Cognition and Behavior in Normal‐Form Games: An Experimental Study

This paper reports experiments designed to study strategic sophistication, the extent to which behavior in games reflects attempts to predict others’ decisions, taking their incentives into account. We study subjects’ initial responses to normal‐form games with various patterns of iterated dominance and unique pure‐strategy equilibria without dominance, using a computer interface that allowed them to search for hidden payoff information, while recording their searches. Monitoring subjects’ information searches along with their decisions allows us to better understand how their decisions are determined, and subjects’ deviations from the search patterns suggested by equilibrium analysis help to predict their deviations from equilibrium decisions.     

THE HIDDEN COSTS AND RETURNS OF INCENTIVES—TRUST AND TRUSTWORTHINESS AMONG CEOs

We examine experimentally how Chief Executive Officers (CEOs) respond to incentives and how they provide incentives in situations requiring trust and trustworthiness. As a control we compare the behavior of CEOs with the behavior of students. We find that CEOs are considerably more trusting and exhibit more trustworthiness than students—thus reaching substantially higher efficiency levels than students. Moreover, we find that, for CEOs as well as for students, incentives based on explicit threats to penalize shirking backfire by inducing less trustworthy behavior—giving rise to hidden costs of incentives. However, thxe availability of penalizing incentives also creates hidden returns: if a principal expresses trust by voluntarily refraining from implementing the punishment threat, the agent exhibits significantly more trustworthiness than if the punishment threat is not available. Thus trust seems to reinforce trustworthy behavior. Overall, trustworthiness is highest if the threat to punish is available but not used, while it is lowest if the threat to punish is used. Paradoxically, however, most CEOs and students use the punishment threat, although CEOs use it significantly less. (JEL: C91, C92, J30, J41)     

Incentivising inter-municipal collaboration: the Lombard experience

The purpose of this exploratory research is to show how incentive policies have helped to shape the scenario of inter-municipal partnerships in the Italian region of Lombardy. Do these policies really work? Have they been the driver of greater collaboration among municipalities? Overall, the impact of the financial subsidies can be seen mainly when the intended beneficiaries are involved in the stages of negotiation and commitment that precede the setting-up of the collaborative arrangements. However, the capacity of the incentives to ensure that collaborative efforts are effectively maintained and developed over time is questionable. Importantly, the incentives do not seem to make a real difference in the collaborative choices aimed at joint policy-making and regulation. This qualitative study extends the evaluation research on implementation and contributes to the partnership management debate.     

Insurance,Public Assistance,and Household Flood Risk Reduction: A Comparative Study of Austria,England, and Romania

In light of increasing losses from floods, many researchers and policymakers are looking for ways to encourage flood risk reduction among communities, business, and households. In this study, we investigate risk‐reduction behavior at the household level in three European Union Member States with fundamentally different insurance and compensation schemes. We try to understand if and how insurance and public assistance influence private risk‐reduction behavior. Data were collected using a telephone survey (n = 1,849) of household decisionmakers in flood‐prone areas. We show that insurance overall is positively associated with private risk‐reduction behavior. Warranties, premium discounts, and information provision with respect to risk reduction may be an explanation for this positive relationship in the case of structural measures. Public incentives for risk‐reduction measures by means of financial and in‐kind support, and particularly through the provision of information, are also associated with enhancing risk reduction. In this study, public compensation is not negatively associated with private risk‐reduction behavior. This does not disprove such a relationship, but the negative effect may be mitigated by factors related to respondents' capacity to implement measures or social norms that were not included in the analysis. The data suggest that large‐scale flood protection infrastructure creates a sense of security that is associated with a lower level of preparedness. Across the board there is ample room to improve both public and private policies to provide effective incentives for household‐level risk reduction.     

Comparison as Incentive: Newsvendor Decisions in a Social Context

Explicit formal mechanisms dominate the discussion about incentives in Operations Management, yet many other mechanisms exist. Social comparison between peers may provide strong implicit incentives for individuals. Social comparison arises naturally in all social settings and may thus be unintended; however, many companies deliberately use it to motivate employees. In this study, we model a social context in which purchasers evaluate their performance relative to their peers; a feeling of inferiority results in a negative contribution to utility, whereas a feeling of superiority results in a positive contribution. We find that social comparison induces characteristic deviations from the newsvendor optimum ordering decision: if fear of inferiority outweighs anticipation of superiority, then purchasers herd together; the converse scenario incites actors to polarize away from each other. In both cases, actors will deviate from ordering the newsvendor optimum in order to satisfy social goals. Demand correlation and profit margins moderate the extent of the deviation.     

Designing Service Level Agreements for Inventory Management

Service level agreements (SLAs) are widely employed forms of performance‐based contracts in operations management. They compare performance during a period against a contracted service level and penalize outcomes exceeding some allowed deviation. SLAs have a number of design characteristics that need careful tuning to ensure that incentives are properly aligned. However, there is little theoretical research in this area. Using an example of an SLA for outsourcing inventory management, we make a number of recommendations. First it is preferable, if possible, that penalties be proportional to the underperformance rather than lump‐sum ones. This goes a long way towards mitigating strategic (“gaming”) behavior by the supplier. Second, it might be thought that giving “bonuses for good performance” rather than “penalties for bad performance” are essentially identical apart from the former being a more positive approach to management. This turns out to be incorrect in the case of large percentage service rate targets and that penalties will normally be preferred by the buying firm. Third, in order not to incorrectly penalize underperformance resulting purely from “noise” rather than supplier efforts, management might think it best to make allowed deviations from the target generous. Again intuition is not a helpful guide here: for proportional penalties, acceptable performance deviations should be close to the target. Although these results come from a particular inventory application, it is likely that the lessons are applicable to SLAs in general.     

Using incentives to address cannibalization

In a decentralized multi-product firm, different products within the firm sometimes compete with one another for the same customers. This paper proposes managing such cannibalistic behavior with incentives. Designing the appropriate incentives requires detailed information on how the sales of one product impact the profitability of other products. As this paper shows, the only additional information required is the second choice preferences of buyers. Drawing on successful development by General Motors, this paper shows how this information can be collected and used to develop cannibalization incentives. While developed for the automotive industry, this approach is applicable across industries.     

The Role of Information in Repeated Games With Frequent Actions

We show that in repeated interactions the avenues for effective provision of incentives depend crucially on the type of information players observe. We establish this conclusion for general repeated two‐player games in which information arrives via a continuous‐time stationary process that has a continuous multidimensional Brownian component and a Poisson component, and in which the players act frequently. The Poisson jumps can be used to effectively provide incentives both with transfers and value burning, while continuous Brownian information can be used to provide incentives only with transfers.     

Behavioral Modeling of Adversaries with Multiple Objectives in Counterterrorism

Attacker/defender models have primarily assumed that each decisionmaker optimizes the cost of the damage inflicted and its economic repercussions from their own perspective. Two streams of recent research have sought to extend such models. One stream suggests that it is more realistic to consider attackers with multiple objectives, but this research has not included the adaption of the terrorist with multiple objectives to defender actions. The other stream builds off experimental studies that show that decisionmakers deviate from optimal rational behavior. In this article, we extend attacker/defender models to incorporate multiple objectives that a terrorist might consider in planning an attack. This includes the tradeoffs that a terrorist might consider and their adaption to defender actions. However, we must also consider experimental evidence of deviations from the rationality assumed in the commonly used expected utility model in determining such adaption. Thus, we model the attacker's behavior using multiattribute prospect theory to account for the attacker's multiple objectives and deviations from rationality. We evaluate our approach by considering an attacker with multiple objectives who wishes to smuggle radioactive material into the United States and a defender who has the option to implement a screening process to hinder the attacker. We discuss the problems with implementing such an approach, but argue that research in this area must continue to avoid misrepresenting terrorist behavior in determining optimal defensive actions.     

Land use planning and the community

For more effective land use to become a reality, the authors argue, citizens must become actively involved in the decision-making process. There must be educational programmes to make people more aware of the alternatives and principles of land use planning. There must also be incentives provided to stimulate citizen input into land use decisions.     

蕴含扩张期权的投资项目决策行为研究

针对蕴含扩张期权的投资项目的特征,从理论上描绘了股东与经理在信息不对称时的投资决策行为和激励方案的设计,并比较了当经理具有不同效用函数时的情况.发现经理夸大扩张期权价值的倾向将导致股东降低投资决策临界点,但该临界点仍将高于信息完全对称时的情况,从而引起投资不足的效率损失.     

“双随机、一公开”产品质量监管模型研究

在市场监管领域全面推行“双随机、一公开”监管，是党中央、国务院作出的重大决策部署，是市场监管理念和方式的重大创新。本文首次构建“双随机、一公开”产品质量监管的理论模型，理清“双随机”与“一公开”及各参与主体之间的作用关系，分析市场主体名录库和执法检查人员名录库中抽查企业与检查人员的群体行为演化机理，得出针对“双随机、一公开”监管的激励机制。研究发现：通过“双随机”抽取检查人员和抽查企业并“公开”产品质量信息，需配以恰当的激励机制才能有效制约抽检企业的假冒伪劣行为和检查人员的无效抽检行为；当公开声誉较高时，对检查人员实施质检激励或对抽查企业实施质量激励均可以使得系统良性演化，但如果公开声誉较低，需同时对检查人员和抽查企业实施质检与质量双重激励；质检激励机制设计时需对标准质量和假冒伪劣对应的检查人员分别给予质检激励，质量激励机制设计时需对有效抽检和无效抽检对应的抽查企业分别给予质量激励；质检激励和质量激励下系统稳定点的演化轨迹存在很大差异，质检激励先使得检查人员演化到有效抽检，然后通过公开声誉带动抽查企业演化到标准质量，而质量激励先使抽查企业演化到标准质量，然后通过公开声誉带动检查人员演化到有效抽检，如果公开声誉较低，这种传动机制会被阻断导致系统不会演化到理想状态。最后本文为完善和创新“双随机、一公开”监管提出了针对性的政策建议。     

电子政府跨部门信息共享的激励机制设计

电子政府的实现,必须以跨部门的信息共享作为其基本前提。为了促使政府机构的跨部门信息共享,我们运用激励理论的基本方法,分析了政府机构跨部门信息共享的激励问题,建立了相应的信息共享激励模型。研究认为,为了诱导政府部门公开其垄断信息,应当同时采取正激励措施和负激励措施,两者互为担保才能保证激励效果的强壮性。本文所建立的信息共享激励模型,是基于我国国情,且主要适用于本级政府所管辖的部门。     

Partnerships as strategic choices in public management

Partnerships are not new phenomena in public administration. However, there is now a more explicit recognition that managing public policy networks involves partnerships within and across policy fields and linking interdependent levels of government nationally and internationally. The aim of this paper is to widen the scope of strategic choice in designing partnerships in public management by developing an alternative approach: the Power-Role Analysis. As the term suggests, Power-Role Analysis uses distinctions between types of power and the roles and relationships corresponding with them to clarify and define different forms of partnership. Power-role analysis provides a basis for considering systematically the problems that arise in managing partnerships of different kinds. It also gives guidance for establishing congruence between forms of partnerships and the results to be expected from selecting one form rather than another. The Power-Role analysis is afterwards performed, its focus being two empirical cases.     

Bubbles and Self‐Enforcing Debt

We characterize equilibria with endogenous debt constraints for a general equilibrium economy with limited commitment in which the only consequence of default is losing the ability to borrow in future periods. First, we show that equilibrium debt limits must satisfy a simple condition that allows agents to exactly roll over existing debt period by period. Second, we provide an equivalence result, whereby the resulting set of equilibrium allocations with self‐enforcing private debt is equivalent to the allocations that are sustained with unbacked public debt or rational bubbles. In contrast to the classic result by Bulow and Rogoff (1989a), positive levels of debt are sustainable in our environment because the interest rate is sufficiently low to provide repayment incentives.     

Physician/hospital business relationships. Sorting through the options

Providers recognize the critical role of physician/hospital partnerships in the newly emerging health care delivery system. However, the possibilities available for establishing such partnerships can be overwhelming. The authors provide a critical review of the options for physician/hospital business relationships. They emphasize the need to match physician/hospital strategies to local market characteristics, develop market-based business objectives, and structure physician/hospital relationships to support the achievement of business objectives.     

LOGISTICS PARTNERSHIPS AND SUPPLY CHAIN RESTRUCTURING: SURVEY RESULTS FROM THE U.S. COMPUTER INDUSTRY

This research investigates the interaction between formation of logistics partnerships and supply chain restructuring in the U.S. computer industry via a survey of 30 ongoing partnerships. Partnerships that have included restructuring are compared to those that have not. Examples of representative partnerships are presented. The survey results indicate that restructurers use partnerships to facilitate restructuring. Restructurers and non-restructurers form partnerships for different reasons and realize different types of benefits. Furthermore, restructurers realize greater benefits than do non-restructurers and view their partnerships as more successful. Restructurers report dramatic improvements in logistics cost (1l-30%) and order cycle time (62%). The research contributes to the existing literature by highlighting restructuring as an important aspect of logistics partnership formation and by presenting empirical data that shows how the two strategies are linked.     

The Effects of Individual Monetary Incentives With and Without Feedback

Abstract

This study examined the effects of an individual monetary incentive system with and without feedback to determine if feedback would supplement the effects of incentives. Participants were seven college students who performed a computerized task called SYNWORK. SYNWORK presented four sub-tasks concurrently: memory, arithmetic, visual monitoring and auditory monitoring. Participants earned points for correct responses. The dependent variable was the number of points earned. An ABAC design was used with A = individual monetary incentives without feedback, B = individual monetary incentives with feedback, and C = hourly pay with feedback. Sessions were 90 minutes, and there were 5 to 10 sessions per phase. The point scores of six of the seven participants increased when feedback was added to the incentive system but stabilized or continued to increase when feedback was removed. The feedback intervention was staggered in time across participants, and performance increased when feedback was added, hence the data suggest that feedback enhanced the effects of the incentives. One possible reason for the reversal failure is that feedback evoked higher levels of performance that were then maintained by the additional incentives. Because performance did not reverse, however, the results must be viewed cautiously.     

DIY Do’s and Don’ts: Limitations to Building University-Community Partnerships with Low Resource Communities of Color

Communities are becoming more diverse and urban planning programs must train students to work with a range of constituents. Little is known about the role of university-community partnerships involved in tactical urbanism as a method to revitalize low resource communities of color. This paper describes the planning process in a partnership between Florida State University and its surrounding community. We highlight the role of faculty and students in facilitating a studio project in Frenchtown implementing tactical urbanism. It also provides the voices of residents, City officials, and non-profit organizations. We conclude with recommendations to improve university-community partnerships through long-term engagement in surrounding communities.     

Inter‐Firm R&D Networks: the Importance of Strategic Network Capabilities for High‐Tech Partnership Formation1

We examine the role of different network capabilities of companies that influence the formation of R&D partnerships in pharmaceutical biotechnology. Strategic network capabilities, specifically centrality‐based capabilities and the efficiency with which companies choose their partners, are found to facilitate the formation of new partnerships. Unlike general experience with partnering, these strategic network capabilities play a crucial role in enabling companies to continue to interact with other companies through partnerships in a complex network setting.