The generalized Stackelberg equilibrium of the all-pay auction with complete information

We characterize the equilibrium of the all-pay auction with general convex cost of effort and sequential effort choices. We consider a set of n players who are arbitrarily partitioned into a group of players who choose their efforts ‘early’ and a group of players who choose ‘late’. Only the player with the lowest cost of effort has a positive payoff in any equilibrium. This payoff depends on his own timing vis-a-vis the timing of others. We also show that the choice of timing can be endogenized, in which case the strongest player typically chooses ‘late’, whereas all other players are indifferent with respect to their choice of timing. In the most prominent equilibrium the player with the lowest cost of effort wins the auction at zero aggregate cost. We thank Dan Kovenock and Luis C. Corchón for discussion and helpful comments. The usual caveat applies. Wolfgang Leininger likes to express his gratitude to Wissenschaftszentrum Berlin (WZB) for its generous hospitality and financial support.     

Investment in the absence of property rights; the role of incumbency advantages

In many situations the individuals who can generate some output must enter a contest for appropriating this output. This paper analyses the investment incentives of such agents and the role of incumbency advantages in the contest. Depending on the advantages, an increase in the productivity of the investment can decrease or increase the amount of investment. The results are applied to autocrats’ investment behavior and job specific investment in organizations.     

General equilibrium with differentiated commodities: the linear activity model without joint production

Summary In this paper the existence of a general equilibrium with differentiated commodities is proved for the classical case of a production set with constant returns, spanned by elementary activities without joint production, and with a finite set of primary factors. This framework allows to proceed without strong assumptions concerning substitution possibilities, which are typical in general equilibrium theory with differentiated commodities, but which at least with respect to production are not adequate to the problem. Moreover, in our model general consumption sets are allowed. Thus true intermediate products are not excluded. Furthermore the possibility of survival without trade is not assumed.I am indebted to E. Dierker, M. Hellwig, K.J. Koch, A. Mas-Colell, M. Nermuth, W. Neudeck, and to an anonymous referee for comments and suggestions. Of course, I am responsible for any shortcomings. Finally, support by the Deutsche Forschungsgemeinschaft through SFB 303 is gratefully acknowledged.     

Global environmental problems and the strategic choice of technology

Reductions of environmentally harmful emissions are often a public good in a global context. For strategic reasons, countries may adopt a technology with high per unit cost of emission reduction, even if a technology with lower per unit cost is available at no extra cost. They thereby credibly commit themselves to not reducing emission much in the future. In a game of private voluntary provision of emission reduction, this commitment will make other countries increase their emission reductions. Also, in the case where countries cooperate in the future, such commitment gives a country a strategic advantage, because it shifts the disagreement point in a favorable direction.     

Job Creation and Job Destruction in a Regulated Labor Market: The Case of Austria

We study Austrian job reallocation in the period of 1978 to 1998, using a large administrative dataset where we correct for spurious entries and exits of firms. We find that on average 9 out of 100 randomly selected jobs were created within the last year, and that about 9 out of randomly selected 100 jobs were destroyed within the next year. Hence, the magnitude of Austrian job flows seems to be comparable to other countries, similar to the well-known results of Davis et al. (1996) for the United States. Job reallocation appears to be driven primarily by idiosyncratic shocks. However, job creation increases significantly during cyclical upswings whereas job destruction rises in downturns. We also find substantial persistence of job creation and destruction. The pronounced pattern of job reallocation rates falling with firm size and age continues to hold when we use a set of controls. Finally, we show that – controlling for sector and firm size composition – Austrian job reallocation rates are only half the rates for the U.S. This result is not surprising given the impact of tighter regulation and labor law in Austria.     

Eliminate (don't automate) inventory tracking

Being competitive in today's global markets is not easy. As a result, most companies are investing heavily in upgrading their competitive posture through the implementation of advanced methodologies, which are now becoming affordable to even the smallest of companies. It is also true that technology is advancing too rapidly for most organizations to absorb and effectively implement new developments. We've learned that technology alone is insufficient to improve competitiveness... and when implemented improperly it adds cost, with very little advantage. We've further learned that the effective implementation of technology must be rooted in common sense, accompanied by fundamental shifts in thinking. A change in how we manage and track inventory is one of those fundamental shifts that must take place if we are to benefit from much of the new technology. This article discusses changing the inventory management and tracking mindset.     

Two-moment decision models and rank-dependent utility

This paper extends results on the consistency of two-moment decision models with expected utility to rank-dependent utility preferences. The representations of expected utility and rank-dependent utility by --preferences have very similar comparative statics properties for linear distribution classes, except for the behavior with respect to small independent risks.I thank Soo Hong Chew for helpful discussion and three anonymous referees for valuable comments.     

Business managers and moral sanctuaries

Moral Sanctuary is used in this paper as a metaphor for any theory which makes actions immune from moral criticism. Three arguments favoring moral sanctuaries for business activities are countered. Two of the arguments rest on faulty analogies. One compares business activities to games, another to the behavior of machines. The third rests on the claim that business is a unique activity. This position is rejected by a reductio ad absurdum argument; it entails the immunity of all professional activities from moral judgment. I argue that business managers are accountable to the combined requirements of professionalism and democratic citizenship, notions which are briefly described at the conclusion of the paper.