INCENTIVES,UNCERTAINTY, AND RISK IN THE NEWSBOY PROBLEM

This study explores the motivational consequences of an incentive device based on standard setting. It is shown that standard setting induces a wealth-seeking manager to undertake decisions that, in the manager's judgment, will improve the position of the owner relative to implementing the standard. Conditions under which it is rational for the owner to allow the manager to choose and implement decisions are discussed. Finally, consideration is given to an alternative incentive mechanism in which the manager's decisions are manipulated through variation of the incentive mechanism.     

TWO-PIECE VON NEUMANN-MORGENSTERN UTILITY FUNCTIONS*

Thirty empirically assessed utility functions on changes in wealth or return on investment were examined for general features and susceptability to fits by linear, power, and exponential functions. Separate fits were made to below-target data and above-target data. The usual “target” was the no-change point. The majority of below-target functions were risk seeking; the majority of above-target functions were risk averse; and the most common composite shape was convex-concave, or risk seeking in losses and risk averse in gains. The least common composite was concave-concave. Below-target utility was generally steeper than above-target utility with a median below-to-above slope ratio of about 4.8. The power and exponential fits were substantially better than the linear fits. Power functions gave the best fits in the majority of convex below-target and concave above-target cases, and exponential functions gave the best fits in the majority of concave below-target and convex above-target cases. Several implications of these results for decision making under risk are mentioned.     

BUSINESS COMBINATION DECISIONS: A U.S./CANADA STUDY*

The purpose of this paper is to clarify the motives behind business combination decisions. Twenty-one favorable characteristics associated with the motivations for business combinations were selected to serve as the basis for an empirical survey. Our analysis revealed that there are seven motivational variables of varying import and that the motivations underlying business combination decisions are similar for U.S. and Canadian executives.     

Communicating future water needs to an at-risk population: lessons learned following defeat of the Applewhite Dam and Reservoir Project in San Antonio,Texas

San Antonio, Texas, the seventh largest city in the United States, has experienced steady population growth, since the “boom” of the 1960s. Projected water shortages due to this growth were realized as early as the 1970s by city leaders and south-central Texas regional development decision makers. To reduce dependence on the already over-taxed, Edwards aquifer, a solution, the Applewhite Dam and Reservoir Project, was developed with wide acceptance by federal, state, and city leaders who regarded the project as a necessary measure for regional growth and development. However, opposition by taxpayer and environmental groups led to referendums of 1991 and 1994 in which voters blocked construction of the dam and reservoir leaving the city with limited options for water provision. This case study investigated the factors which led to a clear mismatch in communication between decision makers—those who were aware of the actual and quantifiable risk to the region in terms of reduced water supplies—and the general public, a population that did not have complete and/or adequate knowledge of their actual risk regarding future water shortages, nor, of solutions being developed, such as the Applewhite project. The findings from this case study indicate that when municipal leadership fails to adequately communicate risk regarding resource shortage to an affected public, as well as, openly planned solutions, that voters are likely to underestimate future impacts of water shortages, heed last-minute opposition, and reject long-standing, publicly proposed projects. The intent of this research is not to support either side in the Applewhite controversy, but to shed perspective on the process of adequately and effectively communicating future water needs to an at-risk population. Decision makers in cities across the United States who are faced with solving problems of limited resources needed by a large populace may be informed by the results of this research.     

Social vulnerability and migration in the wake of disaster: the case of Hurricanes Katrina and Rita

This study explores the relationship between place-based social vulnerability and post-disaster migration in the U.S. Gulf Coast region following Hurricanes Katrina and Rita. Using county-level data from the U.S. Census Bureau, we develop a regional index of social vulnerability and examine how its various dimensions are related to migration patterns in the wake of the storms. Our results show that places characterized by greater proportions of disadvantaged populations, housing damage, and, to a lesser degree, more densely built environments were significantly more likely to experience outmigration following the hurricanes. Our results also show that these relationships were not spatially random, but rather exhibited significant geographic clustering. We conclude with a discussion of the implications of these findings for future research and public policy.     

Wild foods and household food security responses to AIDS: evidence from South Africa

Wild foods may offer unique benefits to households afflicted by AIDS, providing a nutritious and freely available food source at minimal labour and financial costs. This article presents the results of food security assessments in two rural South African sites. Detailed household dietary recalls from 227 households, combined with qualitative work, explored the association of household AIDS proxies (recent morbidity, mortality and orphan fostering) with household food security and dietary composition. The study found that AIDS-proxy households were significantly more food insecure, and households fostering orphans were both poorer and more food insecure. Wild foods were evident in 40.3% of the 48 h recalls, with significantly greater likelihood of use in households with fostering paternal orphans, and/or with at least one AIDS proxy. Only paternal orphans were significantly associated with likelihood of using wild foods when controlling for household socio-economic status. Qualitative data suggests that households afflicted by AIDS might curtail their use of wild foods due to household labour shortages and stigma. This is unfortunate, as regressions indicate that households using wild foods may be more economically resilient. This may be particularly important for households registering AIDS proxies, due to a demonstrated negative correlation between accumulated household AIDS proxies and household income.     

Reexamining the moving to opportunity study and its contribution to changing the distribution of poverty and ethnic concentration

For the past decade and a half a concerted effort has been undertaken to determine whether policy interventions in residential location can solve the problems of inner-city poverty and racial concentration. Studies based on data from the Gautreaux litigation and the U.S. Department of Housing and Urban Development (HUD)-sponsored Moving to Opportunity (MTO) program have provided an overall optimistic interpretation of the possibilities of improving inner-city lives via mobility vouchers and counseling. A reanalysis of the data from the MTO program, focusing specifically on African American households, suggests greater caution in the interpretation of the findings from either Gautreaux or the MTO program. No statistically significant difference exists between the percentage of poor or the percentage of African Americans in the current neighborhoods between MTO and Section 8 experimental groups. In some cases, there is no statistically significant difference between those who move with a voucher and those who move without any assistance at all. Although there is some evidence that MTO programs have brought specific gains for individual families, claims for the MTO program as a whole need to be treated with a great deal more caution than they have been to date.     

Relationships Between Population Density and the Perceived Quality of Neighbourhood

Two overseas survey-based scales measuring perceived quality of neighbourhood were adapted and replicated in a New Zealand context. An Italian study (Bonaiuto, Fornara, and Bonnes. (2003). Landscape and Urban Planning, 65, 41–52) measuring Perceived Residential Environmental Quality (PREQ) and an American study (Carp and Carp. (1982). Journal of Environmental Psychology, 2, 295–312) using the Perceived Environmental Quality Indices (PEQI) were applied to a sample of Auckland residents, separated into low, medium, and high population density areas. The surveys measured attitudes towards subjects such as noise, neighbours, accessibility, green areas, welfare services, recreational services, safety, maintenance, environmental health, transport services, and characteristics of an ideal neighbourhood, and were completed by 369 respondents. Primary analyses examined differences in perception across the three density groups. The factor structures of both scales were replicated with the Auckland sample, and differences across densities were found for subscales of the PREQ. The results are discussed in relation to the cross-cultural similarities of perceived environmental quality, and the concept that environmental satisfaction is based on balancing aspects of the residential environment is proposed. This research was conducted for the Foundation for Research, Science, and Technology under contract OPSX401.