Performance Pay and Adverse Selection*

It is well known in personnel economics that firms may improve the quality of their workforce by offering performance pay. We analyze an equilibrium model where worker productivity is private information and show that the firms’ gain from worker self‐selection may not be matched by a corresponding social gain. In particular, the equilibrium incentive contracts are excessively high‐powered, thereby inducing the more productive workers to exert too much effort and increasing agency costs stemming from the misallocation of effort.     

Waiting times and equilibrium selection

Summary. This paper shows how graphs can be used to calculate waiting times in models of equilibrium selection. It also shows how reducing the state space can simplify the calculations of both waiting times and selected equilibria. The results are applied to potential games and games with strategic complementarities.Received: 31 December 2002, Revised: 25 October 2003, JEL Classification Numbers: C72, C73.Alan Beggs: I am grateful to an anonymous referee for helpful comments.     

我国人造石实体面材行业发展战略思考

文章通过分析人造石实体面材行业发展的现状,对行业战略制定、战略实施方面的普遍性问题进行了探讨,提出了渐进、混合的行业发展战略模式以及若干对策建议。     

A Sample Selection Model of Consumer Adoption of Computer Banking

We develop a bivariate probit selection model of consumer access and adoption that accounts for the cross equation correlations of the errors. The Survey of Consumers, collected by the University of Michigan, is the database used to estimate the model. We find a significant cross equation correlation between consumers perceived access and their use of computer banking. Based on our results, the bivariate selection model provides asymptotically more efficient estimates than does a single equation model because the bivariate selection model accounts for the sample selection bias associated with access. In addition, the bivariate selection model has a higher percentage of correctly predicted adopters than does the corresponding single equation (univariate) model.     

Incentive compatible reward schemes for labour-managed firms

We consider a simple case of team production, where a set of workers have to contribute a single input (say labour) and then share the joint output amongst themselves. Different incentive issues arise when the skills as well as the levels of effort expended by workers are not publicly observable. We study one of these issues in terms of a very simple model in which two types of workers, skilled and unskilled, supply effort inelastically. Thus, we assume away the problem of moral hazard in order to focus on that of adverse selection. We also consider a hierarchical structure of production in which the workers need to be organised in two tiers. We look for reward schemes which specify higher payments to workers who have been assigned to the top-level jobs when the principal detects no lies, distribute the entire output in all circumstances, and induce workers to revel their true abilities. We contemplate two scenarios. In the first one, each individual worker knows only her own type, while in the second scenario each worker also knows the abilities of all other workers. Our general conclusion is that the adverse selection problem can be solved in our context. However, the range of satisfactory reward schemes depends on the informational framework.     

Survival of the Most Foolish of Fools: The Limits of Evolutionary Selection Theory

The paper investigates whether evolutionary selection, in nature or the market, ensures the survival of rational agents. It argues that once rationality appears, evolutionary selection can account for its diffusion—but cannot account for its appearance in the first place. This issue differs from the investigation of whether history matters. The issue of history or path-dependency focuses on whether evolutionary selection can favor the survival of the potentially most productive apparatus (in the biological or technological sense). To show this, the paper commences with the much-neglected difference between efficiency and productivity. This revised version was published online in August 2006 with corrections to the Cover Date.     

An Examination of Differences in Ethical Decision-Making Between Canadian Business Students and Accounting Professionals

This study investigates the differences in individuals' ethical decision making between Canadian university business students and accounting professionals. We examine the differences in three measures known to be important in the ethical decision-making process: ethical awareness, ethical orientation, and intention to perform questionable acts. We tested for differences in these three measures in eight different questionable actions among three groups: students starting business studies, those in their final year of university, and professional accountants.The measures of awareness capture the extent to which respondents felt that a particular action was unethical according to each of several ethical criteria. We found few differences between the two student groups on these measures, suggesting that their education had minimal effect on raising their awareness of the ethical issues in the vignettes. Indeed, overall, the graduating student's scores were marginally lower than those of the entry-level students. However, the professionals viewed some actions as significantly less ethical than did the graduating students.The measures of ethical orientation capture the weight respondents placed on each of the criteria above in their evaluation of the overall morality of an action. The differences between the three groups were generally small, and were a function of the vignette, consistent with Jones' (1991) model of issue-contingent ethical reasoning.The measures of intention capture the extent to which a respondent perceives that s/he would perform the action. There were significant differences between the groups in three of the eight vignettes, driven by a difference between the professionals and the other two student groups. The awareness measures were strong predictors of intention. We discuss the implications of these findings for professional training and future research.     

Dynamic Optimization of Long-Term Growth Rate for a Portfolio with Transaction Costs and Logarithmic Utility

We study the optimal investment policy for an investor who has available one bank account and n risky assets modeled by log-normal diffusions. The objective is to maximize the long-run average growth of wealth for a logarithmic utility function in the presence of proportional transaction costs. This problem is formulated as an ergodic singular stochastic control problem and interpreted as the limit of a discounted control problem for vanishing discount factor. The variational inequalities for the discounted control problem and the limiting ergodic problem are established in the viscosity sense. The ergodic variational inequality is solved by using a numerical algorithm based on policy iterations and multigrid methods. A numerical example is displayed for two risky assets.     

流通产业升级的实现模式与路径选择

流通产业升级是流通产业由低级状态向高级状态演进的一个动态发展过程,是流通产业发展的战略选择。流通产业升级的实现机制分为市场主导型和政府主导型两种模式,二者的第Ⅲ象限融合则是我国流通产业升级模式的现实选择。流通产业组织政策创新、商品流通模式创新、商品流通技术创新、商品流通组织创新和商品流通管理体制创新成为我国流通产业升级的路径选择。