Cultural Inertia and Uniformity in Organizations

We analyze aspects of the structure of organizational culture.We show that old and culturally uniform organizations are proneto cultural inertia, that is, they are reluctant to adopt adifferent culture in response to a change in the environment.Cultural uniformity can be beneficial because the associatedinertia ex post protects and therefore ex ante encourages culture-specificinvestments by agents. We also explore the model's implicationsfor such issues as cultural uniformity within an organization,cultural heterogeneity across organizations, the destabilizingeffect of growth and mergers, and the conflicts arising in themanagement of culture.     

Influence through ignorance

An individual (the leader) with free access to information decides how much public evidence to collect. Conditional on this information, another individual with conflicting preferences (the follower) undertakes an action that affects the payoff of both players. In this game of incomplete but symmetric information, we characterize the rents obtained by the leader as a result of his control of the generation of public information. These rents capture the degree of influence exerted by a chairman on a committee from his capacity to keep discussions alive or call a vote. Similar insights are obtained if the leader decides first how much private information he collects, and then how much verifiable information he transmits to the follower.     

Entrepreneurial Boldness and Excessive Investment

We analyze investment by a population of hyperbolic discounting entrepreneurs. In order to avoid inefficient procrastination, agents with good prospects about their chances of success may choose to forego free information and to invest boldly. This explains an excessive level of investment in the economy. Building on this observation, we show that low risk-free interest rates favor bold entrepreneurship and entry mistakes. Furthermore, public intervention can be socially desirable: Forcing agents to acquire information before deciding whether to invest may reduce competitive interest rates and may be beneficial for all individuals in the economy .

And thus the native hue of resolution Is sicklied o'er with the pale cast of thought, And enterprises of great pith and moment With this regard their currents turn awry, And lose the name of action.                      Hamlet , Act 3: Scene 1.

     

Driving restrictions that work? Quito's Pico y Placa Program

Programs to reduce traffic congestion and air pollution by restricting use of motor vehicles on working days have generally not met with success, given existing studies of such programs. We conduct the first study of Quito, Ecuador's four‐year‐old Pico y Placa program and find that it has reduced ambient concentrations of carbon monoxide (CO), a pollutant primarily emitted by vehicles, by 9% to 11% during peak traffic hours. Given that ambient concentrations of CO generally track the spatial and temporal distributions of traffic, these reductions in pollution suggest similar reductions in vehicle flows. We find no significant evidence that traffic has shifted to other times of the day or week, or to other locations.     

How do financial frictions affect the spending multiplier during a liquidity trap?

We show that credit market imperfections substantially increase the government-spending multiplier when the economy enters a liquidity trap. This finding is explained by the tight association between capital goods and firms? collateral, a relationship that we highlight as the capital-accumulation channel. During a liquidity trap, a government spending expansion reduces the real interest rate, leading to a period of cheap credit. Entrepreneurs use this time to accumulate capital, which persistently improves their balance sheets and reduces their future costs of credit. A public spending expansion can thus encourage private investment, yielding consequently a large spending multiplier. This effect is further reinforced by Fisher?s debt-deflation channel.     

Graft, Bribes, and the Practice of Corruption

We construct a dynamic model of corruption in organizations where officials privately know their propensity for corruption and clients optimally choose the bribe offered. We show that there is a continuum set of stationary bribe equilibria due exclusively to the dynamic nature of the model and the endogenous determination of bribes. This can explain why similar countries have stable but different "implicit prices" for the same illegal services. We also show that, by not considering the reaction of clients, traditional analysis have systematically overestimated the beneficial effect of increasing wages as an anticorruption measure.     

HUMAN CAPITAL ACCUMULATION AND LABOR MARKET EQUILIBRIUM*

We analyze an equilibrium labor market with on‐the‐job search and experience effects (as workers learn by doing). The analysis yields a Mincer wage equation with worker fixed effects and endogenously determined firm fixed effects. Equilibrium sorting—where over time more experienced workers also tend to move to better paid employment—has a significant impact on wage inequality.     

No trade

We investigate a common value bilateral bargaining model with two-sided private information and no aggregate uncertainty. A seller owns an asset whose common valuation is a deterministic function of the two traders' private signals. We first establish a no-trade theorem for this environment, and proceed to study the effect of the asset valuation structure and the trading mechanism on extent to which asymmetric information induces individuals to engage in mutually unprofitable exchange. A laboratory experiment is conducted, where trade is found to occur between 19% and 35% of the time, and this depends in systematic ways on both the asset valuation function and the trading mechanism. Both buyers and sellers adapt their strategy to changes in the asset valuation function and to changes in the trading mechanism in clearly identifiable ways. An equilibrium model with naïve belief formation accounts for some of the behavioral findings, but open questions remain.     

JOB SEARCH WITH BIDDER MEMORIES*

This article revisits the no‐recall assumption in job search models with take‐it‐or‐leave‐it offers. Workers who can recall previously encountered potential employers in order to engage them in Bertrand bidding have a distinct advantage over workers without such attachments. Firms account for this difference when hiring a worker. When a worker first meets a firm, the firm offers the worker a sufficient share of the match rents to avoid a bidding war in the future. The pair share the gains to trade. In this case, the Diamond paradox no longer holds.