operating flexibility global manufacturing and the option value of a multinational network the multinational corporation is a network of activities located in different countries the value of this network derives from the opportunity to benefit from uncertainty through the coordination of subsidiaries which are geographically dispersed we model this coordination as the operating flexibility to shift production between two manufacturing plants located in different countries a stochastic dynamic programming model treats explicitly this flexibility as equivalent to owning an option the value of which is dependent upon the real exchange rate the model is extended to analyze hysteresis effects and within country growth options we show that the management of across border coordination has led to changes in the heuristic rules used for performance evaluation and transfer pricing

regret and feedback information in first price sealed bid auctions we investigate the effect of regret related feedback information on bidding behavior in sealed bid first price auctions two types of regret are possible in this auction format a winner of the auction may regret paying too much relative to the second highest bid and a loser may regret missing an opportunity to win at a favorable price in theory under very general conditions being sensitive to winning and paying too much should result in lower average bids and being sensitive to missing opportunities to win at a favorable price should result in higher bids for example the u s government s policy of revealing losing bids may cause regret sensitive bidders to anticipate regret and bid conservatively decreasing the government s revenue we test these predictions in the laboratory and find strong support for both

multidimensional mechanism design for auctions with externalities abstract in an auction with externalities a buyer s type is multidimensional and specifies the payoff he would get for each of the n 1 possible outcomes the seller keeps the object or buyer i i 1 n gets the object we provide a characterization of multidimensional incentive compatible mechanisms similar to that for one dimensional mechanisms although reservation utilities are endogenous and type dependent the participation constraint is binding for only one critical type a main difficulty in a multidimensional setting is the integrability condition we present a geometric characterization for discontinuous conservative vector fields in auctions where the buyers submit scalar bids and the seller transfers the object to one of the buyers for sure a second price auction maximizes revenue with two buyers this auction remains optimal even if the seller can set a reservation price journal of economic literature classification numbers c7 c72

regulatory multiplicity and conflict towards a combined code on corporate governance in nigeria given the multiplicity of codes designed to regulate different stakeholders in terms of promoting good corporate governance this paper examines areas of conflicts among the various codes and the associated implications for corporate governance practices and regulatory compliances by public listed nigerian firms using the conflict signalling theory for developing the conceptual framework this study examines the proliferation of codes in nigeria through a mixed method approach to provide an exploratory account of the implications of corporate governance regulatory multiplicity evidence suggests the presence of conflict among the various codes which contributes to reduced compliance by firms and ineffective enforceability by regulatory agencies which both impede good corporate governance in nigeria the findings advance conflict signalling theory as an important framework for understanding the implications of the conflicts arising from the multiplicity of codes

secret versus public reserve price in an outcry english procurement auction experimental results abstract in a set of human experiments we analyze the impact of the buyer s reserve price policy in an online open outcry reverse auction we measure the impact of revealing or not the reserve price on the buyer s expected cost when suppliers may be risk averse results confirm that the optimal public reserve price policy dominates for the buyer when the lowest cost supplier is weakly risk averse but in contrast with theory the secret reserve price policy does not dominate when he becomes very risk averse analysis of strategic suppliers bidding behavior shows in conformity with theory that they react to the secret reserve price and are more aggressive when they are more risk averse this explains why the optimal public reserve price does not perform better in this context but is equivalent to the secret one however strongly risk averse bidders are less aggressive than predicted by theory that is why the secret reserve price policy does not strictly dominate

an empirical analysis of entrant and incumbent bidding in road construction auctions this paper explores differences in the bidding patterns of entrants and incumbents in road construction auctions we find that entrants bid more aggressively and win auctions with significantly lower bids than incumbents the differences in their bidding patterns are consistent with a model of auctions in which the distribution of an entrant s costs exhibits greater dispersion than that of an incumbent s and relations of stochastic dominance in the distributions do not persist for the entire range of estimated costs we also find that more efficient firms bid on average more aggressively and firms with greater backlogs bid less aggressively

how not to sell nuclear weapons we consider situations where a sale affects the ensuing interaction between potential buyers these situations are modeled by assuming that an agent who does not acquire the object for sale incurs an identity dependent externality we construct a revenue maximizing auction for the seller we observe that 1 outside options and participation constraints are endogenous 2 the seller extracts surplus also from agents who do not obtain the auctioned object 3 the seller is better off by not selling at all while obtaining some payments if externalities are much larger than valuations

a comparison of buyer determined and price based multiattribute mechanisms reverse auctions are fast becoming the standard for many procurement activities in the past the majority of such auctions have been solely price based but increasingly attributes other than price affect the auction outcome specifically the buyer uses a scoring function to compare bids and the bid with the highest score wins we investigate two mechanisms commonly used for procurement in business to business markets in a setting in which buyers welfare is affected by exogenous nonprice attributes such as the quality service and past relationships under both mechanisms bidders bid based on price but in the buyer determined mechanism the buyer is free to select the bid that maximizes her surplus while in the price based mechanism the buyer commits to awarding the contract to the low price bidder we find both in theory and in the laboratory that the buyer determined mechanism increases the buyer s welfare only as long as enough suppliers compete if the number of suppliers is small and the correlation between cost and quality is low the buyer is better off with the price based mechanism these findings are intended to help procurement managers make better decisions in designing procurement mechanisms for a variety of settings

understanding overbidding in second price auctions an experimental study we present results from second price private value auction spa experiments where bidders may receive noisy signals about their opponentsvalue such signals change biddersperception about the strengthof their opponent and the relationship between biddersperception of their opponent and overbidding provides a novel channel to understand overbidding in spa we found that small and medium overbids are more likely to occur when bidders perceive their rivals to have similar values supporting a modifiedjoy of winninghypothesis but large overbids are more likely to occur when bidders believe their opponents to have much higher values consistent with thespite hypothesis second price private value auctions spas are the most easily understood auction format from a theoretical point of view 1 in standard private value auction models of fully rational bidders with standard preferences bidding one s own value is a weakly dominant strategy this theoretical prediction holds irrespective of biddersrisk atti tudes the number of rival bidders symmetry in the value distributions and so on in laboratory experiments however subjects are found to exhibit a consistent pattern of overbidding kagel et al 1987 found that the actual bids are on average 11 above the dominant strategy bids kagel and levin 1993 found that about 62 of all bids in their five bidder spa sessions exceed the bidder s value while only 8 of all bids were below it both kagel and levin 1993 and harstad 2000 further reported that experience has only a small effect in reducing overbidding in spa an important related finding is that overbidding in english auctions a mechanism that is strategically equivalent to the spa in the case of private values is known to be a short term phenomenon that subjects quickly learn not to undertake kagel and levin 1993 thus any explanation for the prevalence and persistence of overbidding in the spa must also explain its rarity in the english auction given the robustness of the findings of overbidding in spa it is surprising that economists have little understanding of why it happens kagel et al 1987 conjectured that bidding above one s own value in a spa is based on the illusion that it improves the probability of winning with little cost because the winner only pays the second highest bid 2 moreover they argue that overbidding is sustainable because bidders still on average earn positive profits and because the negative feedback from overbidding is a weak mechanism in the spa for example if a bidder overbids in a spa by 10 above her value it is quite possible that she does not win at all and thus does not experience

does feedback really matter in one shot first price auctions does the type of posterior feedback affect how people decide in one shot environments we revisit this question in first price auction markets we consider three feedback types minimal only knowing whether winning or not loser also knowing the winning bid and winner knowing the second highest bid if winning filiz ozbay and ozbay 2007 find that loser as opposed to minimal or winner feedback increases bids we use three novel protocols and additionally replicate theirs using a sample of 624 subjects we find that bidders ex ante knowledge of posterior feedback type has no systematic effect on the average bid value ratios

information disclosure in auctions an experiment we report experimental results on the importance of information disclosure policy in first price sealed bid auctions interaction takes place in 10 periods according to a random matching protocol and we control the level of information feedback bidders receive after each period when bidders are informed about the losing bids in previous periods prices are higher than the theoretical prediction however when this information is not revealed the bidding becomes more competitive and the bids come close to the theoretical prediction we suggest that a signaling phenomenon may be important for explaining these results 2002 elsevier science b v all rights reserved

scale effects in multi unit auctions abstract we argue that auctions with multi unit demand can be used to experimentally conduct new and novel tests of auction theory the focus of the paper is on changes in bidding behavior as the auction is scaled up by adding more bidders and increasing both the demand per bidder and supply of the auctioned good we identify uniquely tractable environments and obtain clear cut theoretical comparative statics in these settings this leads to the construction of uniform price auctions of different scales where the prediction is that risk neutral bidders bids on the last unit they demand are independent of scale in our experiment bidders on average bid much more aggressively than predicted by theory there is also evidence of a scale effect with more aggressive bidding in the small scale treatment compared to the large scale treatment it is argued that these features are consistent with joy of winning and anticipated regret

independent private value auctions bidder behaviour in first second and third price auctions with varying numbers of bidders the symmetric equilibrium of third price auctions is characterized it makes a number of contrasting predictions relative to firms and second price auctions bids exceed private values the marginal effects on bids of an increase in private values is greater than one increasing numbers of bidders reduces bids and risk aversion requires bidding below the risk neutral nash equilibrium in the experiment bidders do not always satisfy the point predictions of the theory however the game theoretic models correctly anticipate at least directionally the important effects of the price rule changes copyright 1993 by royal economic society

e sourcing in procurement theory and behavior in reverse auctions with noncompetitive contracts one of the goals of procurement is to establish a competitive price while affording the buyer some flexibility in selecting the suppliers to deal with reverse auctions do not have this flexibility because it is the auction rules and not the buyer that determines the winner in practice however hybrid mechanisms that remove some suppliers and a corresponding amount of demand from the auction market are quite common we find that in theory such hybrid mechanisms increase competition and make buyers better off as long as suppliers are willing to accept noncompetitive contracts it turns out that suppliers often do because under a wide variety of conditions these contracts have a positive expected profit our theory relies on two behavioral assumptions 1 bidders in a multiunit uniform price reverse auction will follow the dominant strategy of bidding truthfully and 2 the suppliers who have been removed from the market will accept noncompetitive contracts that have a positive expected profit our experiment demonstrates that bidders in the auction behave very close to following the dominant strategy regardless of whether this auction is a stand alone or a part of a hybrid mechanism we also find that suppliers accept noncompetitive contracts sufficiently often although not always to make the hybrid mechanism outperform the reverse auction in the laboratory as well as in theory

how well have social economy financial institutions performed during the crisis period exploring financial and social efficiency in spanish credit unions as social economy financial institutions credit unions have traditionally been considered less efficient than traditional banking entities however like banks and savings banks they have to be as efficient and competitive as possible to survive in today s business environment especially at times of crisis to date there have been very few studies on their efficiency and practically none for the crisis period moreover almost all the existing studies assess only financial efficiency without considering their social function this study examines the levels of both financial and social efficiency in spanish credit unions as well as their main determinants during the recent crisis we apply the two stage double bootstrap data envelopment analysis dea methodology based on panel data corresponding to all the credit unions active in spain between 2008 and 2013 the empirical results indicate that financial and social efficiency achieved an acceptable level although on average the former was slightly greater than the latter we also find that both age and merger and acquisition activity were positively influential on the financial efficiency of credit unions but had a significant negative effect on their social efficiency moreover the regional location of such entities and the financial crisis were also crucial determinants of both types of efficiency our findings are therefore useful for all the stakeholders of credit unions to know if these entities have been efficient according to a double bottom line accounting in the crisis period and hence to maintain successful social management that is compatible with satisfactory financial efficiency

english auctions with resale an experimental study i design and test a simple english auction and two english auctions with resale but with different informational backgrounds all three treatments theoretically have the same equilibrium i find however that the possibility of resale alters behavior significantly in the two treatments with resale subjects deviated from both the nash prediction and the common results about bidding behavior in english auctions subjects tend to overbid when they are certain they can reap the whole surplus in the resale market i employ different models like qre and levels of reasoning and conclude that overbidding can be explained as a rational response to the noisy environment in markets with human participants that is as rational decision making when anticipating others to make errors when the outcome of the resale market is not certain there is significant signaling behavior and auction prices tend to be lower than the nash prediction

reconsidering the common good in a business context in our contemporary post modern context it has become increasingly awkward to talk about a good that is shared by all this is particularly true in the context of mammoth multi national corporations operating in global markets nevertheless it is precisely some of these same enormous aggrandizing forces that have given rise to recent corporate scandals these in turn raise questions about ethical systems that are focused too myopically on self interest or the interest of specific groups locations or cultures the obvious traditional alternative to moral bellybutton gazing is the common good which challenges the modern business enterprise to realize non instrumental values that can only be attained in our life together the common good dictates that leadership should be judged first of all according to moral criteria rather than professional competence it helps correct the distorted prioritization of the maximization of profit in every business decision recognizing that businesses have a multitude of rights and responsibilities and the common good reminds us that the first of these is not always profit making

pricing substitutable products under consumer regrets abstract since many firms provide consumers with substitutable products which may be launched sequentially over several periods strategic consumers need to make their purchase or wait decisions at the beginning of the first period however they may face second period valuation uncertainty when such decisions are made and decisions made under uncertainty may lead to regrets ex post lots of empirical studies show that consumers anticipate these regrets and take anticipated regrets into consideration this paper studies the impact of valuation uncertainty and consumer anticipated regrets on consumer purchasing behavior firm s prices and pricing strategy we consider a firm selling two substitutable products over two periods one product for one period in a selling season the firm announces all its prices at the beginning of the selling season price commitment or announces each price at the beginning of each period dynamic pricing besides a consumer may experience purchase regret from missing a better choice if she chooses to buy in the first period and otherwise wait regret if she chooses to wait consumers make decisions based on the firm s prices and strategies and the anticipated regrets we find that a firm may need to set a lower price in the first period even when the average valuation in this period is higher second with price commitment the impact of each type of regret on the optimal second period price can be opposite and depends on the value of the uncertainty and regret parameters finally we show that price commitment dominates dynamic pricing and the value of price commitment depends on the uncertainty and anticipated regret

vertical scope turbulence and the benefits of commitment and flexibility we address the contested state of theory and the mixed empirical evidence on the relationship between turbulence and vertical scope by studying how turbulence affects the benefits of commitment from integrated development of components and the benefits of flexibility from sourcing components externally we show that increasing turbulence first increases but then decreases the relative value of vertical integration moderate turbulence reduces the value of flexibility by making supplier selection more difficult and increases the value of commitment by mitigating the status quo bias of integrated structures both effects improve the value of integration higher levels of turbulence undermine the adaptive benefits of commitment but have a less adverse effect on flexibility making nonintegration more attractive we also show how complexity and uneven rates of turbulence moderate the nonmonotonic relationship between turbulence and integration this paper was accepted by jesper sorensen organizations

the effect of regret on optimal bidding in auctions while most models of auctions and competitive bidding assume that each bidder s utility for an outcome depends only on his own profit we allow the utility to also depend on any regret that a bidder suffers after the fact and characterize when and how this affects bidding specifically a winner might regret money left on the table in federal offshore oil lease sales while a loser might regret seeing an object sell for less than his own value for it we show that for risk neutral bidders who after the fact know the winner s price for the object a bidder s optimal bidding strategy will not depend on the relative weight given to profit versus regret if both forms of regret weigh equally heavily however if bidders weight money left on the table regret more heavily then the bid taker suffers likewise if losers do not learn the winner s price then the bid taker also suffers thus the existing models exclusion of regret from risk neutral bidders utility functions affects the applicability of the

5 information impact and allocation rules in auctions with affiliated private values a laboratory study in affiliated private value auctions each bidder has perfect information regarding his her own value for the object at auction but higher values of the item for one bidder make higher values for other bidders more likely we report on a series of experiments examining three key implications of these auctions i in a first price auction public information about rivals values increases expected revenue ii an english auction increases expected revenue compared to a first price auction and iii a second price auction is isomorphic to an english auction in examining these issues we compare predictions of some ad hoc bidding models with nash equilibrium predictions in the first price auction experiments nash equilibrium bidding theory organizes the data better than either of two ad hoc bidding models public information about others valuations does increase average revenue but the increase in revenue is smaller and less reliable than predicted under risk neutral nash equilibrium bidding lower average revenue might be attributed to risk aversion while the high variability is attributed to a sizable frequency of individual bidding errors relative to the theory bidding theory precisely organizes english auction outcomes after a brief initial learning period the dominant strategy equilibrium does not organize second price auctions nearly as well as market prices persistently exceed predicted prices the difference between english and second price outcomes is attributed to effects of different information flows inherent in the structure of the two institutions on eliminating bidding errors revenue impacts of these two institutions relative to a first price auction are examined in light of observed bidding patterns

anticipated loser regret in third price auctions abstract losing the auction at an affordable price generates loser regret in third price auctions if bidders anticipate loser regret then in line with the experimental findings in a symmetric equilibrium the bids are more than the risk neutral nash equilibrium

information feedback in first price auctions i apply the notion of a self confirming equilibrium sce to study how feedback in first price auctions influences bidders perceptions about their strategic environment and consequently their bidding behavior in a private values setting revealing the two highest bids at the end of each auction is sufficient for bidders to have correct beliefs justifying the assumption of nash equilibrium in contrast in every symmetric sce of a symmetric affiliated private values model bidding strategies and revenue are weakly higher if only the highest bid is revealed i also consider interdependent valuations and discuss implications for the empirical auction literature

price formation in single call markets this paper reports a laboratory experiment designed to examine the price formation process in a simple market institution the single call market the experiment features random values and costs each period so each period generates a new price formation observation other design features are intended to enhance the predictive power of the bayesian nash equilibrium bne theory developed recently for this trading institution we find that the data support several qualitative implications of the bne but that subjects bid and ask behavior is not as responsive to changes in the pricing rule as the bne predictions bids and asks tend to reveal more of the underlying values and costs than predicted particularly when subjects are experienced nevertheless observed trading efficiency falls below the bne prediction the results offer more support for the bne when subjects compete against nash robot opponents a simple learning model accounts for several of the deviations from bne

rent seeking with regretful agents theory and experiment abstract we investigate both theoretically and experimentally the role that information disclosure has on behavior in all pay environments in which all agents must exert costly effort but only the winner is rewarded through the lens of all pay auctions we show that bidders who have regret concerns when they lose an auction may alter their bids whether or not information about the winning bid is disclosed all losing bidders regret not bidding 0 however when feedback on the winning bid is provided those bidders who lost at an affordable price may regret not bidding more we show that the former effect causes bidders to lower their bids while the latter effect causes bidders to raise their bids our experimental results indicate overbidding whether or not the winning bid is disclosed to losing bidders however disclosing the winning bid leads to even more aggressive bidding increases revenues decreases the frequency of dropouts and also leads to more efficient allocations thus our results show that information disclosure is a powerful tool that mechanism designers may wish to exploit to extract more rents in all pay environments

information and conspiracy in sealed bid auctions abstract this paper examines the allocative properties of the sealed bid institution when different aspects of the available information to bidders are considered specifically we examine a the effect on price determination in repeated sealed bid auctions of post auction revelation of losing bids and b the effect on price determination when conspiratorial discussions are allowed

bidding between incumbent and entrant abstract facing an informed incumbent who has cost advantages in two different states the uninformed entrant bids cautiously due to the incumbent s cost advantage in the low cost state the incumbent bids aggressively earning additional profits because of his cost advantages

theory and misbehavior of first price auctions comment glenn harrison s recent 1989 article in this review has provoked the loudest debate yet heard among experimental economists his critique of the james cox vernon smith and james walker 1983a b 1985a b 1988 henceforth csw laboratory studies of first price sealed bid auctions with independent and private values in my view raises a fundamental methodological issue that is well worth debating and the csw research program deserves further discussion in this short comment i confine myself to what i see as the most important issues and do not try to address all evidence relevant to the ongoing debate first i summarize harrison s central argument very briefly after pointing out two shortcomings in harrison s specific analysis of csw i propose a methodological reconciliation finally and with some trepidation since my own experience with the auction data is relatively slight i suggest an alternative approach to understanding the anomalies discovered by csw

robust monopoly pricing we consider a robust version of the classic problem of optimal monopoly pricing with incomplete information in the robust version the seller faces model uncertainty and only knows that the true demand distribution is in the neighborhood of a given model distribution we characterize the pricing policies under two distinct decision criteria with multiple priors i maximin utility and ii minimax regret the equilibrium price under either criterion is lower then in the absence of uncertainty the concern for robustness leads the seller to concede a larger information rent to all buyers with values below the optimal price without uncertainty

equilibrium in sealed high bid auctions there is a voluminous theoretical literature on sealed high bid auctions auctions in which bids are sealed and the high bidder pays his bid see for example vickrey 1961 myerson 1981 riley and samuelson 1981 milgrom and weber 1982 matthews 1983 maskin and riley 1984 holt 1980 cox smith and walker 1988 a critical property on which this literature relies is the existence of equilibrium in which buyers bidding strategies are monotonic in their types this enables the analyst to perform comparative statics as the distribution of types changes and to compare the welfare properties of the high bid auction with those of other auction institutions one case in which the existence of monotonic equilibrium is readily established is that in which buyers types are distributed smoothly independently and symmetrically in this case there exists a symmetric equilibrium one in which all bidders share the same bidding behaviour as a function of their valuations and this bid function is the solution to a first order differential equation

neither principles nor rules making corporate governance work in sub saharan africa corporate governance is often split between rule based and principle based approaches to regulation in different institutional contexts this split is often informed by the types of institutional configurations their strengths and the complementarities within them this approach to corporate governance regulation is mostly discussed in the context of developed economies and their regulatory demands however in developing and weak market economies such as in sub saharan africa there is no such explicit split and the debates on such contexts in the comparative corporate governance literature have been meagre nonetheless there are sparks of good corporate governance practices in the region drawing from institutional theory and a case study of a largest economy we explore the appropriateness or suitability of corporate governance regulatory frameworks in sub saharan africa our findings suggest that nigeria needs an integrated system that combines elements of both rule based and principle based regulation supported by a multi stakeholder co regulation strategy this paper departs from the mainstream rule based and principle based categorisations by forging ahead new perspectives on corporate governance regulation especially in weak market economies

auctions with anticipated regret theory and experiment this paper demonstrates theoretically and experimentally that in first price auctions overbidding with respect to the risk neutral nash equilibrium might be driven from anticipated loser regret felt when bidders lose at an affordable price different information structures are created to elicit regret bidders know they will learn the winning bid if they lose loser regret condition or the second highest bid if they win winner regret condition or they will receive no feedback regarding the other bids bidders in loser regret condition anticipated regret and significantly overbid however bidders in the winner regret condition did not anticipate regret jel d44

regret theory a bold alternative to the alternatives in their famous 1982 paper in this journal loomes and sugden introduced regret theory now more than 30 years later the case for the historical importance of this contribution can be made

the role of inventory in delivery time competition the paper operationalizes the notion of shortage cost by considering the behavior of customers and competing firms and examines the role of inventory in response time competition we start with a single firm production control model in which customers are characterized by their preferences of price quality and delivery time the optimal production inventory policy and the optimal choice between make to order and make to stock operations are determined in simple newsboy like formulas the basic model is then extended to an n firm market game in which firms compete for orders from the aspect of early delivery one could think of this setting as an oligopoly racing market the analysis shows that competition can breed a demand for produce to stock just as other economic phenomena such as economies of scale uncertainty or seasonality can induce make to stock and that delivery time competition increases the buyer s welfare while decreasing the producer s welfare

pricing production scheduling and delivery time competition this paper studies competition between firms that produce goods or services for customers sensitive to delay time firms compete by setting prices and production rates for each type of customer and by choosing scheduling policies the existence of a competitive equilibrium is proved the competitive equilibrium is well defined whether or not a firm can differentiate between customers based upon physical characteristics because each customer has incentive to truthfully reveal its delay cost further insights are derived in two special cases a unique equilibrium exists for each of the cases in the first case firms are differentiated by cost mean processing time and processing time variability but customers are homogeneous the conclusions include that a faster lower variability and lower cost firm always has a larger market share higher capacity utilization and higher profits however this firm may have higher prices and faster delivery time or lower prices and longer delivery time in the second

corporate social responsibility in challenging and non enabling institutional contexts do institutional voids matter the extant literature on comparative corporate social responsibility csr often assumes functioning and enabling institutional arrangements such as strong government market and civil society as a necessary condition for responsible business practices setting aside this dominant assumption and drawing insights from a case study of fidelity bank nigeria we explore why and how firms still pursue and enact responsible business practices in what could be described as challenging and non enabling institutional contexts for csr our findings suggest that responsible business practices in such contexts are often anchored on some csr adaptive mechanisms these mechanisms uniquely complement themselves and inform csr strategies the csr adaptive mechanisms and strategies in combination and in complementarity then act as an institutional buffer i e institutional immunity which enables firms to successfully engage in responsible practices irrespective of their weak institutional settings we leverage this understanding to contribute to csr in developing economies often characterised by challenging and non enabling institutional contexts the research policy and practice implications are also discussed

the stakeholder theory and the common good the theory of the social responsibility of the firm oscillates between two extremes one that reduces the firm s responsibility to the obtainment of the greatest possible profit for its shareholders and another that extends the firm s responsibility to include a wide range of actors with an interest or stake in the firm the stakeholder theory of the social responsibility of business is more appealing from an ethical point of view and yet it lacks a solid foundation that would be acceptable to a variety of schools of thought in this paper i argue that the stakeholder theory could be founded on the concept of the common good first i explain the foundations of the theory of the common good the concept itself how it relates to the individual good and its role in the firm following that i explain how the theory of the common good could be applied to the stakeholder theory finally i draw some conclusions

auctions with anticipated emotions overbidding underbidding and optimal reserve prices the experimental literature has documented that there is overbidding in second price auctions regardless of the valuations of bidders in contrast in first price auctions there tends to be overbidding for large valuations but underbidding for small valuations we show that the experimental evidence can be rationalized by a simple extension of the standard auction model where bidders anticipate constant positive or negative emotions caused by the mere fact of winning or losing even if the emotional dis utilities are very small the revenue maximizing reserve price r might be significantly different from the standard model moreover r decreases with the number of bidders

dynamism capital structure and performance in a sub saharan economy extending the institutional difference hypothesis extant research examining the capital structure performance relationship has been undertaken primarily in developed economies these studies integrate agency theory considerations with the contingency perspective and suggest a positive interaction between sector dynamism equity and performance our study extends this research stream by examining the capital structure performance link in a sub saharan economy an underresearched but economically emerging region using logic undergirding a substantial stream of institutional theory based studies that we term the institutional difference hypothesis we argue that the implications of the capital structure performance relationship are contingent on the extent of national level institutional underdevelopment taking into account institutional differences between developed economies and those in the sub saharan region we hypothesize a negative interaction between sector dynamism equity and firm performance in sub sahara using longitudinal data from ghanaia

theory and misbehavior in first price auctions comment in his recent paper in this review glenn harrison 1989 argues that the conclusions of james cox et al 1982 1983 1985 1988 in their studies of first price private value auctions are not well supported because of shortcomings in the way their experimental investigations were designed analyzed and reported harrison argues that the expected cost of deviations from risk neutral nash equilibrium rnne bidding in these auctions was quite small less than 0 05 at the median so that in terms of expected monetary payoffs payoff space many subjects had little to lose from deviating from the rnne strategy harrison suggests that the significance of the differences cox vernon smith and james walker hereafter csw report between subjects bids and the rnne bids deviations in the message space may therefore need to be reexamined in discussing harrison versus csw we have three primary points to make first in arguing that it is more natural to evaluate subject behavior in expected payoff space harrison 1989 p 749 we think harrison has overstated his case however we agree with his more important point that looking at the cost of deviations is a useful diagnostic tool for determining when experimenters are likely to have lost control over subjects incentives further as we will show in section i this part of harrison s critique applies with special force to csw s studies of bidding second a broader examination of the results of private value auction experiments indicates that risk aversion cannot be the only factor and may well not be the most important factor behind bidding above the rnne found so often in first price privatevalue auctions the most telling evidence here is bidding above the dominant bid price found in second price auctions kagel et al 1987 kagel and levin 1990 and the risk loving found under several treatment conditions in csw s 1984 own multipleunit discriminative auctions auctions in which the high bidders pay their bid price these and other data inconsistent with risk averse bidding are largely ignored in csw 1988 but are nevertheless relevant to the substantive issue of risk aversion in private value auctions they are discussed in section ii third there are data gathered in other investigations which provide strong support for the view that the deviations from rnne bidding reported in first price auctions are not the results of the low expected cost of such deviations however these data unlike the higher stakes payoff data that csw offer in response to harrison are not consistent with csw s subsidiary conclusions that the data can be well accounted for by a narrow class of risk aversion parameters for the bidders together with the assumption that all agents are playing a nash equilibrium of the resulting game of incomplete information a key difference between these experiments and csw s is that if subjects do not respond to csw s treatment condition increasing the payoffs from experimental to u s dollars their behavior will be consistent with csw s theory in contrast department of economics university of pittsburgh pittsburgh pa 15260 we thank jack ochs and emilie roth for thoughtful discussions on earlier drafts of the paper jim cox and glenn harrison for helpful comments on the initial draft of the paper susan garvin for research assistance and ray battalio carl kogut and don meyer for providing us with access to their data research support was provided by the information science and technology and economics divisions of the national science foundation the alfred p sloan foundation and the russell sage foundation the usual caveat applies with special force iwe do not respond to specific comments that csw 1992 make in response to our comment as in order to avoid indefinite regress the ground rules for this debate required us to comment on csw s criticism of harrison after which they would be given the opportunity to respond to our comment

profit and more catholic social teaching and the purpose of the firm the empirical findings in collins and porras study of visionary companies built to last and the normative claims about the purpose of the business firm in centesimus annus are found to be complementary in understanding the purpose of the business firm a summary of the methodology and findings of built to lastand a short overview of catholic social teaching are provided it is shown that centesimus annus claim that the purpose of the firm is broader than just profit is consistent with collins and porras empirical finding that firms which set a broader objective tend to be more successful than those which pursue only the maximization of profits it is noted however that a related finding in collins and porras namely that the content of the firm s objective is not as important as internalizing some objective beyond just profit maximization can lead to ethical myopia two examples are provided of this the walt disney company and philip morris centesimus annus offers a way to expose such myopia by providing guidance as to what the purpose of the firm is and therefore as to what kinds of objectives are appropriate to the firm

optimal operating policies for multiplant stochastic manufacturing systems in a changing environment this paper addresses the horizontal coordination between production units located in different countries within a supply chain in a changing environment the model incorporates 1 congestion and delay through uncertainties in demand and processing times 2 a changing production cost environment through uncertainty in an environmental state such as the exchange rate and 3 allowing production to stock the main contribution of the paper is to characterize the optimal production policy assuming no switchover cost as a barrier type control policy for a series of models for each plant there is a barrier function defined on the environmental state that gives the total worldwide stock level barrier this plant should be operated if and only if the stock level is below this barrier the authors also show that in a simple setting of two plants in different countries the barrier functions are not always monotone in the exchange rate even when the production costs are the authors present a condition under which the control barriers are shown to be monotone under this condition and with only two plants it is optimal to follow a primary secondary plant policy in which given a fixed environmental state it is optimal to operate both plants when stock is low only the primary plant when stock is moderate and neither when stock is high furthermore the roles of the plants switch as the environmental state passes through the equal production cost state in addition the firm seeks to carry the most stock as a hedge against future environmental state moves when one plant is significantly cheaper than the other the firm seeks to carry the least stock when both plants are equally costly to operate

endogenous price expectations as reference points in auctions the paper models auctions with bidders who have reference dependent payos the reference point is endogenised as the expected price of the good in the auction the model predicts that in equilibrium bidders both overbid and underbid in comparison to the standard bidding function without reference dependent utility the model predicts that more bidders overbid than underbid and that bidders bid more aggressively as the number of bidders or the reserve price increases finally it is shown perhaps surprisingly that revenue equivalence continues to hold between rst and second price

auction fever rising revenue in second price auction formats the prevalent term auction fever visualizes that ascending auctions inconsistent with theory are likely to provoke higher bids than one shot auctions to explore and isolate causes of auction fever experimentally we design four different strategy proof auction formats and order these according to expected rising bids based on pseudo endowment effect arguments psychological ownership and disparity between willingness to pay and willingness to accept observed revenues in the experiment in the four formats rank as expected if bidders have private uncertain values the private information of a bidder is the distribution of her value a control treatment supports our view that the traditional private certain values approach prevents auction fever in the laboratory another control treatment with a procurement auction relates the auction fever bids to bids in a one shot auction with real endowments we conclude that when bidders are uncertain about their valuations auctions that foster pseudo endowment may raise bids and revenues

keeping good company a study of corporate governance in five countries this study describes in turn the systems that operate in five leading industrial countries germany japan france the usa and the uk it establishes two basic principles of good corporate governance and shows how they are applied in each country indicating where methods vary and how most countries fall short of the ideal the book concludes by highlighting the uk s strengths and weaknesses and calls for a thorough overhaul of policy

impulse balance equilibrium and feedback in first price auctions abstract experimental sealed bid first price auctions with private values in which feedback on the losing bids is provided yield lower revenues than auctions where this feedback is not given the concept of weighted impulse balance equilibrium which is based on a principle of ex post rationality and incorporates a concern for social comparison captures the data

an experimental investigation of the seller incentives in the epas emission trading auction the clean air act requires the epa to conduct annual auctions of emission allowances under the discriminative auction rules sellers with the lowest asking prices receive the highest bids this paper studies an inverted version of this auction in which buyers face the same incentives as sellers in the epa auction consistent with theoretical predictions buyers bid above their valuation auction outcomes are inefficient and increasing the number of buyers increases bids buyers facing human opponents compete more aggressively than the risk neutral prediction but bids do not differ systematically from this prediction when buyers face computerized nash robots copyright 1995 by american economic association

when does it pay to delay supplier qualification theory and experiments we study a procurement setting in which the buyer seeks a low price but will not allocate the contract to a supplier who has not passed qualification screening qualification screening is costly for the buyer involving product tests site visits and interviews in addition to a qualified incumbent supplier the buyer has an entrant of unknown qualification the buyer wishes to run a price only open descending reverse auction between the incumbent and the entrant and faces a strategic choice about whether to perform qualification screening on the entrant before or after the auction we analytically study the buyer s optimal strategy accounting for the fact that under postauction qualification the incumbent knows he could lose the auction but still win the contract in our analysis we derive the incumbent s optimal bidding strategy under postauction qualification and find that he follows a threshold structure in which high cost incumbents hold back on bidding or even boycott the auction to preserve their profit margin and only lower cost incumbents bid to win these results are strikingly different from the usual open descending auction analysis where all bidders are fully qualified and bidding to win is always a dominant strategy we test our analytical results in the laboratory with human subjects we find that qualitatively our theoretical predictions hold up quite well although incumbent suppliers bid somewhat more aggressively than the theory predicts making buyers more inclined to use postauction qualification this paper was accepted by martin lariviere operations management

optimal operating policies in the presence of exchange rate variability we study the structure of the optimal policies for a firm operating plants in different countries the relative costs of production between the plants are assumed to vary over time due to economic and political factors such as exchange rates inflation taxes and tariffs based on the costs the firm can alter the quantity produced in each plant we determine the structure of the optimal policies for deciding when and by how much to alter the production quantities when the switch over costs are linear or step functions regardless of whether the variable production costs are concave or piece wise linear convex and regardless of whether the firm is supplying one or more markets the optimal policy is always a barrier policy the optimal barriers can be determined by using linear programming techniques and the optimal costs can be computed by solving a system of linear equations when the number of optimal barriers is two the optimal expected costs and the condition that determines the optimal barriers are explicitly derived

corporate governance in nigeria in recent years international economic pressures have induced nigeria to adopt a program of economic liberalization and deregulation advocates of the reforms tout their potential not only for generating greater economic growth but also for contributing to more responsible corporate governance sceptics abound this paper provides an account of the nature of corporate governance in nigeria and investigates the prospects for recent reforms contributing to more responsible governance and development

advance selling when consumers regret we characterize the effect of anticipated regret on consumer decisions and on firm profits and policies in an advance selling context where buyers have uncertain valuations advance purchases trigger action regret if valuations turn out to be lower than the price paid whereas delaying purchase may cause inaction regret from missing a discount or facing a stockout consumers whom we describe as emotionally rational act strategically in response to the firm s policies and in anticipation of regret in this context regret explains two types of behavioral patterns inertia delayed purchase and frenzies buying early at negative surplus we show how firms should optimally respond to consumer regret and also characterize a normative regret threshold above which they should not advance sell action regret reduces profits as well as the value of advance selling and booking limit policies for price setting firms inaction regret has the opposite effects these effects are diminished by capacity constraints and are reversed for firms facing price pressure in the advance period owing e g to competition or market heterogeneity regret heterogeneity explains premium advance selling for the capacity constrained firm which may benefit from larger shares of regretful buyers finally we show how the negative effects of regret on profits can be mitigated by regret priming marketing campaigns and by offering refunds or options or allowing resales our results highlight the importance of assessing the relative strength of regret within and across market segments and of accounting for these factors in pricing and marketing policies this paper was accepted by christian terwiesch operations management

economy of mutuality merging financial and social sustainability the article posits the concept of economy of mutuality as an intellectual mediation space for shifts in emphasis between market and social structures within economic theory and practice economy of mutuality it is contended provides an alternative frame of reference to the dichotomy of market economy and social economy for inquiry about what business is for and what values it presupposes and creates the article centers around the objective of gaining a broadened understanding of business so as to include not just market economy but social enterprise and social economy in pursuit of this objective a range of various archetypes of business enterprise are considered in light of higher ends of economic life the highest telos of business encompassing all such archetypes it is argued is founded on reciprocity and integral human development the article concludes that compared to market economy per se economy of mutuality provides a better conceptual framework for business in undertaking the challenges of sustainability

toward a common good theory of the firm the tasubinsa case tasubinsa is a special employment and occupational center constituted in accordance with spanish law where 90 of the workers have mental sensorial or physical impairments of at least 30 its positive experience of more than 15 years provides entirely different responses from mainstream neoclassical theory transaction cost theory agency theory and shareholder theory to basic questions such as what is a firm what is its purpose who owns a firm and what do a firm s owners seek the article discusses how these different premises give rise to a distinctive corporate culture centered on the handicapped person

rfq auctions with supplier qualification screening we consider a manufacturer using a request for quotes rfq reverse auction in combination with supplier qualification screening to determine which qualified supplier will be awarded a contract supplier qualification screening is costly for the manufacturer for example involving reference checks financial audits and on site visits the manufacturer seeks to minimize its total procurement costs i e the contract payment plus qualification costs although suppliers can be qualified prior to the auction prequalification we allow the manufacturer to delay all or part of the qualification until after the auction postqualification using an optimal mechanism analysis we analytically explore the trade offs between varying levels of pre and postqualification although using postqualification causes the expected contract payment to increase bids from unqualified suppliers are discarded we find that standard industrial practices of prequalification can be improved upon by judicious use of postqualification particularly when supplier qualification screening is moderately expensive relative to the value of the contract to the manufacturer

valuing operational flexibility under exchange rate risk in this paper we develop a stochastic dynamic programming formulation for the valuation of global manufacturing strategy options with switching costs overall we adopt a hierarchical approach first exchange rates are modeled as stochastic diffusion processes that exhibit intercountry correlation second the firm s global manufacturing strategy determines options for alternative product designs as well as supply chain network designs product options introduce international supply flexibility supply chain network options determine the firm s manufacturing flexibility through production capacity and supply chain network linkages third switching costs determine the cost of operational hedging i e the costs associated with reducing downside risks overall the firm maximizes its expected discounted global after tax value through the exercise of product and supply chain network options and or through exploitation of operational flexibility contingent on exchange rate realizations in this environment the firm must trade off fixed operating costs switching costs and the economic benefits derived from exploiting differentials in factor costs and corporate tax rates a multinomial approximation of correlated exchange rate processes is proposed that leads to a consistent and tractable lattice model for this compound option valuation problem we then demonstrate how the global manufacturing strategy planning model framework can be utilized to analyze financial and operational hedging strategies

the politics of shareholder activism in nigeria shareholder activism has become a force for good in the extant corporate governance literature in this article we present a case study of nigeria to show how shareholder activism as a corporate governance mechanism can constitute a space for unhealthy politics and turbulent politicking which is a reflection of the country s brand of politics as a result we point out some translational challenges and suggest more caution in the diffusion of corporate governance practices across different institutional environments we contribute to the literature on corporate governance in africa whilst creating an understanding of the political embeddedness of shareholder activism in different institutional contexts i e a step closer to a political theorising of shareholder activism

behavioral models for first price sealed bid auctions with the one shot decision theory abstract we build an auction model with the one shot decision theory which describes the process of a bidder deciding his her bidding price in first price sealed bid auctions the decision making procedure involves two steps first for each of his her possible bidding prices the bidder examines every possible highest bidding price provided by the other bidders and chooses one as a focus point of this bidding price of him her then the bidder determines such a bidding price as the optimal one that generates the best outcome when its focus point occurs the optimal bidding price can be obtained and two common phenomena in auction markets throwing away and overbidding are well explained

multi dimensional reference dependent preferences in sealed bid auctions how most laboratory experiments differ from the field abstract we study bidding behavior in first and second price sealed bid auctions with loss averse agents our model predicts overbidding in first price induced value auctions consistent with evidence from most laboratory experiments substantially different bidding behavior could result in commodity auctions where money and auction item are consumed along different dimensions of the consumption space differences also result in second price auctions our study thereby indicates that transferring qualitative behavioral findings from induced value laboratory experiments to the field may be problematic if subjects are loss averse

better faster cheaper an experimental analysis of a multiattribute reverse auction mechanism with restricted information feedback the majority of reverse auctions for procurement use a single attribute price format while providing constraints on nonprice attributes such as quality and lead time alternatively a buyer could choose to conduct a multiattribute auction where bidders can specify both a price and levels of nonprice attributes while such an auction may provide higher theoretical utility to the buyer it is not clear that this theoretical improvement will be realized given the increased complexity of the auction in this research we present an ascending auction mechanism for a buyer whose utility function is known and dependent on three attributes motivated by a supply chain procurement problem setting we consider quality and lead time for the two attributes in addition to price the auction mechanism provides the bidders with restricted feedback regarding the buyer s utility function we explore experimentally the performance of this multiattribute auction mechanism as compared to a price only auction mechanism compared with the price only auction we find that our mechanism design is effective in increasing both buyer utility and bidder supplier profits