The United Germany in The Single European Market

Dr Hermann von Richthofen, German Ambassador in London 1988–1993, now German Ambassador to NATO, spoke at the second LSE Business Performance Lecture on 29 January 1992 about the radical changes taking place in Europe. In particular, the Ambassador stressed that Germany's integration is an inseparable part of Europe's integration and will provide opportunities not only for Germany but also for the rest of Europe.     

On the design of regulatory price adjustment mechanisms

Price adjustment mechanisms are employed in the electric utility industry to pass changes in fuel costs on to consumers without formal rate review by a regulatory commission. The predictability of this pass-through and the regulator's limited ability to observe the actions of a firm can create potential incentive problems associated with the choices of technology and fuel supply. This paper is concerned with the regulatory design of pass-through formulas when a factor price is uncertain. The optimal design involves deviating from the full-information optimal price formulas in order to mitigate the incentive problems.     

Positive effects of conflict: A cognitive perspective

Managers rated the extent to which conflict produces both positive and negative effects. Results indicated that they rated several negative effects significantly higher than any positive effects. However, virtually all managers reported personal experiences in which conflict yielded beneficial outcomes. These and other findings suggest that practicing managers perceive conflict as having the potential to yield positive as well as negative effects. A review of recent literature on human cognition identified several factors that may play a role in determining whether conflict yields predominantly positive or negative effects. These factors include the impact of strong negative emotions on cognition, stereotype-driven thinking, and attributional processes. Techniques for modifying conflict situations so that they are more likely to result in positive effects are suggested.     

Self‐Regulation and the Market for Activism

This paper presents a theory of the market for activism where citizens fund activists, campaigning activists pressure firms to change their practices, and firms self‐regulate to forestall or mitigate campaigns. Activists have leverage because firms must self‐regulate before they are targeted, and their self‐regulation must deter the activists conditional on being targeted. Activists anticipate gaining more from campaigns against soft (more vulnerable) firms than hard (less vulnerable) firms, so it is more costly for soft firms to forestall the activists, and some risk a campaign but self‐regulate to mitigate the probability that the campaign succeeds. Campaigns thus can occur in equilibrium. The threat from activism is the probability that a firm is targeted, and the stronger the threat the fewer campaigns there are because more firms self‐regulate to forestall a campaign. Radical activists target harder firms than do moderate activists, and the more radical the activists the more costly it is to forestall them. Some firms are too hard to be threatened by activism and maximize their profits. Firms that are too hard to target directly may be vulnerable to campaigns threatening their supply and distribution chains. Activists and their donors have an incentive to maximize the scope of activism; that is, the breadth of the threat from activism.     

A note on control costs and logit rules for strategic games

We consider best response dynamics with endogenous noise based on a finite game in strategic form. A player can reduce the noise level by expending an extra effort and incurring some disutility or control costs. We specify control costs that result in logit adjustment rules. The stochastically stable states of the dynamic process are partial Nash configurations, that is, states where at least one player plays a best response against the others. If the game has a potential, then the stochastically stable states coincide with the Nash equilibria on which the potential is maximized. RID="*" ID="*" Instructive comments of a referee are gratefully acknowledged. Correspondence to:H. Haller