report substantial lapses in compliance among smaller firms where the majority of men and women work. We also find that the pay equity law had no effect on aggregate wages in female jobs or on the gender wage gap. This experience provides unique perspectives on (1) the tensions between the workings of a decentralized labour market and the principles of comparable worth and (2) the obstacles to its extension to the private sector. JEL classification: J7, J3     

Customer preferences versus managerial decision-making in open innovation communities: the case of Starbucks

Customers can participate in open innovation communities posting innovation ideas, which in turn can receive comments and votes from the rest of the community, highlighting user preferences. However, the final decision about implementing innovations corresponds to the company. This paper is focused on the customers' activity in open innovation communities. The aim is to identify the main topics of customers' interests in order to compare these topics with managerial decision-making. The results obtained reveal first that both votes and comments can be used to predict user preferences; and second, that customers tend to promote those innovations by reporting more comfort and benefits. In contrast, managerial decisions are more focused on the distinctive features associated with the brand image.     

Influence and the discretionary allocation of several prizes

When a decision process involves discretion, it may also be open to influence by various actors. If a single prize is at issue, then this influence can be modelled in the context of a rent-seeking game. However, the basic rent-seeking model needs to be extended in order to examine the amount of influence exerted when more than one prize is at stake. In this paper, we investigate the effect of several factors which may affect rent-seeking in this multi-prize framework but are not accounted for in single-prize models; examples here are the number of prizes, the division of the prize mass and the distribution mechanism which is employed.     

Precautionary motivation and consumption insurance: Empirical analysis of household consumption behavior in rural China

Based on a household survey in rural China, this paper discusses parameters such as precautionary motive, excess sensitivity, consumption insurance, and inter-temporal substitution in the household consumption function in rural China. The conclusions of the paper indicate that there is a significant precautionary motive in household consumption in rural China, but the function of consumption insurance is very limited, and the consumption is also excessively sensitive to the income change. Such parameters are different among consumers within different groups. __________ Translated from Zhongguo Nongcun Jingji 中国农村经济 (Chinese Rural Economy), 2006, (4): 12–19     

Money,inflation, and maximizing behavior: The case of many countries

This paper examines a world which is composed of countries each inhabited by a population of farsighted overlapping generations and in which the only assets are the national currencies that grow at constant proportional rates. It is shown that the world economy is unstable in the sense that, away from the steady state, either the real value of each country's stock of money goes to zero or the world monetary system eventually collapses. It is also shown that the dynamic paths of the price level and the real stock of money in each country may move nonmonotonically over time.     

Information,optimality and pollution control

A mechanism that provides for the efficient production of public goods suggested recently by Groves-Ledyard is reinterpreted as an efficient emissions' rights market scheme. A generalization of the Groves-Ledyard mechanism which Suchanek has shown to comprise an efficient emissions' quotas scheme is restated and then converted into an efficient emissions' charges scheme. The relationship between these schemes yields the standard duality of optimal emissions' charges and optimal emissions' quotas. This duality result is not as strong as one might believe. As an illustration, two emissions' charges schemes are presented each of which generates the charges dual to the optimal quotas given by the specified optimal emissions' quotas government but which are inefficient in general.     

Willingness to pay for managerial training: A case from the knitwear industry in Northern Vietnam

Managerial capital has received attention in recent years as one of the major determinants for enterprise productivity, growth, and longevity. While recent empirical studies make it clear that training intervention can improve the management level, it remains unclear why the managers had not made efforts to obtain these basic knowledge. To test the hypothesis that the reason lies in low valuation for obtaining knowledge, we conduct experimental training programs for the managers of SMEs in a knitwear cluster in rural town in Vietnam. We find that the demand for these training was indeed low prior to training, but increased greatly with own learning experience, and that those with a higher prior demand tended to benefit more from the training.     

Nonprofit organizations, privatization and the mixed economy: A managerial economics perspective

This paper is divided into two parts. The first illustrates the present characteristics and future prospects for the development of the third sector in Italy. It then examines the social context in which the third sector develops not only in Italy but also in the rest of Europe. The theoretical perspective that seems to be the most appropriate to the dimensions the third sector has taken on in most Western countries is that of dynamic complementarity between state agencies, for-profit organizations and nonprofit organizations. In order to foster economic and social innovation, there is a need for collaboration and complementarity of roles among organizations of different types. An economic policy implemented on a rational basis should select its own intervention instruments after building a set of strategic and organizational alternatives, avoiding the exclusive adoption of only one of these, as happened at the time of the almost unlimited provision of state aid to enterprises and with the unproductive rescues of ailing public enterprises.     

Information and behavior in experimental markets

This paper reports the results of a block of experiments designed to analyze the effects of information on market performance in experimental competitive markets. Variations in institutional structure are utilized to affect the kind and amount of information subjects could gather about prices and supply and demand conditions. More information is associated with more rapid convergence, smaller variances, and closer convergence while efficiency and mean transactions prices are unaffected.     

Information in the hiring process: A case study

A variety of theoretical models have been concerned with the extent to which economic agents base their decisions on full information. This paper describes the stages of the hiring process for secretaries in a large conglomerate, the information sources used at each stage, and then estimates the relative importance of each source. Almost all applicants are interviewed when they apply and the interviewer's comments are a significant source of information. But in spite of the firm's use of complex information, it appears that the people hired are not likely to do well than those applicants not hired.     

Fairness, price stickiness, and history dependence in decentralized trade

The paper investigates price formation in a decentralized market with random matching. Agents are assumed to have subdued social preferences: buyers, for example, prefer a lower price to a higher one but experience reduced utility increases below a reference price that serves as a common fairness benchmark. The strategic equilibrium reflects market fundamentals, but it is markedly less sensitive to the buyer–seller ratio near the fair price benchmark. Prices may be sticky around very different reference levels in markets with otherwise identical fundamentals. The implied history dependence turns out to be mitigated rather than exacerbated by friction.     

Corruption,intrinsic motivation,and the love of praise

Do higher wages prevent corruption (bribe taking)? We investigate a setting where individuals who apply for public sector jobs are motivated not just by monetary incentives but also by intrinsic motivation and concern for the collective reputation of their profession. We show that an increase in monetary compensation may cause reputation‐concerned individuals to be more prone to participate in corruption due to an “overjustification” effect. The overall effect of monetary incentives on fighting corruption crucially depends on the composition of the pool of public sector workers for two reasons: first, different types of workers react differently to the same policy; second, the composition of the pool of workers affects individual behavior through its effect on collective reputation. These results imply in particular that policies to fight corruption should focus more on increasing the collective reputation of the public sector rather than using monetary incentives, which have perverse effects on some agents.