Default and Punishment in General Equilibrium1

We extend the standard model of general equilibrium with incomplete markets to allow for default and punishment by thinking of assets as pools. The equilibrating variables include expected delivery rates, along with the usual prices of assets and commodities. By reinterpreting the variables, our model encompasses a broad range of adverse selection and signalling phenomena in a perfectly competitive, general equilibrium framework. Perfect competition eliminates the need for lenders to compute how the size of their loan or the price they quote might affect default rates. It also makes for a simple equilibrium refinement, which we propose in order to rule out irrational pessimism about deliveries of untraded assets. We show that refined equilibrium always exists in our model, and that default, in conjunction with refinement, opens the door to a theory of endogenous assets. The market chooses the promises, default penalties, and quantity constraints of actively traded assets.     

Using Bayesian Networks to Model Expected and Unexpected Operational Losses

This report describes the use of Bayesian networks (BNs) to model statistical loss distributions in financial operational risk scenarios. Its focus is on modeling "long" tail, or unexpected, loss events using mixtures of appropriate loss frequency and severity distributions where these mixtures are conditioned on causal variables that model the capability or effectiveness of the underlying controls process. The use of causal modeling is discussed from the perspective of exploiting local expertise about process reliability and formally connecting this knowledge to actual or hypothetical statistical phenomena resulting from the process. This brings the benefit of supplementing sparse data with expert judgment and transforming qualitative knowledge about the process into quantitative predictions. We conclude that BNs can help combine qualitative data from experts and quantitative data from historical loss databases in a principled way and as such they go some way in meeting the requirements of the draft Basel II Accord (Basel, 2004) for an advanced measurement approach (AMA).     

Building a Values‐Informed Mental Model for New Orleans Climate Risk Management

Individuals use values to frame their beliefs and simplify their understanding when confronted with complex and uncertain situations. The high complexity and deep uncertainty involved in climate risk management (CRM) lead to individuals’ values likely being coupled to and contributing to their understanding of specific climate risk factors and management strategies. Most mental model approaches, however, which are commonly used to inform our understanding of people's beliefs, ignore values. In response, we developed a “Values‐informed Mental Model” research approach, or ViMM, to elicit individuals’ values alongside their beliefs and determine which values people use to understand and assess specific climate risk factors and CRM strategies. Our results show that participants consistently used one of three values to frame their understanding of risk factors and CRM strategies in New Orleans: (1) fostering a healthy economy, wealth, and job creation, (2) protecting and promoting healthy ecosystems and biodiversity, and (3) preserving New Orleans’ unique culture, traditions, and historically significant neighborhoods. While the first value frame is common in analyses of CRM strategies, the latter two are often ignored, despite their mirroring commonly accepted pillars of sustainability. Other values like distributive justice and fairness were prioritized differently depending on the risk factor or strategy being discussed. These results suggest that the ViMM method could be a critical first step in CRM decision‐support processes and may encourage adoption of CRM strategies more in line with stakeholders’ values.     

Complementary person-supervisor fit: An investigation of supplies-values (S-V) fit,leader-member exchange (LMX) and work outcomes

By applying the supplies-values (S-V) fit approach from the complementary person-environment (P-E) fit literature to the leader-employee perspective, and drawing upon social exchange theory, we examine how fulfillment of different work values is related to Leader-Member Exchange (LMX) and work outcomes. First, polynomial regression analyses combined with response surface analysis of data collected at two time points (N = 316) showed that LMX (Time 2) was higher the more the leader fulfills the employee's work values (Time 1). Second, LMX (Time 2) was higher when leader supplies (Time 1) and employee work values (Time 1) were both high than when both were low. Third, analyses of data from a sub-sample of matched leader-employee dyads (N = 140), showed that LMX (Time 2) played a mediating role on the relation between S-V fit (Time 1) and work outcomes (Time 2). Specifically, we found eight out of 10 relationships between S-V fit (Time 1) and leader-rated task performance and OCB (Time 2) to be fully mediated by LMX (Time 2). LMX (Time 2) partially mediated the relation between S-V fit (Time 1) and job satisfaction (Time 2) as only two out of five relationships were fully mediated.     

Should I Stay or Should I Go? Explaining Turnover Intentions with Organizational Identification and Job Satisfaction*

The social identity approach is a powerful theoretical framework for the understanding of individuals' behaviour. The main argument is that individuals think and act on behalf of the group they belong to because this group membership adds to their social identity, which partly determines one's self‐esteem. In the organizational world, social identity and self‐categorization theories state that a strong organizational identification is associated with low turnover intentions. Because identification is the more general perception of shared fate between employee and organization, we propose that the relationship between identification and turnover will be mediated by job satisfaction as the more specific evaluation of one's task and working conditions. In four samples we found organizational identification feeding into job satisfaction, which in turn predicts turnover intentions.     

Pay-What-You-Want – Praxisrelevanz und Konsumentenverhalten

Pay-What-You-Want (PWYW) is a participative pricing mechanism which is characterized by the fact that consumers have maximum control over the price they pay. We discuss the business relevance of PWYW and extend the findings of Kim et al. (2009) using latent class regression. Two different classes can be identified and transaction prices are explained by psycho- and socio-demographics. The estimation of the parameters shows that the internal reference price is a good predictor for the prices in class 1, whereas in the 2nd class the level of fairness and satisfaction with the product positively affect the final transaction prices.     

Bisphenol A: How the Most Relevant Exposure Sources Contribute to Total Consumer Exposure

Bisphenol A (BPA) is an endocrine disrupting chemical that is found in human urine throughout industrial societies around the globe. Consumer exposure pathways to BPA include packaged food, household dust, air, and dental fillings. To date, information on the relative contribution of the different pathways to total consumer exposure is lacking, but is key for managing substance‐associated risks. We investigated the relative contributions of the pathways known to be most relevant for nine different consumer groups. Our results suggest that the most important pathways for infants and children are the use of polycarbonate (PC) baby bottles and for adults and teenagers the consumption of canned food. Dental surgery can also considerably contribute over a short time directly after the surgery. For infants fed with PC baby bottles with mean dose rates of 0.8 μg/kg_bw/d the highest exposure dose rate was calculated. This dose rate is far below the tolerable daily intake of 50 μg/kg_bw/d. However, it is of the same order of magnitude as recently reported concentrations that caused low‐dose health effects in rodents. We find a pattern of falling exposure levels with rising age that is supported by urinary concentrations of BPA available for selected consumer groups. Similarly, the exposure levels we predict are confirmed by the levels reported in these studies.     

Sequence Independent Lifting in Mixed Integer Programming

We investigate lifting, i.e., the process of taking a valid inequality for a polyhedron and extending it to a valid inequality in a higher dimensional space. Lifting is usually applied sequentially, that is, variables in a set are lifted one after the other. This may be computationally unattractive since it involves the solution of an optimization problem to compute a lifting coefficient for each variable. To relieve this computational burden, we study sequence independent lifting, which only involves the solution of one optimization problem. We show that if a certain lifting function is superadditive, then the lifting coefficients are independent of the lifting sequence. We introduce the idea of valid superadditive lifting functions to obtain good aproximations to maximum lifting. We apply these results to strengthen Balas' lifting theorem for cover inequalities and to produce lifted flow cover inequalities for a single node flow problem.     

Supervising Professional Work under New Public Management: Evidence from an ‘Invisible Trade’

This paper assesses the extent to which the new public management (NPM) project has succeeded in replacing the custodial mode of professional work supervision with a more bureaucratic approach. The paper conceptualizes the key components of each mode within two ideal types of professional work supervision. It then draws on findings from a study of local‐authority social service departments to consider current arrangements against these ideal type configurations. The findings demonstrate that elements of the bureaucratic mode have emerged unevenly. So far, they have not displaced the emphasis that the supervisors of professional work place on protecting autonomy and limiting management control systems. This suggests that custodial approaches to the supervision of professional work may be more resilient than has been assumed within previous analyses of NPM.     

The Exploration Phase of Replication Strategies: The Role of Autonomous Action for Reverse Knowledge Flows

Replication strategies rely on the exploration of new knowledge. An important source of new knowledge is the transfer of unit level experience to headquarters, a process referred to as reverse knowledge flows. Such knowledge flows are fraught with difficulty as formal mechanisms often break down due to diverging business interests of unit and headquarters managers. This study brings together research on knowledge stickiness and autonomous action to provide a new avenue for understanding reverse knowledge flows. By drawing on an exploratory study of a franchise network, we provide an insight into how autonomous action reduces initiation stickiness but potentially increases implementation stickiness. Our analysis suggests that the role of autonomous action for reverse knowledge flows is moderated by unit managers’ resource expectations that emerge as a result of autonomous action. Exploring the interplay of autonomous action and knowledge stickiness provides new explanatory means for understanding reverse knowledge flows in replicator organizations.