Optimal Contracts when Enforcement is a Decision Variable

This paper analyzes choice‐theoretic costly enforcement in an intertemporal contracting model with a differentially informed investor and entrepreneur. An intertemporal contract is modeled as a mechanism in which there is limited commitment to payment and enforcement decisions. The goal of the analysis is to characterize the effect of choice‐theoretic costly enforcement on the structure of optimal contracts. The paper shows that simple debt is the optimal contract when commitment is limited and costly enforcement is a decision variable (Theorem 1). In contrast, stochastic contracts are optimal when agents can commit to the ex‐ante optimal decisions (Theorem 2). The paper also shows that the costly state verification model can be viewed as a reduced form of an enforcement model in which agents choose payments and strategies as part of a perfect Bayesian Nash equilibrium.     

Measuring social dynamics in a massive multiplayer online game

Quantification of human group-behavior has so far defied an empirical, falsifiable approach. This is due to tremendous difficulties in data acquisition of social systems. Massive multiplayer online games (MMOG) provide a fascinating new way of observing hundreds of thousands of simultaneously socially interacting individuals engaged in virtual economic activities. We have compiled a data set consisting of practically all actions of all players over a period of 3 years from a MMOG played by 300,000 people. This large-scale data set of a socio-economic unit contains all social and economic data from a single and coherent source. Players have to generate a virtual income through economic activities to ‘survive’ and are typically engaged in a multitude of social activities offered within the game. Our analysis of high-frequency log files focuses on three types of social networks, and tests a series of social-dynamics hypotheses. In particular we study the structure and dynamics of friend-, enemy- and communication networks. We find striking differences in topological structure between positive (friend) and negative (enemy) tie networks. All networks confirm the recently observed phenomenon of network densification. We propose two approximate social laws in communication networks, the first expressing betweenness centrality as the inverse square of the overlap, the second relating communication strength to the cube of the overlap. These empirical laws provide strong quantitative evidence for the Weak ties hypothesis of Granovetter. Further, the analysis of triad significance profiles validates well-established assertions from social balance theory. We find overrepresentation (underrepresentation) of complete (incomplete) triads in networks of positive ties, and vice versa for networks of negative ties. Empirical transition probabilities between triad classes provide evidence for triadic closure with extraordinarily high precision. For the first time we provide empirical results for large-scale networks of negative social ties. Whenever possible we compare our findings with data from non-virtual human groups and provide further evidence that online game communities serve as a valid model for a wide class of human societies. With this setup we demonstrate the feasibility for establishing a ‘socio-economic laboratory’ which allows to operate at levels of precision approaching those of the natural sciences.All data used in this study is fully anonymized; the authors have the written consent to publish from the legal department of the Medical University of Vienna.     

Patients-in-waiting: Living between sickness and health in the genomics era

What are the social consequences of the recent expansion of newborn screening in the United States? The adoption of new screening technologies has generated diagnostic uncertainty about the nature of screening targets, making it unclear not only whether a newborn will develop a disease but also what the condition actually is. Based on observations in a genetics clinic and in-depth interviews with parents and geneticists, we examine how parents and clinical staff work out the social significance of uncertain newborn screening results. We find that some newborns will experience a specific trajectory of prolonged liminality between a state of normal health and pathology. Based on a review of related literatures, we suggest "patients-in-waiting" as an umbrella concept for those under medical surveillance between health and disease.     

Public governance of information asymmetries—The gap between reality and economic theory

There are numerous situations where governments take action due to systematic information asymmetries in society, while economics textbooks do not offer an integrated theory to justify these interventions in terms of utility. This paper starts with a taxonomy of situations where governments try to correct for information asymmetries. A distinction is made between government interventions due to information asymmetries between market partners, within political markets and between the government and citizens. It is then shown that Public Choice Theory offers only few and Public Finance Theory not enough explanations for the prevalence of such government interventions. Further explanations for government actions are given by Institutional Economics and Cultural and Behavioural Economics. The latter will probably generate the best progress towards creating better explanations.     

Collective empowerment: A comparative study of community work in Mumbai and Stockholm

Mumbai and Stockholm are worlds apart in terms of public services, infrastructures and standard of living. However, both cities have known common problems of social exclusion and marginalisation related to neo‐liberal globalisation. Social workers are facing similar challenges regarding collective empowerment as a strategy for community work. This comparative study explored how collective empowerment is undertaken by community workers. The research participants were 13 informants from community‐work organisations in the two settings. Semi‐structured interviews were used and were analysed with the help of Atlas‐ti 6.2 (ATLAS.ti Scientific Software Development GmbH D‐10623 Berlin Germany). Social work in Mumbai is in a context of extreme poverty and mainly within the informal sector, whereas in Stockholm most social work is done in relation to a public welfare model. In Stockholm, interventions are aimed towards strengthening social networks, without direct aim at social change. In Mumbai, community workers organise people for collective empowerment to strengthen marginalised groups and achieve social change.     

Child Rights Practice among the Indigenous Communities in Bangladesh

The objective of this article was to explore the practice of child rights among the indigenous communities of Bangladesh. We used a mixed method approach to collect data from four ethnic communities in the Bandarban District of the Chittagong Division in Bangladesh. We questioned children, parents, community members, local leaders, and service providers of those communities on a number of child rights issues, for example, child education, child labor, child recreation and culture, parents' guidance to children for capacity development, and access to child rights at home and in the community according to Convention on the Rights of the Child treaty. The results showed that while the community was aware of child rights, financial vulnerability and a lack of social support meant that these rights could not be upheld in practice. The paper urges improvement of social support, including income generation activities for indigenous communities.     

Reforming against all odds: Multi‐pillar pension systems in the Czech Republic and Romania

Attempts to replace pay‐as‐you‐go pension schemes with private funded systems came to a halt in Central and Eastern Europe after 2005. However, more recently, the region has witnessed two belated reformers: the Czech Republic and Romania. Both countries decided to partially privatize pensions despite the rising tide of evidence concerning the challenges associated with the policy. We argue that while part of the domestic political elite remained supportive of private funded pensions, the difficulties experienced by earlier reformers and reduced support from International Financial Institutions led to the adoption of small funded pension pillars. Such cautious attempts at privatization might become more common in the future as large reforms have proven politically unsustainable.     

Manufacturing network configuration in supply chains with product recovery

Efficient implementation of product recovery requires appropriate network structures. In this paper, we study the network design problem of a firm that manufactures new products and remanufactures returned products in its facilities. We examine the capacity decisions and expected performance of two alternative manufacturing network configurations when demand and return flows are both uncertain.     

A Lagrangian relaxation approach for the multiple sequence alignment problem

We present a branch-and-bound (bb) algorithm for the multiple sequence alignment problem (MSA), one of the most important problems in computational biology. The upper bound at each bb node is based on a Lagrangian relaxation of an integer linear programming formulation for MSA. Dualizing certain inequalities, the Lagrangian subproblem becomes a pairwise alignment problem, which can be solved efficiently by a dynamic programming approach. Due to a reformulation w.r.t. additionally introduced variables prior to relaxation we improve the convergence rate dramatically while at the same time being able to solve the Lagrangian problem efficiently. Our experiments show that our implementation, although preliminary, outperforms all exact algorithms for the multiple sequence alignment problem. Furthermore, the quality of the alignments is among the best computed so far.