Information Acquisition and the Equilibrium Incentive Problem

I study the optimal incentive provision in a principal–agent relationship with costly information acquisition by the agent. I emphasize that adverse selection or moral hazard is the principal's endogenous choice by inducing or deterring information acquisition. The principal designs the contract not only to address an existing incentive problem but also to implement its presence. Implementation of adverse selection relies on a steeper information rent to the agent than the standard menu, such that the agent is motivated to distinguish the efficient state of nature from the inefficient. Moral hazard is implemented by replacing the benchmark debt contract with a debt‐with‐equity‐share contract, such that the agent does not attempt to acquire information to either avoid debt or to extract rent.     

The Atlanta Experience Re‐examined: The Link Between Agenda and Regime Change

In recent years, Atlanta appears unable to move from diffuse problem recognition to the framing of a broad program of action, despite major problems associated with a high level of poverty. With its exceptionally fragmented structure of local government, a tradition of business wariness of a strong governmental sector, and continued reliance on personal and informal collaboration, the city has failed to put together a plan to address the city's social‐investment needs. Atlanta's once‐vaunted biracial coalition shows signs of a declining ability to adapt to emergent issues and frame purposes accordingly. Récemment, Atlanta s'est révélée incapable de passer de la reconnaissance d'un problème plus ou moins identifiéà la conception d'un programme d'action d'envergure, malgré d'énormes difficultés liées à un niveau de pauvretéélevé. Compte tenu de la structure exceptionnellement fragmentée de son autorité locale, d'une tradition de défiance des milieux d'affaires à l'égard d'un puissant secteur public local, ainsi que d'une confiance persistante dans une collaboration personnelle informelle, la ville n'a pas réussi à mettre sur pied un plan capable de répondre aux besoins locaux en matière d'investissement social. La coalition biraciale d'Atlanta, autrefois si célèbre, montre des signes de défaillance quand il s'agit de s'adapter aux problèmes émergents et de définir des objectifs en conséquence.     

Simon Patten on Public Infrastructure and Economic Rent Capture

Reflecting the Progressive Era's reform agenda Simon Patten (1852–1922) argued that freeing markets from one source of economic rent (by taxing land rent) would merely leave the surplus to be taken by other monopolists and rent extractors (railroads, Wall Street trusts, and basic privatized utilities). To prevent unearned income (economic rent) from adding to the economy's cost of living and doing business, potentially rent‐yielding infrastructure should be kept in the public domain as a “fourth factor of production.” Instead of rentiers making a profit by charging access fees and user fees, the return to public investment should take the form of reducing the economy's overall price structure.     

Towards a Social Theory of Agency

We challenge critics of agency theory who suggest that agency theory's value does not extend outside a narrow context dominated by egocentric agents seeking only to maximize wealth at the expense of the principal. Instead, we argue that agency theory's flexibility allows for its application to a variety of non‐traditional settings where the key elements of agency theory, such as self‐interest, information asymmetry, and the mechanisms used to control agency costs can vary beyond the narrow assumptions implied in traditional agency‐based research. We suggest that extending agency theory to diverse settings using a deductive approach can be accomplished by formally recognizing and incorporating the institutional context surrounding principal–agent (P–A) relations into agency‐based models. Thus, criticisms that agency theory fails to acknowledge the social context in which P–A relations occur provides not a barrier but an opportunity for extending our understanding of P–A relations to a variety of diverse contexts.     

The limits of branding: the World Trade Center,fiscal crisis and the marketing of recovery

This article investigates the branding of New York's World Trade Center, and the city itself, as both financial center and entertainment destination between the 1960s and 1990s. After addressing the symbolic as well as material damage caused by the terrorist attacks of September 11th, the article traces the history behind the towers' design and ultimate use in marketing. It first examines the early motivations behind the project, and the forces leading to its controversial construction in the 1960s–70s. Then, in the wake of the city's 1975 fiscal crisis, the Twin Towers and Downtown skyline were branded through campaigns like ‘I ? NY’ to represent a resurgent, global New York. With the recession of 1989–92, and the scaling back of public‐sector marketing, this new brand was used by a host of private‐sector media and marketing firms then establishing global headquarters in New York. In the current period, the site of the towers, and the city as a whole, are being ‘re‐branded’ as a patriotic destination. Building on content analysis and archival research, the article critically analyzes how such marketing became central to New York City's overall economic development strategy. Cet article étudie la stratégie de marque qui a étiqueté le World Trade Center de New York et la ville elle‐mäme, en tant que centre financier et destination de loisirs des années 1960 à 1990. Après avoir traité les préjudices symboliques et matériels liés aux attaques terroristes du 11 septembre, l'article retrace l'histoire de la conception des tours et leur exträme utilisation en marketing. Il examine d'abord les premières motivations du projet et les forces qui ont conduità sa construction controversée dans les années 1960–70. Suite à la crise fiscale de la ville en 1975, les Tours jumelles et la silhouette des immeubles du centre ont ensuite été choisies dans le cadre de campagnes comme ‘I ? NY’ (J'aime New York) afin de représenter un New York ressuscité et mondialisé. Après la récession de 1989–92, et la réduction du marketing public, cette nouvelle ‘étiquette’ a servi à une foule d'entreprises privées de médias et marketing qui ont alors installé leur siège international à New York. Actuellement, le site des tours, et la ville dans son ensemble, sont en train d'ätre ‘ré‐étiquetés’ comme destination patriotique. A partir d'une analyse de contenu et de recherches d'archives, l'article scrute la façon dont ce marketing est devenu essentiel à la stratégie de développement économique globale de la ville de New York.     

The RBV theory foundation of strategic HRM: critical flaws,problems for research and practice,and an alternative economics paradigm

The resource‐based view (RBV) of the firm is a guiding paradigm for strategic HRM research. This article explores the RBV–strategic HRM intersection, identifies and critiques RBV weaknesses and problem areas, develops new implications for RBV–strategic HRM theory and empirical work, and develops an alternative economics‐based decision model for making HRM choices. The article focuses on four RBV–strategic HRM dimensions: HRM performance and the ‘no rules for riches’ proposition; alternative definitions of value and competitive advantage and implications for strategic HRM's dependent variable; neglect of marginal decision rules and consequent misprediction of optimal HRM adoption; and the impact on employee relations of RBV‐guided rent‐capture practices. Numerous implications for theory and practice are developed; also suggested is a new paradigm approach for strategic HRM theory.     

CONTRACTS,ENTREPRENEURS, MARKET CREATION AND JUDGEMENT: THE CONTEMPORARY MAINSTREAM THEORY OF THE FIRM IN PERSPECTIVE

This survey gives an overview of the theory of the firm as it is formulated within the contemporary ‘mainstream’ of economics. Two groupings of theories are briefly discussed: principal–agent and incomplete contract models. Next, three of the most recent contributions regarding firms are considered. The reference point approach is looked at first followed by a discussion of Spulber's book The Theory of the Firm. Last, we consider the entrepreneurial judgement perspective.     

Taxation: The Lost History

Regular, periodic taxation is a function of modern government, a practice that arose only because the rent of land and natural resources was transformed from the traditional source of public revenue in the Middle Ages to private property, starting in the 17th century. In the earlier era, taxes (special exactions on ordinary income and daily necessities) were imposed only under unusual circumstances, usually to fight wars. The French Physiocrats and their student, Adam Smith, proposed that the best form of modern taxation would be based on the same principle as the medieval system—a fee derived entirely from surpluses, not imposed as a burden on production. This was actually what Adam Smith meant by “ability to pay.” Smith's sophisticated understanding of economic rent was, however, simplified and distorted by numerous economists throughout the 19th century, who buried the concept under layers of obfuscation. In particular, the substitution of “Paretian rent” for “Ricardian rent” committed the fallacy of composition by shifting rent from a social concept to a private, unit‐level concept, which caused social surplus to simply “disappear.” Bringing this “lost history” to light permits us to re‐evaluate how modern societies might benefit from Smith's physiocratic concept of taxation. This work not only traces debates about rent—for example, whether rent arises from risk‐taking, or whether a tax on rent raises commodity prices—but also discusses the practical benefits of taxing it today.     

The Management of Creative Vision and the Economics of Creative Cycles

This paper proposes a new theory of variability in innovation performance in managerial firms that contract ‘creative vision’. We argue that such firms are prone to ‘creative cycles’ that arise from uncertainty‐induced systemic overshooting that can threaten the firm's financial viability, requiring managers to shift control back to risk‐averse financial controllers. But this creates opportunities for competing firms to engage in bold creative visions, threatening the firm's market viability and inducing control to shift back to newly contracted suppliers of ‘creative vision’. We discuss how this ‘principal‐agent‐agent’ mechanism plays out, the types of uncertainty that drive it, and consider the industry‐level externalities it induces. Copyright © 2015 John Wiley & Sons, Ltd.     

Urban land rent theory: a regulationist perspective

Whilst real estate capital became a driving force in analyses of urban development, urban land rent theory has made only very limited progress during the past decade. There are a number of reasons for this – such as a weak conceptualization of the role of political agency, for example. Hence, a way out of this relative stagnation, by attempting to systematically develop an integrated view on structure and agency in the context of urban land rent, is offered in this article. Advances in critical theory, thinking about space and dialectic reasoning contribute to the development of a new perspective on land rent. Land rent is conceptualized as a middle‐range theory. In order to bring together concrete urban phenomena with the general process of political‐economic development, a systematic link between land rent theory and the theoretical apparatus of the French Regulation School is developed. The reformulation of land rent theory from a regulationist perspective underlines the importance of the institutional context (and its changes) for an understanding of rent and its role in the urban context. In so doing, land rent theory proves to be a very useful tool for providing an integrated political‐economic perspective for analyses of urban phenomena. This is illustrated briefly in the cases of Vienna and Montevideo. Si le capital immobilier est devenu un point central des analyses du développement urbain, la théorie n'a guère progressé au cours de la dernière décennie. Plusieurs facteurs sont en cause, telle la faible conceptualisation du rôle politique d'agence. Cet article propose donc une porte de sortie à cette relative stagnation, en tentant de construire systématiquement une vision intégrée de la structure et l'agence dans le cadre de la rente urbaine. Les progrès en matière de théorie critique, réflexion en termes d'espace et raisonnement dialectique facilitent l'élaboration d'une nouvelle perspective sur la location foncière, laquelle est conceptualisée en tant que théorie intermédiaire. Afin de regrouper phénomènes urbains concrets et processus général d'aménagement politico‐économique, une relation systématique est établie entre la théorie sur la rente foncière et l'appareil théorique de l'École Française de Régulation. Reformuler la théorie sur la rente foncière d'un point de vue régulationiste souligne combien le contexte institutionnel (et ses changements) est important pour comprendre la rente et son rôle dans le cadre urbain. Ce faisant, la théorie sur la rente foncière se révèle un outil très utile pour créer une perspective politico‐économique intégrée permettant d'analyser les phénomènes urbains. Cet aspect est brièvement illustré dans les cas de Vienne et Montevideo.     

Building,Marketing and Living in an Islamic Gated Community: Novel Configurations of Class and Religion in Istanbul

This article analyses the development and marketing of Islamic gated communities in Basaksehir, Istanbul. It demonstrates how a blueprint of public–private urban development was appropriated by middle‐class Islamists. The gated communities in Basaksehir—which, at the outset, were not explicitly religious—gradually became attractive to religious actors searching for enclosed urban enclaves where Islamic communities would be protected against perceived moral‐urban threats. While urban‐religious enclaves appear to bear similarities to pre‐modern Ottoman Islamic urban enclaves, the rise of contemporary Islamic gated communities should be understood in light of the recent coming to power of the Islamist Turkish government. In cooperation with this government, housing development agencies approached Islamic investors to find capital for their public–private housing projects. One of the results of this form of urban development is that, contrary to pre‐modern Ottoman Islamic urban enclaves, the Islamic gated communities are homogenous in terms of economic class, catering specifically to the Islamic middle classes. Moreover, people who invest in Basaksehir desire an urban‐religious lifestyle that differs from the ‘traditional' religious lifestyle experienced in ‘traditional' Islamic neighbourhoods. The specific urban‐religious configuration generates a new type of Islam that better fits middle‐class values and a middle‐class lifestyle.     

Delegation of risky activities

This paper studies the delegation contract of a risky activity under the presence of adverse selection and moral hazard. The problem is posed as providing incentives from the principal to the agent to enhance the protective action of the agent through payment schemes. Given non‐bankruptcy of both the principal and the agent, the principal rewards the agent if no accident occurs but penalizes the agent if an accident occurs. Given bankruptcy of either the principal or the agent, regardless of the agent's risk type, the agent is only rewarded with the same amount of remuneration and not penalized if the accident occurs. The social welfare level resulting from contracting processes depends on the asset levels of both parties and the agent's technology to reduce risks of the activity. Copyright © 2005 John Wiley & Sons, Ltd.     

Employees' entrepreneurial contributions to firms in Russia, 1995–2004

This article examines how employee self‐reported entrepreneurial contributions evolved in firms operating in Russia in 1995–2004 and whether changes can be explained by Akerlof's theory of implicit gift exchange in labour contracts. We find that these contributions were indeed influenced by wage premia and shifting work norms, declining by about a half during the period and with a particularly marked fall in contributions by manual workers. The trend was found among foreign‐owned, private Russian‐owned and state‐owned companies. Akerlof's model therefore helps explain Russian workers' changing behaviour.     

Going for Gold: Atlanta's Bid for Fame

This article explores the importance of image to the Atlanta Olympic Games of 1996. It suggests that the event must be seen as an example of the use of the propagation of selected images designed to boost the standing of the city in an increasingly competitive interurban environment. The intersection of major sporting spectacles, big business and vastly increased television coverage provides an important new medium through which boosterists can put their city on the world map. However, as the Atlanta case reveals, the ‘semiotics of the successful city‘ involves a highly ideological construction which often presents urban areas as conflict‐free zones. In Atlanta, potentially negative images were removed both physically and symbolically from the urban landscape, while the actual experience of the Games suggested that the city had some way to go in material terms to match its often hyperbolic self‐promotion. The article suggests that the staging of events such as the Olympics is a necessarily high‐risk venture for cities, one that, as in the case of Atlanta, may not have been ultimately worth the effort. Cet article examine l'importance de l'image dans le cadre des Jeux Olympiques d'Atlanta de 1996. Il propose de considérer l'événement comme un exemple de la diffusion d'images sélectionnées, conçues et utilisées afin de promouvoir la réputation de la ville dans un contexte interurbain de plus en plus concurrentiel. L'intersection entre des spectacles sportifs exceptionnels, de grandes entreprises et une couverture télévisuelle considérablement étendue constitue un moyen novateur grâce auquel les promoteurs de cette dynamique peuvent positionner leur ville sur la carte du monde. Cependant, comme le montre le cas d'Atlanta, la ‘sémiotique d'une ville gagnante’ implique une construction idéologique très forte qui présente souvent les zones urbaines comme des espaces non conflictuels. À Atlanta, les images à potentiel négatif ont étééliminées à la fois physiquement et symboliquement du paysage urbain, tandis que les Jeux eux‐mêmes laissaient à penser que la ville devait progresser sur le plan matériel si elle voulait correspondre à son auto‐promotion souvent hyperbolique. L'article suggère que la mise en scène d'événements tels que les Jeux Olympiques est une opération nécessairement très risquée pour des villes, opération qui, à l'instar de l'expérience d'Atlanta, peut finalement ne pas justifier les efforts réalisés.     

Reassembling Lesseps Square,Rethinking Barcelona: A More‐than‐Human Approach

This article discusses the great paradox of the planning of public spaces in Barcelona. While for years the city's residents, politicians and experts have been steeped in democratizing, participatory discourses, the interminable controversies almost all the council's initiatives in the streets and squares of Barcelona have aroused are evidence of a clear short‐circuit. Somehow this participatory‐democratic consensus has run up against a collective discord which, in my view, indicates the incapacity of the current channels and mechanisms of citizen participation to truly give shape to a more democratic city, one which does not block dissent or stand in the way of the possible. I discuss this short‐circuit through a case study, the Lesseps Square controversy, including a methodological and epistemological debate which, in order to study how the square was reassembled in practice after the participatory remodeling process, puts forward an actor‐network‐theory‐inspired approach to the study of public space. I argue that Barcelona, a city whose public institutions are deeply committed to creating channels for residents to participate in public processes, is at the same time enacting a closure of its public spaces. My contention here is that the urban environment is already distributed (in Rancière's sense) before it is given over to participation, and that this prevents the emergence of a (more‐than‐human) demos that could redistribute public space by taking account of innumerable unrepresented parties.     

An agency theory perspective of the Israeli labor market segmentation: Past,present, and future

In this paper we use agency theory to present a process of the dichotomization of the Israeli workforce into two structures, each representing distinct organizational cultures. The first structure is the private sector, led by the high-tech industry; a model where the principal has strong control over the activities of the agent. The second is the public sector, an opposing model in which the principal has virtually no control over the activities of the agents and as a result, the effectiveness within this sector deteriorates. We argue that such conflicting systems cannot exist side by side without affecting each other and we suggest a role for human resource management (HRM) in future developments. Within the public sector it is the responsibility of the principal, the Israeli government, to gain more control over the agent and employ professional HRM systems for this purpose.     

The Flemish customer contact centre for public information from a marketing and management perspective

This paper describes the Flemish customer contact centre for government information (‘the Flemish Infoline’) as an example of marketing in the public sector. First it defines the term ‘customer contact centre’ and describes the objectives and main characteristics of the Flemish Infoline. It then identifies the three reasons for setting up the Flemish Infoline in 1999: the complicated Belgian institutional landscape; the unprofessional telephone traffic handling and service; and the lack of knowledge about citizens' information needs. Finally, the paper applies Kotler's 4 Ps concept to the case, and puts the relevant stages from Lees‐Marsh‐ment's political marketing orientations into one integrated scheme in order to understand the functioning of the Flemish Infoline. Based on the literature and on an in‐depth interview with the project head of the Flemish Infoline, the authors demonstrate that marketing techniques can be used in contact centres for public information, but they also illustrate some important differences from those in the forprofit sector, such as the available amount of customers' personal data, the level of call operators' skills and the degree of heterogeneity of the questions. Further research on information needs and contact centres, and providing one ‘umbrella’ contact centre for government information in Belgium are recommended. Copyright © 2003 Henry Stewart Publications     

Determinants of price mark‐up tolerance for green electricity – lessons for environmental marketing strategies from a study of residential electricity customers in Germany

This paper develops hypotheses on the effects of various attitudinal and perceptual variables as well as socio‐demographic characteristics of residential electricity customers on an individual's willingness to pay a mark‐up for electricity generated from renewable energy sources compared with the price due for electricity from conventional sources. The hypotheses are tested with data from a standardized telephone survey of 238 household electricity consumers in Germany. 53.4% of the participants are willing to pay a mark‐up for green electricity. 26.1% report a price tolerance equal to a 5–10% increase in their current electricity bill. Binary logistic and ordinal regression analyses indicate that price tolerance for green electricity is particularly influenced by attitudes (1) towards environmental issues and (2) towards one's current power supplier, (3) perceptions of the evaluation of green energy by an individual's social reference groups, (4) household size and (5) current electricity bill level. The findings are used to derive suggestions for energy related informational activities of public institutions, green marketing strategies of energy companies and future consumer research regarding demand for pro‐environmental goods. Copyright © 2009 John Wiley & Sons, Ltd and ERP Environment.     

Trust‐based decisions in commission–agency relationships

In commission–agency case, an agent has an incentive to increase the recommended order quantity (ROQ) to maximize the expected profit. This study refers to a retailer's degree of dependence on the agent's ROQ as “trust.” We aim to formulate the agent and the retailer's decisions with trust‐based optimization models. To conduct the study, we first build the demand prediction and income model of the retailer and the agent with a trust‐updating model. Furthermore, we investigate the facts of the retailer's trust value by some experimental studies. Some managerial insights are thereby given and helpful to practice.     

How should a principal reward and support agents when firm performance is characterized by success or failure?

Principal‐agent models with multiple agents typically assume that the principal wishes to maximize the sum of the agents' achievements (net of the rewards paid to them). But in many settings, like R&D, all that the principal “needs” is that at least one agent will be “successful.” We identify settings where the principal actually wants agents to refrain from exerting high effort in order to save expected compensation. We show that the number of agents can decrease in the project's value for the principal. We also consider sequential efforts and investigate settings where the principal can provide support to agents.