Decision Making & Negotiations

Consumers frequently evaluate their own traits before making consumption decisions (e.g., am I thin enough for skinny jeans?). The outcome of these self-evaluations depends on the standard consumers use and on whether they evaluate self in assimilation or contrast to that standard. Previous self-judgment research has focused on self-standards that arise from social aspects of the environment, including people and groups.

Improvisation is informing new models for strategy and organization design and determining how improvisation can create more productive interactions between individuals in an organization. Management research offers something to the study of improvisation in the form of evidence that groups that combine access to diverse ideas with internal cohesion are more creative and better able to develop those ideas into effective products and performances.

An Expected Utility maximizer can be risk neutral over a set of non-degenerate multivariate distributions even though her NM (von Neumann Morgenstern) index is not linear. We provide necessary and sufficient conditions for an individual with a concave NM utility to exhibit risk neutral behavior and characterize the regions of the choice space over which risk neutrality is exhibited. The least concave decomposition of the NM index introduced by Debreu [3] plays an important role in our analysis as do the notions of minimum concavity points and minimum concavity directions.

When a proxy contest is looming, the rate at which CEOs exercise options to sell (hold) the resulting shares slows down by 80% (accelerates by 60%), consistent with their desire to maintain or strengthen voting rights when facing challenges. Such deviations are closely aligned with features unique to proxy contests, such as the record dates and nomination status, and are more pronounced when the private benefits are higher or when the voting rights are more crucial.

Delegation is a central feature of organizational design that theory suggests should be aligned with the intensity of incentives. We explore a specific form of delegation, namely price delegation, whereby firms allow sales people to offer a maximum discount from the list price to their customers. We develop a model of the price delegation decision based on information acquisition that relies on characteristics of our empirical context of industrial sales.

We develop a tractable incomplete-markets model with an earnings process Y subject to permanent shocks and borrowing constraints. Financial frictions cause the marginal (certainty equivalent) value of wealth W to be greater than unity and decrease with liquidity w=W/Y. Additionally, financial frictions cause consumption to decrease with this endogenously determined marginal value of liquidity. Risk aversion and the elasticity of inter-temporal substitution play very different roles on consumption and the dispersion of w.

This paper examines the effects of employer social responsibility on the wages workers demand through randomized field experiments in two online labor marketplaces. Workers were recruited for short-term jobs and I manipulated whether or not they received information about the employer's social responsibility. I then observed the payment workers were willing to accept for the job.

Regulatory changes are transforming the multitrillion dollar swaps market from a network of bilateral contracts to one in which swaps are cleared through central counterparties (CCPs). The stability of the new framework depends on the CCPs’ resilience. Margin requirements are a CCP’s first line of defense against the default of a counterparty. To capture liquidity costs at default, margin requirements need to increase superlinearly in position size.

The notion that effort and hard work yield desired outcomes is ingrained in many cultures and affects our thinking and behavior. However, could valuing effort complicate our lives? In the present article, the authors demonstrate that individuals with a stronger tendency to link effort with positive outcomes end up complicating what should be easy decisions. People distort their preferences and the information they search and recall in a manner that intensifies the choice conflict and decisional effort they experience before finalizing their choice.