(Non-)Existence of Equilibria in Multicommunity Models

This paper reconsiders equilibrium existence in models with migration and voting over local public goods. We show that under some straightforward assumptions on preferences and income distributions, the basic structure of multicommunity models (i.e., perfect mobility, majority rule, single crossing property) implies that no equilibrium with jurisdictions conducting different policies can exist. Stratification equilibria—with sorting of the population according to income classes—are therefore not as natural as is sometimes suggested. Mechanisms that can serve to support stratification (i.e., tight housing markets, returns to scale in the provision of publicly consumed goods) are discussed.     

Equal or equitable pay? Individual differences in pay fairness perceptions

This study examined how social comparison (i.e., comparing one's pay to similar others' pay) and deserved comparison (i.e., comparing one's pay to one's deserved pay) affect pay fairness perceptions, and the individual differences in the comparison processes. Results based on a field study with a sample of 167 employees showed pay fairness was low when employees received lower pay than a similar other (or what they deserved), increased as their pay exceeded that of a similar other (or deserved pay) to some extent, and then decreased when overpayment was considerable. Second, pay fairness increased as one's actual and similar others' pay levels both increased while pay fairness remained the same as one's actual and the deserved pay levels both increased. In addition, the “threshold” that people start to perceive overpayment as less fair occurred more quickly for those with higher preference for consistency in social comparison and for those with higher preference for the merit principle in deserved comparison. We also conducted experiments, and the results generally replicated the findings in the field study. These findings offer theoretical implications regarding organizational justice, as well as practical implications for designing and executing a compensation system.     

Pay‐Level Satisfaction and Employee Outcomes: The Moderating Effect of Employee‐Involvement Climate

The present study examined employee‐involvement climate (i.e., information‐sharing and decision‐making climate) as a moderator of the relationship between pay‐level satisfaction and employee outcomes (i.e., job satisfaction, affective commitment, and turnover intention). Survey data were collected from 22,662 Belgian employees, representing 134 organizations. The hypotheses derived from distributive justice theory and from research on the meaning of pay received partial support. Multilevel analyses revealed that a decision‐making climate buffered the negative effects of low pay‐level satisfaction, and that an information‐sharing climate exacerbated the negative effects of low pay‐level satisfaction. Theoretical and practical implications of this differential moderating effect are discussed.     

Optimal two-object auctions with synergies

We design the revenue-maximizing auction for two objects when each buyer has bi-dimensional private information and a superadditive utility function (i.e., a synergy is generated if a buyer wins both goods). In this setting the seller is likely to allocate the objects inefficiently with respect to an environment with no synergies (see Armstrong, RES (2000)). In particular, the objects may be bundled too rarely or a buyer may win the bundle even though her valuations for the goods are weakly dominated by the values of another buyer.Received: 29 October 2001, Accepted: 29 October 2002, JEL Classification: D44, D82This paper has been written while the author was a member of the Dipartimento di Statistica e Matematica Applicata alle Scienze Umane "Diego De Castro", Universitá degli Studi di Torino, Italy. Valuable comments and suggestions were provided by Antonio Cabrales, Massimo Marinacci, three anonymous referees and, especially, by Mark Armstrong. The usual disclaimer applies.     

Dynamic vehicle routing with anticipation in disaster relief

Pickup and delivery problems (PDP), where locations may both receive and send goods, are an extension of the classical vehicle routing problem. This paper considers the application of a routing and scheduling problem for forwarding agencies handling less-than-truckload freight in disasters. The approach evaluates the benefits of dynamic optimization anticipating varying travel times (i.e., the availability of connections in this case) as well as unknown orders (i.e., the integration of demand regions on short-notice) in the specific environment of emergencies. The objective is to avoid delays and increase equipment utilization. We model a multi-stage mixed integer problem which is able to operate under variable demand and transport conditions.     

An analysis of decentralized collection and processing of end-of-life products

In this study, we analyze decentralized collection and processing operations for end-of-life products in durable goods industries. We consider a durable end-of-life product from which a particular part can be dismantled and remanufactured, and the remainder of the product can be further processed for part and/or material recovery. Both the quantity of end-of-life products available and the demand for remanufactured parts are price-sensitive. We develop models to determine the optimal acquisition price of the end-of-life products and the selling price of the remanufactured parts in centralized as well as remanufacturer- and collector-driven decentralized channels. We discuss how the decentralized channels can be coordinated to attain the end-of-life product collection rate that can be achieved in the centralized channel. In the presence of environmental regulations that require an original equipment manufacturer (OEM) of durable goods to collect and process its end-of-life products, we identify when and why the OEM would prefer a remanufacturer- or a collector-driven channel, i.e., outsource the processing or the collection activity, respectively. From a practical perspective, we show that the OEM should prefer a collector-driven channel to increase the collection rate, when end-of-life products are homogenous. However, we also show that the OEM would prefer a remanufacturer-driven channel under certain conditions. We also examine how the OEM can increase the quantity of used products collected, when the collection rate in the preferred channel setting falls short of the collection rate mandated by the environmental regulation. When end-of-life products are heterogeneous, we observe that the collection rate for all quality groups can be positive in a remanufacturer-driven channel, whereas the collection rate for some quality groups may be zero. This indicates that the OEM must pay more attention to its outsourcing decision in this case, if the environmental regulation in effect specifies target collection rates for individual quality groups.     

Clubs in an urban setting

In this paper the properties of a congestable concentrated local public good (CCoLPG) are described, taking into account both locational aspects and congestion. This discussion, therefore, completes the analysis of congestable local public goods (LPG) which was started in our earlier paper (Congestable local public goods in an urban setting, J. Urban Econ., 290–310 (1982). It is here shown that the optimal provision of CCoLPG leads to the creation of clubs, where the government has to determine the location and provide the optimal quantity of LPG in each club and also levy congestion tolls on users according to their level of utilization of the club. Congestion tolls cover the αest part of the costs, where α is the level of congestability of the CCoLPG. The rest of the costs are covered by taxing land rents. Clubs will form, possibly more than one per city, even if the LPG is pure (i.e., α = 0) and they will contain a single household if the LPG is private (i.e., α = 1). The difference between these results and those of classical club theorists stem from the fact that here we also take into account the limited supply of land of given accessibility (i.e., locational aspects), which like congestion lead to the creation of clubs. When these two factors are considered together, it explains why congestion tolls alone are not sufficient to finance clubs' operations, or why pure LPGs also have to be provided locally, etc.     

Eliminating the "I hate you" in the supplier-purchasing relationship

Throughout time there has always been a supplier of some service or goods, and there has always been a purchaser of that service or goods. The one thing that has remained constant throughout that time is that they have an agreement not to like each other. This article will approach the subject in the "today" sense using current practical approaches that are used in all industries and will not deal with the relationships of the future. To cover this complex arena, the article will deal with four areas: (1) where we are now, (2) supplier-based concentration, (3) single sourcing, and (4) transportation techniques.     

Pay Comparability Across and Within UK Boards: An Empirical Analysis of the Cash Pay Awards to CEOs and Other Board Members

Drawing on the literature on social comparison and equity theories, this paper analyses the determinants of, and the relationships between, the cash pay awards of CEOs and other board members for a sample of large UK companies over the period 1992–95. Our results suggest that external labour market and internal (i.e., within board) pay comparisons are important in explaining both CEO and other directors' pay awards. In the case of CEOs, however, there is evidence of an asymmetric adjustment to prior period pay anomalies, whereby the pay of the relatively underpaid executives displays significantly greater sensitivity to external market comparison pay levels. This asymmetric adjustment process results in a 'bidding-up' of average CEO pay relative to other board members over the four year period investigated.     

Evaluating efficient public good provision: Theory and evidence from a generalised conditional efficiency model for public libraries

Provision of most public goods (e.g., health care, libraries, education, police, fire protection, utilities) can be characterized by a two-stage production process. In the first-stage, basic inputs (e.g., labor and capital) are used to generate service potential (e.g., opening hours, materials), which is then, in the second-stage, transformed into observed outputs (e.g., school outcomes, library circulation, crimes solved). As final outputs are also affected by demand-side factors, conflating both production stages likely leads to biased inferences about public productive (in)efficiency and its determinants. Hence, this paper uses a specially tailored, fully non-parametric efficiency model allowing for both outlying observations and heterogeneity to analyse efficient public good provision in stage one only. We thereby employ a dataset comprising all 290 Flemish public libraries. Our findings suggest that ideological stance of the local government, wealth and density of the local population and source of library funding (i.e., local funding versus intergovernmental transfers) strongly affect library productive efficiency.     

The psychological role of pay systems in choosing to work more hours

Psychological and economic perspectives are blended to model aspects of pay systems that dispose employees to work more hours beyond what would be predicted by economically rational exchange alone. Three pay-system triggers and their respective paths to more work are expounded: 1) pay equated to units of time, 2) pay contingent on subjective performance standards, and 3) pay growth determined by tournament pay structures. The effects are conceived as self-reinforcing due to loss aversion stemming from endowment of income and sunk cost bias. Also considered are implications for human capital, a posed curvilinear relationship that holds practical relevance for organizational sustainability—i.e., maintenance of the firm's human capital over the long term.     

Evaluating Form and Functionality of Pay‐for‐Performance Plans: The Relative Incentive and Sorting Effects of Merit Pay,Bonuses, and Long‐Term Incentives

Using two‐year longitudinal data from a large sample of US employees from a service‐related organization, the present study investigates the relative effects of three forms of pay‐for‐performance (PFP) plans on employees’ job performance (incentive effects) and voluntary turnover (sorting effects). The study differentiates between three forms of pay: merit pay, individual‐based bonuses, and long‐term incentives. By definition, these PFP plans have different structural elements that distinguish them from each other (i.e., pay plan form) and different characteristics (functionality), such as the degree to which pay and performance are linked and the size of the rewards, which can vary both within and across plan types. Our results provide evidence that merit raises have larger incentive and sorting effects than bonuses and long‐term incentives in multi‐PFP plan environments where the three PFP plans are operating simultaneously. Only merit pay has both incentive and sorting effects among the three PFP plans. The implications for the PFP‐related theory, as well as for the design and implementation of PFP plans, are discussed. © 2015 Wiley Periodicals, Inc.     

Homevoters vs. leasevoters: A spatial analysis of airport effects

We use a public referendum on a new aviation concept in Berlin, Germany, as a natural experiment to analyze how the interaction of tenure and capitalization effects influences the outcome of direct democracy processes. We distinguish between homevoters, i.e., voters who are homeowners, and leasevoters, i.e., voters who lease their homes. We expect that homevoters would be more likely to support initiatives that positively affect the amenity value of a neighborhood because some of the related benefits of leasevoters are neutralized by adjustments in market rents. Likewise, homevoters would be more likely to oppose initiatives that negatively affect the amenity value of a neighborhood. Our empirical results are consistent with these expectations, implying that public votes on local public goods do not necessarily reflect the spatial distribution of welfare effects in mixed-tenure environments.     

A model of international asset pricing under imperfect commodity arbitrage

This paper examines the effect of imperfect international commodity arbitrage (i.e., violation of the law of one price), modeled as the existence of non-traded goods, on the structure of purchasing power risk, optimal portfolio rules of the risk-averse investors and the equilibrium yield relationship among assets. The major results of the paper include: (i) There are two separate sources of purchasing power risk, i.e., relative price risk and inflation risk; relative price risk is specific to the country in which the investor resides. (ii) In a world of n countries, investors may hold n + 1 hedge portfolios as vehicles to hedge against purchasing power risk; facing different relative prices, investors residing in different countries display divergent portfolio behavior. (iii) In equilibrium, investors are compensated in terms of excess return for bearing not only the systematic world market risk but also the systematic inflation and relative price risks.     

Shareholder Activism, "Voluntary" Restructuring, and Internal Labor Markets

We model an internal labor market in which employee behavior and compensation are affected by the firm's financial position and the threat of hostile takeover or other exercise of shareholder "voice." We show how good past performance can result in excessively generous promotion and pay decisions. While the threat of shareholder activism will remove this "slack," activists optimally face a positive cost barrier, which in turn varies across firms. The cost barrier is higher when cooperation or "helping" between employees is more important, and is lower when employees receive efficiency wages due to an inability to "pay" for their jobs. Since the importance of helping is associated with pay compression and "flat" pay ladders, such firms should also exhibit a greater degree of management entrenchment.     

Impact of financial development on SAARC’S human development

The objective of the study is to investigate the link between economic growth and financial development (i.e., broad money supply, credit to private sector (CPS) and bank deposit liabilities) in human development for a panel of selected South Asian Association for Regional Cooperation (SAARC) countries; namely, Bangladesh, India, Nepal, Pakistan and Sri Lanka during 1988–2008; over the period of 1988–2008. The panel cointegration technique is employed for analysis of short and long-run relationship between the variables. The results of panel cointegration found that there is a long-run relationship between financial development indicators and economic growth in human development in SAARC region. The estimated results indicate that in the short run, bank deposit liabilities exerts the maximum impact (i.e., 0.425 %) on human development in SAARC region, subsequently, broad money supply (i.e., 0.301 %) and CPS (i.e., 0.128 %) respectively, while there is a negative relationship between real GDP growth and human capital (i.e., \(-\) 0.189 %). In the long-run, DOLS estimator constitutes broad money supply which increases by 0.912 %, followed by credit to private sector (i.e., 0.121 %) on human development. While, in case of FMOLS estimator, these results are disappear, as broad money supply does not have any significant impact on human development in SAARC region. The coefficient of real GDP per capita in both estimators, have a negative impact on human development, however, the intensity of both estimators are different in nature, as real GDP per capita decrease human development in FMOLS (i.e., \(-\) 0.828 %) and in DOLS estimators (i.e., 0.458 %). The results indicate that due to a low quality of human capital in SAARC region; the direct effect of economic growth becomes negative; however, financial development indicators act as an important driver for increase in human capital in SAARC region. The implications of present research relate to heightening the need for labor market reforms and making the educational system more flexible.     

Worse than others but better than before: Integrating social and temporal comparison perspectives to explain executive turnover via pay standing and pay growth

Organizations often pay greater salaries to higher‐ranking executives compared to lower‐ranking executives. While this method can be useful for retaining those at the organization's apex, it may also incline executives at the bottom of the pay pyramid to see themselves at a disadvantage and thus exit the firm. Naturally, organizations often want to retain some of their lower‐paid, but highly valuable executives; the question, then, is how organizations can reduce the turnover of lower‐ranking executives. By integrating social with temporal comparison theory, we argue that, when executives earn relatively less than their peers, more pay growth (i.e., individual pay increases over time) leads to less turnover. The results of our analysis, which covered almost 20 years of objective data on a large sample of U.S. top executives, provide support for our theory.     

The impact of corporate social responsibility associations on trust in organic products marketed by mainstream retailers: a study of Italian consumers

This paper investigates the determinants of consumer attitudes toward organic products marketed by mainstream retailers under a private label. Since organic products are credence goods, consumers cannot directly verify whether these products comply with official standards. Organic labels are the primary source of consumer trust in organics, but these labels must be noticed and understood before consumers will actively seek them out. In that some consumers may not prioritize product labels when they shop, it is sometimes up to retailers to strengthen consumer trust. Within the antecedents of this trust, we isolated the contribution of the corporate social responsibility associations held by consumers about retailers. We surveyed Italian customers interested in organics and found that they are more likely to trust the private‐label organic products sold by a retailer when it is considered socially responsible. Our results also show that consumer trust translates into brand loyalty and a willingness to pay a premium price for organic products. Copyright © 2009 John Wiley & Sons, Ltd and ERP Environment.     

Analyzing the gender pay gap

Empirical research on gender pay gaps has traditionally focused on the role of gender-specific factors, particularly gender differences in qualifications and differences in the treatment of otherwise equally qualified male and female workers (i.e., labor market discrimination). This paper explores the determinants of the gender pay gap and argues for the importance of an additional factor, wage structure, the array of prices set for labor market skills and the rewards received for employment in favored sectors. Drawing on our previous work we illustrate the impact of wage structure by presenting empirical results analyzing its effect on international differences in the gender gap and trends over time in the gender differential in the U.S.     

Optimal selling mechanisms for multiproduct monopolists: incentive compatibility in the presence of budget constraints

We analyze the nonlinear pricing problem faced by an incomplete information monopolist operating in a market populated by agents with budget constraints. We show that if other goods are available and if the monopolist's goods are nonessential relative to other goods, then there exists an optimal, individually rational, and incentive compatible selling mechanism for the monopolist (Theorem 1). Moreover, we show that a solution to all such nonlinear pricing problems exists if and only if the monopolist's goods are nonessential (Theorem 2). In the absence of nonessentiality, we show that if the monopolist's profit function is independent of quantity (e.g., if all costs are fixed), then an optimal selling mechanism exists (Theorem 3). Finally, we show that if there is reporting (of types by agents) and partial recognition of types (by the monopolist), then an optimal selling mechanism exists, even in the absence of nonessentiality, provided agents' utility functions are affine and continuous in goods (Theorem 4).