Aggregation and the existence of a social utility function

In a well-known paper Gorman (Econometrica21 (1953)) established that the necessary and sufficient condition for the existence of an aggregate, or social, utility function, independent of the distribution of income, is that all individuals' income consumption paths be parallel straight lines. Recently Chipman (J. Econ. Theory8 (1974)), building on the paper of Hurwicz and Uzawa (in “Preference Utility and Demand”) has shown that if the distribution of income is proportional and individual preferences are homothetic, aggregate consumption behavior obeys the necessary integrability conditions. It is shown here that the consistency of aggregate behavior can be derived from more general conditions than the ones used by Chipman and Gorman. Examples of demand systems from which aggregate behavior implies a social utility function are provided. It is then shown that if individual demand functions are linear in income—a form employed by both Gorman and Chipman—it is not necessary that the distribution of income be fixed.     

Capital and saving in a share economy

Weitzman is correct in his claim that, in long-run equilibrium, the capital stock will be identical in wage and share systems. But a corollary of Weitzman's excess demand for labor in the short run is that the firm is holding too much capital at any given moment. The reduction in demand for capital goods following a shock might create a new channel for the accelerator. A share system also exposes workers to increased capital risk.     

Limited deviation estimators of the Poisson parameter

Estimators for the Poisson parameter are proposed which perform well with respect to both a weighted, i.e. Bayes, and unweighted risk criterion. The estimators follow the Bayes rule (with respect to a conjugate gamma prior) as closely as possible subject to a restraint imposed on the allowable deviation from the minimax estimate. The resulting class of rules maintains good performance with respect to the Bayes criterion while at the same time possessing bounded risk functions. The excess Bayes risk incurred is compared to a lower bound on the optimal restricted Bayes risk.     

Ownership structure and innovation: An emerging market perspective

Considerable attention has been focused on the ways in which emerging market firms can obtain and mobilize the knowledge and resources required for innovation. Innovation is a particular challenge in emerging markets because of inadequate external institutions. In this study, we focus on the importance of ownership structure, and in particular on ownership type diversity and ownership concentration. Using transaction cost and agency theories embedded in an emerging market context, we argue that ownership structure provides an important mechanism by which firms can assemble and direct the resources necessary for innovation in the context of inadequate external institutions. Specifically, we hypothesize that ownership type diversity improves innovation performance and that increasing ownership concentration has the same effect, but only up to a point. Using a panel dataset of 487 and 475 Chinese listed companies during 2004–2005 and 2005–2006 respectively, we find supportive empirical evidence for our hypotheses. Our findings also suggest that ownership type diversity is a more important factor in explaining innovation performance than ownership concentration, although most of the extant literature focuses on the latter.     

Optimal Asset Allocation and Risk Shifting in Money Management

This article investigates a fund manager's risk-taking incentivesinduced by an increasing and convex relationship of fund flowsto relative performance. In a dynamic portfolio choice framework,we show that the ensuing convexities in the manager's objectivegive rise to a finite risk-shifting range over which she gamblesto finish ahead of her benchmark. Such gambling entails eitheran increase or a decrease in the volatility of the manager'sportfolio, depending on her risk tolerance. In the latter case,the manager reduces her holdings of the risky asset despiteits positive risk premium. Our empirical analysis lends supportto the novel predictions of the model.     

Building and transforming an emerging market global enterprise: Lessons from the Infosys journey

The story of Infosys’ growth and transformation from a $250 start-up to its current market valuation of approximately $26 billion provides one of the most pertinent lessons in leveraging India's strengths and managing the challenges faced by an emerging market global enterprise based in India. In this article, we present a wide-ranging interview with Infosys’ current CEO, Mr. S.D. Shibulal, as he explains what he considers to be the core strengths of the company that made it successful in the past, lays out his vision for the company's future, and discusses in detail how he sees the company's transformation taking place over the coming years. The conversation uncovers several interesting themes and lessons for multinational enterprises in emerging as well as developed economies, including the relevance of being born global, values-based governance, the necessity of creating hybrid business models that infuse the ‘India way’ with local cultures and practices in global markets, leveraging strategic partnerships via co-creation and co-evolution, and the delicate balance between ‘preservation-creation-destruction.’     

Judicial Response to the 2010 Horizontal Merger Guidelines

Review of Industrial Organization - We study how the courts have responded to the 2010 Horizontal Merger Guidelines issued by the U.S. Department of Justice and the Federal Trade Commission....