Communication and Cooperation: A Methodological Study

We study the effect of communication in an experimental game where cooperation is consistent with equilibrium play. We examine two methodological questions which affect many studies of communication in games, particularly those studying the relationship between communication and cooperation in supergames. We show that making it easier for subjects to reach an agreement (by allowing more rounds of communication) does not increase cooperation with a limited message space treatment. Thus, limited message space treatments are not a good substitute for the use of chat. Making the game longer, thereby making the connection between the first period and the continuation game more obvious, also has little impact on cooperation. For both the two‐ and three‐period versions of our game we find substantial amounts of contingent play. This implies that use of a finitely repeated game, which has a number of methodological advantages, maintains the main properties of the underlying supergame.     

A profit-center game with incomplete information

Profit centers in a firm in multidivisional form agree in the ex ante stage upon a plan about their joint production and profit imputation. The plan is executed in the subsequent two periods of the interim stage: the setup period and the manufacturing period. In the setup period, each center has its private information, but a part of its information is revealed to the other centers through its action. Based on the information endogenously pooled this way, the centers take another round of actions in the manufacturing period. A core plan is defined as a Bayesian incentive-compatible plan of the grand coalition of profit centers, upon which no coalition can improve using its Bayesian incentive-compatible plan. A core plan is called full-information revealing if each center fully reveals its private information in the setup period. Three existence theorems for a full-information revealing core plan are established. The first two theorems impose alternative conditions on returns to scale: (1) the neoclassical convex technology, and (2) increasing returns to scale. In case (2), a stronger condition than Scarf's distributiveness is imposed on the total production set. The third theorem is based on a specific supplier-customer relationship among the divisions. Received: 13 October 1997 / Accepted: 26 July 1999     

Applying the marketing concept to design new products

This article is an empirical application of the marketing concept in the design of new product offerings in the area of religious instructional materials. The general approach and methodology of this research should be appropriate for many types of consumer products and organizations. The marketing concept was applied to the design of religious instructional materials in this study through an empirical investigation of the values, attitudes, and perceived needs of key market populations. The study consisted of determination of perceived needs for alternative topics, identification of educational themes around which specific topics could be integrated into instructional packages, and assessment of the importance of these themes across alternative market segments. A total of 1161 respondents (464 pastors and 697 lay members) completed a mail questionnaire which solicited their perceptions of themselves and the domain of the church in their lives. Respondents also indicated the level of importance they placed on alternative instructional topics. The data were analyzed through the use of multivariate techniques to provide understanding and interpretation of the perceived needs of alternative market segments. Results of the analyses were very useful in determining which instructional packages to develop and the target markets for each package.     

OPTIMAL CORPORATE LENIENCY PROGRAMS*

This study characterizes the corporate leniency policy that minimizes the frequency with which collusion occurs. Though it can be optimal to provide only partial leniency, plausible sufficient conditions are provided whereby the antitrust authority should waive all penalties for the first firm to come forward. It is also shown that restrictions should be placed on when amnesty is awarded, though it can be optimal to award amnesty even when the antitrust authority is very likely to win the case without insider testimony.     

Regression discontinuity inference with specification error

A regression discontinuity (RD) research design is appropriate for program evaluation problems in which treatment status (or the probability of treatment) depends on whether an observed covariate exceeds a fixed threshold. In many applications the treatment-determining covariate is discrete. This makes it impossible to compare outcomes for observations “just above” and “just below” the treatment threshold, and requires the researcher to choose a functional form for the relationship between the treatment variable and the outcomes of interest. We propose a simple econometric procedure to account for uncertainty in the choice of functional form for RD designs with discrete support. In particular, we model deviations of the true regression function from a given approximating function—the specification errors—as random. Conventional standard errors ignore the group structure induced by specification errors and tend to overstate the precision of the estimated program impacts. The proposed inference procedure that allows for specification error also has a natural interpretation within a Bayesian framework.     

Cognition,Redundancy, And Learning In Organizations

What exactly does it mean for something to be an ‘organization’? How do we know when something is organized? What exactly is organizational learning? We attempt to attack some of these questions by turning to cybernetics and the mathematical theory of information In the work of Atlan and von Foerster we find provocative attempts to describe the processes of self-organization in terms of such variables as redundancy and information content. Using the running example of a monastery library we attempt to explicate these approaches and connect them to economic concerns.     

Industry Expertise,Information Leakage and the Choice of M&A Advisors

This paper examines the impacts of M&A advisors’ industry expertise on firms’ choice of advisors in mergers and acquisitions. We show that an investment bank's expertise in merger parties’ industries increases its likelihood of being chosen as an advisor, especially when the acquisition is more complex, and when a firm in M&A has less information about the merger counterparty. However, due to the concerns about information leakage to industry rivals through M&A advisors, acquirers are reluctant to share advisors with rival firms in the same industry, and they are more likely to switch to new advisors if their former advisors have advisory relationship with their industry rivals. In addition, we document that advisors with more industry expertise earn higher advisory fees and increase the likelihood of deal completion.     

The effects of global alliances on international flight frequencies: Some evidence from Italy

We collect half-yearly data on nonstop flight frequencies offered by carriers on routes originating from Italian regions to European countries in the period 1998–2010. We find that, as the share of flights belonging to global alliances increases, the number of flights offered by airlines simultaneously expands, especially in the case of full-service carriers. Moreover, there is also evidence that the number of global alliances has a positive impact on flight supply.     

A DYNAMIC ENTRY AND PRICE GAME WITH CAPACITY INDIVISIBILITY

Strategic market interaction is here modelled as a two‐stage game in which potential entrants choose capacities and next active firms compete in prices. Due to capital indivisibility, the capacity choice is made from a finite grid and there are economies of scale. In the simplest version of the model with a single production technique, the equilibrium turns out to depend on the ratio between the level of total output at the long‐run competitive equilibrium and the firm's minimum efficient scale: if that ratio is sufficiently large (the market is sufficiently ‘large’), then the competitive price emerges at a subgame‐perfect equilibrium of the capacity and price game; if not, then the firms randomize in prices on the equilibrium path. The role of the market size for the competitive outcome is shown to be even more important if there are several available production techniques.     

The determinants and effects of CEO–employee pay ratios

We study the determinants and effects of the relative compensation of top executives and lower-level employees. First, we show that CEO–employee pay ratios depend on the balance of power between the CEO (relative to the board) and ordinary employees (relative to management). Second, our results suggest that employees do not perceive higher pay ratios as an inequitable outcome to be redressed via costly behaviors that lower productivity. We do not find a negative relation between relative pay and employee productivity, either in our full sample or in subsamples where employees are well-informed about executive pay and are protected against career retributions. Rather, we find that productivity increases with relative pay when the firm has fewer employees who are well-informed, and when promotion decisions are predominantly merit-based. We also find that firm value and operating performance both increase with relative pay. We conclude that ordinary employees appear to perceive an opportunity in higher pay ratios but the extent to which such perception incentivizes them depends on the likelihood of success in a series of sequential promotion tournaments.