Proto-coalition bargaining and the core

In the proto-coalition model of government formation, formateur F appoints a proto-coalition and asks its members whether to start negotiating a coalition contract. If all accept, then the proto-coalition forms and starts negotiating; otherwise, a caretaker government assumes office. I extend this model by allowing F to revise the chosen proto-coalition after rejections, that he states pre-conditions for the subsequent negotiations, and that F??s opponents may publicly pre-commit to accept/reject certain proposals. The set of equilibrium outcomes is identified as the core if F??s opponents can pre-commit and as the convex hull of the core if they cannot pre-commit credibly. This extended model eliminates two flaws of the standard model: it explains why F cannot always install his favored coalition (whatever the status quo) and why ??important?? coalition members may have more bargaining power in the subsequent negotiations than others.     

Intra‐stakeholder alliances in plant‐closing decisions: A stakeholder theory approach

This article discusses plant‐closing decisions by multinational enterprises (MNEs) applying a stakeholder theory approach. In particular, we focus on the emergence of “intra‐stakeholder alliances,” that is, alliances among the various stakeholder groups of a specific corporation. We analyze the emergence of stakeholder alliances in reaction to MNEs' decisions to terminate production locally and discuss their influence on the outcomes of such decisions. Our research is inspired by two exceptional case studies of two multinational breweries that announced their decisions to close niche breweries in small towns in Italy and Belgium. In both cases, the initial decision was ultimately reversed through the actions of intra‐stakeholder alliances. We combine insights from stakeholder theory and the social movement literature to analyze the action and influence of intra‐stakeholder alliances in seven cases of plant‐closing decisions. We conclude by formulating four general propositions that can provide guidance to MNE management in plant‐closing decisions. Our findings extend managerial stakeholder theory, show how this approach can improve strategic management analysis, emphasize the importance of the relationships among (local) stakeholders in the (global) value‐creation process, and shed light on the collective action and influence of intra‐stakeholder alliances.     

Using past experience to optimize audit sampling design

Optimal sampling designs for audit, minimizing the mean squared error of the estimated amount of the misstatement, are proposed. They are derived from a general statistical model that describes the error process with the help of available auxiliary information. We show that, if the model is adequate, these optimal designs based on balanced sampling with unequal probabilities are more efficient than monetary unit sampling. We discuss how to implement the optimal designs in practice. Monte Carlo simulations based on audit data from the Swiss hospital billing system confirms the benefits of the proposed method.     

Quality,quantity and duration of lives

The evaluation of development processes and of public policies often involves comparisons of social states that differ in income distributions, population sizes and life longevity. This may require social evaluation principles to be sensitive to the quality, the quantity and the duration of lives. This paper: 1) reviews some of the normative issues at stake, 2) proposes and discusses some specific methods to address them in a generalized utilitarian framework and 3) briefly illustrates the application of some of these methods to the global distribution of incomes, population sizes and longevity over the last century. Depending on the approach taken, it is found inter alia that global social welfare in 2010 can be deemed to be between 1.8 and 407 times that of 1910, the role given to the quantity of lives being particularly important in that assessment.     

Take the money or run? Investors' ethical reputation and entrepreneurs' willingness to partner

Drawing on the multi-principal–agent perspective, this research models the influence of venture capitalists' reputation for ethical behavior on entrepreneurs' willingness to partner decisions. We test our model using a two-study design. Study one, a conjoint experiment, revealed that explicit knowledge of past unethical behavior negatively affects entrepreneurs' willingness to partner. Interaction effects revealed that factors previously shown to influence the entrepreneurs' evaluations—investor value-add and investment track record—become largely contingent upon and often subjugated by investors' ethical reputation. Study two, a traditional between-subjects scenario experiment, revealed that when entrepreneurs develop their own perceptions about the ethicality of an investor's prior behaviors, the ethical dimension remains highly influential. Further, we find that as the consequences of rejecting funding become more severe (e.g., possible bankruptcy), entrepreneurs become increasingly willing to partner with unethical investors. We also find that high fear of failure entrepreneurs are less willing to partner with unethical investors than their low fear of failure counterparts.     

Smart rules: six ways to get people to solve problems without you

As the world has become more complex, companies have steadily increased their performance requirements: Now they strive to offer low prices and high quality; to customize products for local markets and standardize them for greater returns; to innovate and be efficient. The typical corporate response to such conflicting goals complicates things further: Firms restructure and try to align their organizations with extra coordinating functions, processes, and incentives. This approach does more harm than good. Managers' time gets sucked up by reports and meetings, leaving little time to work with employees. But there is a better way, says BCG senior partner Yves Morieux: Instead of strangling employees with new rules and procedures, create an environment in which they're compelled to work with one another to develop solutions to complex challenges. Managers can create this environment by applying six "smart rules": (1) improve understanding of what coworkers do and the real constraints they face, (2) determine which people are the firm's natural integrators and strengthen their roles, (3) expand the amount of power available to everyone, (4) increase the need for reciprocity in the system, (5) make employees feel the "shadow of the future," and (6) hold uncooperative people accountable. By tapping employees' ingenuity through the use of smart rules, firms can manage complexity quickly and creatively-and streamline their organizations.     

The economic valuation of biodiversity as an abstract good

The notion of an economic valuation of biodiversity raises major philosophical and practical challenges, especially due to the fact that biodiversity is an abstract good. Insights from political philosophy and philosophy of language can help to clarify the reliability and scope of the current economic methods that can be used for the purpose of valuing it. The analogy with another abstract good, justice, indeed shows that thinking about abstract goods is a very specific exercise. If they do not take account of this specificity, applications of hedonic and contingent valuation methods can hardly claim to be relevant to value biodiversity. Rawls' theory of justice provides for the conceptual tools to overcome this problem. A reinterpretation, based on the theory of counterfactuals, allows generalizing this account of justice to outline a theory of thinking about abstract goods. This new framework emphasizes the importance of the institutional context in determining the reliability of thinking about abstract goods. It points toward substantial reforms of the methodology of economic valuation. Specifically, it suggests reinterpreting valuation as a dynamic expressive process, where initial steps aim at reinforcing the reliability of later steps through an institutional transformation and stabilization of preferences for abstract goods.     

On demand responsiveness in additive cost sharing

Under partial responsibility, the ranking of cost shares should never contradict that of demands.The Solidarity axiom says that if agent i demands more, j should not pay more if k pays less. It characterizes the quasi-proportional methods, sharing cost in proportion to `rescaled' demands.Full responsibility rules out cross-subsidization for additively separable costs. Restricting solidarity to submodular cost characterizes the fixed-flow methods, containing the Shapley-Shubik and serial methods.The quasi-proportional methods meet—but most fixed-flow methods fail—Group Monotonicity: if a group of agents increase their demands, not all of them pay less. Serial cost sharing is an exception.     

Semiparametric hedonic price models: assessing the effects of agricultural nonpoint source pollution

In the area of environmental analysis using hedonic price models, we investigate the performance of various nonparametric and semiparametric specifications. The proposed model specifications are made up of two parts: a linear component for house characteristics and a non‐(semi)parametric component representing the nonlinear influence of environmental indicators on house prices. We adopt a general‐to‐specific search procedure, based on recent specification tests comparing the proposed specifications with a fully nonparametric benchmark model, to select the best model specification. An application of these semiparametric models to rural districts indicates that pollution resulting from intensive livestock farming has a significant nonlinear impact on house prices. Copyright © 2008 John Wiley & Sons, Ltd.     

Weakened WARP and top-cycle choice rules

We propose the following weakened version of WARP: if the decision maker selects an alternative x and rejects another alternative y in some context, he cannot select y and reject x in another context. This axiom is consistent with cyclic choices. It is necessary and sufficient for the choice from every subset A of a (finite) universal set X to coincide with the weak upper-contour set of the transitive closure of some fixed complete relation at some alternative in A. Adding further simple axioms forces the choice from each subset to coincide with the top cycle (in that subset) of some fixed tournament over the universal set.