Preverbal Infants' Ability to Encode the Outcome of Distributive Actions

This research examined whether 10‐month‐old infants expect agents to perform equal distribution of resources. In Experiment 1, infants saw a distributor performing either an equal distribution where one strawberry was given to each of two recipients, or an unequal distribution that favored one of the recipients. Infants looked longer at the unequal test event, suggesting that they expected the strawberries to be distributed equally. In Experiment 2, the potential recipients were replaced with inanimate objects to rule out a lower‐level alternative explanation of the results in Experiment 1 based on symmetric movement of the distributor. Infants' looking times did not reveal a preference for one of the two outcomes of the test events (i.e., symmetric or asymmetric movement). Experiment 3 controlled for the role of the distributive action, that is, here the distributors only removed barriers revealing strawberries that the recipients already had. No preference was observed when an equal or unequal initial allocation of resources was revealed. Experiment 4 assessed whether infants relied on affiliative information provided by the distributor's movements. The distributor made the same movements as in Experiment 1, but without distributing any strawberries, and no difference in looking times was observed. These findings support the view that preverbal infants expect agents to behave according to a simple principle: Resources are to be distributed equally among equivalent recipients. We discuss the possible links between such reactions and the emergence of an early sense of fairness.     

Politisierte Aufsichtsräte? Über die Entwicklung personeller Verflechtungen von Wirtschaft und Politik in Österreich (1989–2011)

Party affiliations of managers form the basis of social networks that are not only positioned between the mostly autonomous systems of politics and business, but are able to undermine the functional logics of these social systems. In the eighties Austrian business was dominated by the state to such an extent that political parties could vote their men of confidence into the boards of large stated-owned companies. This article quantifies the evolution of personal connections between business and politics in Austria (1983–2011) and explains changing patterns by pointing out shifts of power between the state and business. The focus of attention here is on multiple directors in supervisory boards of Austria’s big business. The study shows that businessmen have largely displaced the statesmen of industry who used to mediate conflicts between the state and business within a corporatist setting. “Proporz”, however, remains widespread and a change of government still leads to new constellations of political representation in supervisory boards of large companies. Political capital has thus not lost completely its value for top managers.     

Asset Accumulation: An Alternative Approach to Achieving the Millennium Development Goals

The United Nations Millennium Development Goals (MDGs) are unlikely to be achieved by 2015, owing to conceptual flaws in their design as well as the structural and political constraints faced during implementation at the country level. While criticism of the MDGs is widespread, innovative ideas on addressing these operational challenges are still scanty. By reviewing a number of experiences, including those of the Foundation for the Promotion of Local Development (PRODEL) in Nicaragua and the Ministry of Cities in Brazil, this article highlights the importance of incorporating an asset‐accumulation perspective into MDG‐related policies and programmes as a way of generating an enabling environment that opens up new opportunities for poverty reduction in the cities of low‐ and middle‐low‐income countries.     

A Polynomial Optimization Approach to Principal–Agent Problems

This paper presents a new method for the analysis of moral hazard principal–agent problems. The new approach avoids the stringent assumptions on the distribution of outcomes made by the classical first‐order approach and instead only requires the agent's expected utility to be a rational function of the action. This assumption allows for a reformulation of the agent's utility maximization problem as an equivalent system of equations and inequalities. This reformulation in turn transforms the principal's utility maximization problem into a nonlinear program. Under the additional assumptions that the principal's expected utility is a polynomial and the agent's expected utility is rational in the wage, the final nonlinear program can be solved to global optimality. The paper also shows how to first approximate expected utility functions that are not rational by polynomials, so that the polynomial optimization approach can be applied to compute an approximate solution to nonpolynomial problems. Finally, the paper demonstrates that the polynomial optimization approach extends to principal–agent models with multidimensional action sets.     

Efficient Competition Through Cheap Talk: The Case of Competing Auctions

We consider a large market where auctioneers with private reservation values compete for bidders by announcing cheap‐talk messages. If auctioneers run efficient first‐price auctions, then there always exists an equilibrium in which each auctioneer truthfully reveals her type. The equilibrium is constrained efficient, assigning more bidders to auctioneers with larger gains from trade. The choice of the trading mechanism is crucial for the result. Most notably, the use of second‐price auctions (equivalently, ex post bidding) leads to the nonexistence of any informative equilibrium. We examine the robustness of our finding in various dimensions, including finite markets and equilibrium selection.     

Probabilistic solutions to ordinary differential equations as nonlinear Bayesian filtering: a new perspective

Statistics and Computing - We formulate probabilistic numerical approximations to solutions of ordinary differential equations (ODEs) as problems in Gaussian process (GP) regression with nonlinear...     

Experimental evidence on external auditor reliance on the internal audit

With the revised version of ISA 610 (revised 2013), external auditors now face both requirements and guidance addressing their responsibilities when relying on the internal audit function (IAF). The reliance decision of an external auditor has important economic consequences and implications for the efficiency and effectiveness of the annual audit. Using an experimental design, we explore how German external auditors’ reliance decisions regarding the IAF are affected by varying levels of environmental factors, like client business risk, effectiveness of the internal control system, and quality of the corporate governance. Furthermore, the experiences of external auditors in collaborating with an IAF are taken into consideration. The results indicate main effects for each factor and a two-way interaction between the effectiveness of the internal control system and the quality of corporate governance. Specifically, a strong internal control system can compensate for weaknesses in corporate governance with respect to the confidence of external auditors in the IAF. Also, the type of audit procedure influences the willingness of auditors to rely on the IAF, and the inherent risk of the examined transaction strengthens the negative impact of client business risk on the reliance decision. Moreover, past experiences of external auditors with an IAF have a significant impact on their reliance decision. Overall, the findings suggest that organizations can foster internal–external auditor coordination by enhancing corporate governance effectiveness and strengthening the internal control system.

     

The disenchantment of Bitcoin: unveiling the myth of a digital currency

Bitcoin and its peculiar, decentralized transaction system, have already ignited interest by professional and retail traders in search for profits and by economists and legal experts, looking for possible regulation to contain illegal uses. We instead examine the unexpected and ongoing success of Bitcoin from a sociological perspective, first questioning its unusual legitimation system, backed by the so called ‘blockchain technology’, instead of by governmental authorities. Then we collect data and elements to reconstruct Bitcoin’s history as a cryptocurrency, starting from the mysterious story surrounding its birth. We then follow its spread and development through social networks and words of mouth, together with its sudden booms and bursts, finally to suggest that both users and institutional regulators should be aware of the risks of Bitcoin and of its alleged power to challenge our very notion of money.