Incentive effects and overcrowding in tournaments: An experimental analysis

This study reports experiments that examine outcomes when agents choose between a payment scheme that rewards based on absolute performance (i.e., piece rate) and a scheme that rewards based on relative performance (i.e., a tournament). Holding total payments in the tournament constant, performance is higher when the tournament option is winner-take-all compared to a graduated tournament (i.e., second and third-place performers also receive a payment). Performance is higher in the winner-take all tournaments even among participants that choose the piece-rate option. While there is a modest amount of overcrowding, there are no significant differences in overcrowding across conditions. Entry rates into the tournament and the relative ability of tournament entrants (compared to non-entrants in the same condition) are higher in the graduated tournament condition than the winner-take-all conditions. Consequently, the winner-take-all tournament is more efficient than the graduated tournament (incentive effects are stronger and the overcrowding is about the same), but the graduated tournament provides a more effective mechanism to identify the most capable performer in a talent pool. Electronic Supplementary Material Supplementary material is available in the online version of this article at . JEL Classification D8 · J3 · L2     

Customer reactions to variety: Too much of a good thing?

Summary Studying product variety is an interesting and relevant area for research. Work in this area should build on careful understanding of both customers’ reactions to it and managers’ decision making with respect to it. This requires an interdisciplinary focus, drawing on work in information processing, channels, operations management, game theory, and managerial decision making. In fact, the major advances may come more from combining knowledge from the different areas rather than boring more deeply into a single one. Donald R. Lehmann is George E. Warren Professor of Business at the Columbia University Graduate School of Business. He has a B.S. degree in mathematics from Union College, Schenectady, New York, and an M.S.I.A. and Ph.D. from the Krannert School of Purdue University. His research interests include modeling individual choice and decision making, understanding group and interdependent decisions, meta-analysis, and the introduction and adoption of innovations. He has taught courses in marketing, management, and statistics. He has published in and served on the editorial boards ofJournal of Consumer Research, Journal of Marketing, Journal of Marketing Research, Management Science, andMarketing Science, and is founding editor ofMarketing Letters. In addition to numerous journal articles, he has published four books:Market Research and Analysis, Analysis for Marketing Planning, Product Management, andMeta Analysis in Marketing. Professor Lehmann served as executive director of the Marketing Science Institute from 1993 to 1995 and as president of the Association for Consumer Research in 1995.     

Recycling consumer solid waste: A commentary on selected channel alternatives

The recycling of consumer solid waste presents special problems for reverse marketing channels. Specifically, the accumulation of bulk quantities of homogenous materials from consumer-generated sources that are highly heterogenous in nature represents a major functional problem that must be overcome through the development of appropriate reverse marketing channels. In this article, factors influencing reverse channels development are outlined, and specific marketing implications concerning the three basic channel types that primarily handle consumer solid waste are discussed.     

THE EFFECT OF MARKET PROXY REBALANCING POLICIES ON DETECTING ABNORMAL PERFORMANCE

In this paper, effects on the measured abnormal performance of test portfolios are compared against market proxies having the same or different rebalancing policies. Results show that the common practice of comparing buy-and-hold test portfolios with equally weighted market proxies produces lower Jensen [ 7 ] alphas and lower alpha t-values. Comparing buy-and-hold test portfolios with value-weighted market proxies produces higher portfolio betas and alphas, but lower alpha t-values. Finally, comparing buy-and-hold test portfolios with buy-and-hold market proxies produces the most powerful tests of abnormal performance.     

The representation problem and the efficiency of the price mechanism

It is shown in this paper that the way in which an allocation is represented (net trades, final allocation, etc.) can affect the design of any realizing mechanism or incentive compatible system. The reason is that a poor choice of representation may be imposing superfluous conditions and demands upon the realizing mechanism. So, in this paper a technique is developed to (1) find the optimal representation of an allocation, and (2) to characterize the associated, realizing mechanisms. Although this approach is designed to be applied to any smooth economic model, it is illustrated and motivated here by applying it to the price mechanism. More specifically, there are assertions in the literature by Mount and Reiter and by Hurwicz that the price mechanism is informationally efficient over the class of Pareto seeking mechanisms. These proofs are incomplete because they consider only one choice of representation for the Pareto allocations. We use this technique to (a) reassert the dimensional efficiency of the price mechanism, (b) compare mechanisms for spaces of economics with and without externalities, (c) characterize for the space of quadratic functions the other dimensionally efficient allocation concepts, and (d) characterize those two agent economics where the price mechanism is dimensionally efficient.     

When Are Commercial Loans Secured?

We analyze the factors that influence the decision to secure a commercial loan. We find evidence that variables reflecting adverse selection, moral hazard, and the prospects for default all affect the likelihood a loan will be collateralized. We find no evidence in favor of the predictions of certain theoretical models that high‐quality firms signal by providing collateral. Our results also show that lenders with less risk protection in the form of equity capital are more likely to require collateral, but that banks themselves are less likely to secure loans than nonbanks. Certain loan characteristics also influence the collateralization decision.     

The effects of zoning on population and employment density

This article examines zoning's impacts on population and employment density. It develops a model to explore the effects of zoning on the density of residential and nonresidential land use. Drawing on this model, density gradients that incorporate the effects of zoning are estimated for Greensboro, North Carolina. The model is used to simulate the effects of a change in restrictive-use residential zoning. The simulation shows that a 1 percent increase in the level of restrictive-use residential zoning across all neighborhoods in the city is associated with a 0.3 percent increase in gross population density and a 0.1 percent decline in net density (intensity). It suggests that restrictive-use zoning affects both the density and the intensity of residential land use through its effects on the value of residential land.     

Toward a theory of consumerism

Consumerism is not unique to modern times or to the United States. Eight hypotheses explaining the movement arc based on history, sociology, law, economics, and psychology.