Piece Rates, Fixed Wages, and Incentive Effects: Statistical Evidence from Payroll Records

We develop and estimate an agency model of worker behavior under piece rates and fixed wages. The model implies optimal decision rules for the firm's choice of a compensation system as a function of working conditions. Our model also implies an upper and lower bound to the incentive effect (the productivity gain realized by paying workers piece rates rather than fixed wages) that can be estimated using regression methods. Using daily productivity data collected from the payroll records of a British Columbia tree-planting firm, we estimate these bounds to be an 8.8 and a 60.4 percent increase in productivity. Structural estimation, which accounts for the firm's optimal choice of a compensation system, suggests that incentives caused a 22.6 percent increase in productivity. However, only part of this increase represents valuable output because workers respond to incentives, in part, by reducing quality.     

Can Social Cohesion be Harnessed to Repair Market Failures? Evidence from Group Lending in Guatemala

The success of group lending in developing countries has been attributed to the ability of the institution to mitigate asymmetric information problems in credit markets. Previous research has offered a number of explanations for this phenomenon: social ties between borrowing group members, internal group pressure to repay loans, and peer monitoring. This research presents empirical tests on borrowing group data from Guatemala which indicate that peer monitoring significantly effects borrowing group performance through stimulating intra-group insurance. Group pressure is found to have a small effect in deterring moral hazard, while the effect of social ties among members is statistically insignificant.     

Innovation Aesthetics: The Relationship between Category Cues,Categorization Certainty,and Newness Perceptions

Recent research notes a disconnect between what marketers deem new and innovative versus what consumers actually perceive. Many factors may contribute to this; however, the factor that has significant potential to first attract a consumer to a new product, visual aesthetic design, is investigated in this research. Findings from four studies indicate that if a consumer cannot affix a category label to a new product with certainty, as can happen with innovative aesthetics, a product's newness will be underappreciated and product evaluations will suffer. By utilizing a categorization framework and specifically accounting for the role of categorization certainty, insight into the effects of innovative visual aesthetics and why newness perceptions are inherently subjective, and therefore, potentially hazardous to new product adoption, is provided.     

The use of Probability-Multipliers in Replacement Analysis

Engineering economy analyses are often made for both the most and least favorable combinations of forecasted future conditions. This procedure has two major weaknesses. First, the two solutions usually indicate that contradictory courses of action should be followed. When this occurs, the engineeringeconomic study has failed to provide the management of a business with a quantitative aid and mathematical method for evaluating data and arriving at sound decisions. Second, that method of analysis is unrealistic because it emphasizes the extreme possibilities rather than some intermediate situation which is more likely to occur.     

Interpreting Nicknames: A Micropolitical Portal

Perhaps due to their ubiquitous and seemingly nonsensical nature, workplace nicknames have received little analytic attention to date. This exploratory study based on six case scenarios from the United States reveals nicknames often convey potent meanings. These monikers are found to have a wide variety of purposes: including among others, furthering social control, contributing to socialization, marking group boundaries, building camaraderie, catalysing joking, conveying discontent, cathartically venting frustrations, equalizing social exchanges and adjusting to labelling. Although the nicknaming and collateral social processes we encountered were not the product of formal planning, they are a complex and highly organized set of micropolitical activities. In the future, nicknames should be thought of as key symbols that can unlock many meanings when they are properly interpreted     

Can retailers get higher prices for “end-of-life” inventory through online auctions?

Manufacturers and retailers are using online auctions to liquidate excess inventory. Using a field study of 11,879 online auctions, this paper builds upon theories of competitive processes to relate four key seller-controlled variables (starting price, day of close, auction length, and brand) to outcomes of online auction for apparel goods. Results suggest that to obtain a higher percentage of the original retail price, retailers should start with a lower price and feature national brands. These and other findings are discussed and a number of future research topics are offered.     

LAND MARKETS AND THE EFFECT OF REGULATION ON FORMAL-SECTOR DEVELOPMENT IN URBAN INDONESIA

Until recently, urban land and housing markets in Indonesia seemed to function well. Informal-sector development provided low-income housing affordably. Through government programs, formal-sector developers could build housing for all but the poor. Since 1989, however, daily conversation pictures land speculation as rampant and formal-sector housing as rising beyond the means of the middle class. Newspapers carry stories of conflicts between small landowners and large developers with government officials in between. This article investigates this situation by addressing two related questions: are urban land prices rising “too fast?”; how do land regulations and development practices affect costs, and who pays these costs? The article includes quantitative estimates of urban land prices, changes in urban land supply, movement of land through the permitting process, and the effect of development regulations on costs. Data come from a literature survey and interviews of some of the largest formal-sector developers in Indonesia. A principal finding concerns a development regulation called a “location permit” and the “social function” of land in Indonesian law. Although helpful as a means of assembling land in Indonesia's highly fragmented land markets, location permits allow formal-sector developers to hold land off the market and pay low prices to small landowners. Ultimately, the “social function” of land under Indonesian law holds down the price formal-sector developers pay for land, but not at the price at which they sell their product. The article concludes by proposing reforms to the regulatory process.