Faculty AI Research

This study offers empirical support for a recently proposed theoretical model of asset market bubbles in which relative wealth concerns cause rational investors to choose to participate in a finite horizon bubble. I find that laboratory asset market bubbles are larger when participants are given upward social information, i.e., are informed of the highest payoff in their market, as compared to downward social information.

We examine decision makers' use of tacit linguistic intuitions and explicit linguistic knowledge for brand name translations from English to Chinese. We present a market study, which reveals that managers intuitively use linguistic sound and meaning characteristics, that is, which sounds and meanings best fit for the Chinese translation of the English names. A subsequent experiment shows that generalized types of existing name approaches (that is, whether the names are translated based on sound or based on meaning) are employed as explicit benchmark standards for new names.

The current research explored the neural mechanisms linking social status to perceptions of the social world. Two fMRI studies provide converging evidence that individuals lower in social status are more likely to engage neural circuitry often involved in "mentalizing" or thinking about others' thoughts and feelings.

We consider three "crisis shocks" related to key features of the 2007-2008 crisis, for emerging and developed economies: (1) the collapse of global trade, (2) the contraction of credit supply, and (3) selling pressure on firms' equity. Using an international cross-section of firms, we find that returns' sensitivities to these shocks imply large and statistically significant influences on residual equity returns during the crisis period (after controlling for normal risk factors that are associated with expected returns).

Previous research suggests that cortisol can affect cognitive functions such as memory, decision making and attentiveness to threat-related cues. Here, we examine whether increases in cortisol, brought on by an acute social stressor, influence threat-related decision making. Eighty-one police officers completed a standardized laboratory stressor and then immediately completed a computer simulated decision making task designed to examine decisions to accurately shoot or not shoot armed and unarmed Black and White targets.

A set of recent papers attempts to explain the size and book-to-market anomalies with conditional CAPM or CCAPM models with economically motivated conditioning variables, or with factor models with economically motivated factors. The tests of these models, as presented, fail to reject the proposed model. We argue that these tests fail to reject the null hypothesis because they have very low statistical power against what we call the characteristics alternative.

This article presents a consumer-psychology model of brands that integrates empirical studies and individual constructs (such as brand categorization, brand affect, brand personality, brand symbolism and brand attachment, among others) into a comprehensive framework. The model distinguishes three levels of consumer engagement (object-centered, self-centered and social) and five processes (identifying, experiencing, integrating, signifying and connecting). Pertinent psychological constructs and empirical findings are presented for the constructs within each process.

The current research explores how roles that possess power but lack status influence behavior toward others. Past research has primarily examined the isolated effects of having either power or status, but we propose that power and status interact to affect interpersonal behavior. Based on the notions that a) low-status is threatening and aversive and b) power frees people to act on their internal states and feelings, we hypothesized that power without status fosters demeaning behaviors toward others.

The authors propose that a crowded product space motivates consumers to better discriminate between options of different quality. Specifically, this article reports evidence from three controlled experiments and one natural experiment that people are prepared to pay more for high-quality products and less for low-quality products when they are considered in the context of a dense, as opposed to a sparse, set of alternatives. To explain this effect, the authors argue that consumers uncertain about the importance of quality learn from observing market outcomes.

Groups are very prevalent in organizations and society. Previous experiments on groups have mainly investigated how "minimal groups," which are only arbitrary labels, like "red" and "blue" group, can influence prosocial behavior, like altruistic cooperation and norm enforcement. But real groups are often more than just a label; they also involve social interactions leading to social ties, i.e., emotional bonds, between group members. Our experiments compare randomly assigned minimal groups to randomly assigned groups involving real social interactions.

Past research in marketing and psychology suggests that pricing structure may influence consumers' perception of value. In the context of two commonly used pricing schemes, pay-per-use and two-part tariff, we evaluate the impact of pricing structure on consumer preferences for access services. To this end, we develop a utility-based model of consumer retention and usage of a new service. A notable feature of the model is its ability to capture the pricing structure effect and measure its impact on consumer retention, usage, and pricing policy.

This paper provides new evidence on time use and subjective well-being of employed and unemployed individuals in 14 countries. We devote particular attention to characterizing and modeling job search intensity, measured by the amount of time devoted to searching for a new job. Job search intensity varies considerably across countries, and is higher in countries that have higher wage dispersion. We also examine the relationship between unemployment benefits and job search.

This article characterizes optimal policy when a government uses indirect control toexert its authority. Wedevelopadynamicprincipal-agent model inwhich a principal (a government) delegates thepreventionof a disturbance–suchas riots, protests, terrorism, crime, or tax evasion–to an agent who has an advantage in accomplishing this task. Our setting is a standard repeated moral hazard model with two additional features. First, the principal is allowed to exert direct control by intervening with an endogenously determined intensity of force which is costly to both players.

This paper provides evidence of the real effects of financial markets. Using mutual fund redemptions as an instrument for price changes, we identify a strong effect of market prices on takeover activity (the "trigger effect"). An inter-quartile decrease in valuation leads to a 7 percentage point increase in acquisition likelihood, relative to a 6% unconditional takeover probability. Instrumentation addresses the fact that prices are endogenous and increase in anticipation of a takeover (the "anticipation effect").

Five experiments tested the hypothesis that there is a bi-directional link between ideological (multiculturalism and color-blindness) and self-regulatory (perspective-taking and stereotype-suppression) approaches to managing diversity. A first set of experiments found that exposure to multiculturalism facilitated perceptual and conceptual forms of perspective-taking.

Using informant reports on working professionals, we explored the role of listening in interpersonal influence and how listening may account for at least some of the relationship between personality and influence. The results extended prior work which has suggested that listening is positively related to influence for informational and relational reasons.

This research examines how two dimensions of moral intensity involved in a corporation's external crisis response — magnitude of effectiveness and interpersonal proximity — influence observer perceptions of and behavioral intentions toward the corporation. Across three studies, effectiveness decreased negative perceptions and increased pro-organizational intentions via ethical judgment of the response. Moreover, the two dimensions interacted such that a response high in proximity but low in effectiveness led to more negative perceptions and to less pro-organizational intentions.

In the recent subprime crisis, many individuals defaulted on their loans. Though the institutional sources of defaulting and delinquencies were much debated in the aftermath of the crisis, much less attention was given to individual differences in defaulting behavior. How do individuals decide whether to repay borrowed money? The decision to default can be viewed as an intertemporal choice, as defaulting provides monetary benefits in the near future and costs in the more distant future (Chatterjee, Corbae, Nakajima, & Rios-Rull, 2007; Fehr, 2002).

Past research on pay dispersion has found that hierarchy hurts commitment, cooperation, and performance. In contrast, functional theories of social hierarchy propose that hierarchy can facilitate coordination and performance. We investigated the effects of hierarchical differentiation using a sample of professional basketball teams from the National Basketball Association (NBA). Analyses of archival data revealed that hierarchical differentiation in pay and participation enhanced team performance by facilitating intragroup coordination and cooperation.

It is self-evident that performing poorly on a task makes people dissatisfied relative to performing well. How can this negative affect be overcome? We provide an adaptive strategy for dealing with poor performance. Experiment 1 shows that poor performers tend to recruit the highest potential performance as a comparison standard and hence are dissatisfied. However, if they are reminded that they set their own low goals, and that these goals were met, they are as satisfied as better performers.

Political theorists of globalization have argued that foreign inflows to a society can give rise to collective-identity closure — social movements aiming to narrow the in-group, and exclude minorities. In this research we investigate whether exposure to the mixing of a foreign culture with one's heritage culture can evoke need for closure, a motive that engenders ethnocentric social judgments.

Objective: To reconcile empirical inconsistencies in the relationship between emotionally-negative families and daughters' abnormal eating, we hypothesized a critical moderating variable: daughters' vulnerability to emotion contagion.

Default options exert an influence in areas as varied as retirement program design, organ donation policy, and consumer choice. Past research has offered potential reasons why no-action defaults matter: (i) effort, (ii) implied endorsement, and (iii) reference dependence. The first two of these explanations have been experimentally demonstrated, but the latter has received far less attention. In three experiments we produce default effects and demonstrate that reference dependence can play a major role in their effectiveness.

Defaults arising from illiquidity can lead to private workouts, formal bankruptcy proceedings or even liquidation. All these outcomes can result in deadweight losses. Corporate illiquidity in the presence of realistic capital market frictions can be managed by a) equity dilution, b) carrying positive cash balances, or c) entering into loan commitments with a syndicate of lenders. An efficient way to manage illiquidity is to rely on mechanisms that transfer cash from "good states" into "bad states" (i.e., financial distress) without wasting liquidity in the process.

We propose a model of dynamic corporate investment, financing, and risk management for a financially constrained firm. The model highlights the central importance of the endogenous marginal value of liquidity (cash and credit line) for corporate decisions.

We investigate the leverage of hedge funds in the time series and cross-section. Hedge fund leverage is counter-cyclical to the leverage of listed financial intermediaries and decreases prior to the start of the financial crisis in mid-2007. Hedge fund leverage is lowest in early 2009 when the market leverage of investment banks is highest. Changes in hedge fund leverage tend to be more predictable by economy-wide factors than by fund-specific characteristics. In particular, decreases in funding costs and increases in market values both forecast increases in hedge fund leverage.

A perennial question facing managers is how much decision latitude to give their employees at work. The current research investigates how decision latitude affects employees' perceptions of managers' personalities and, in turn, their leadership effectiveness. Results from three studies using different methods (two experiments and a survey) indicate an inverted-U shaped relationship between degree of decision latitude and leadership effectiveness perceptions.

This research documents an intriguing empirical phenomenon whereby states of relaxation increase the monetary valuation of products. This phenomenon is demonstrated in six experiments involving two different methods of inducing relaxation, a large number of products of different types, and various methods of assessing monetary valuation. In all six experiments participants who were put into a relaxed affective state reported higher monetary valuations than participants who were put into an equally pleasant but less relaxed state.

Leading up to the recent crisis, government encouraged risky lending, and failed to measure banks' risks credibly or to require sufficient capital. Regulators also failed to losses or enforce intervention protocols for timely resolution. This paper proposes radical policy changes to prevent a recurrence. The need is not for more complex rules and more supervisory discretion, but rather for simpler rules that are meaningful in measuring and limiting risk, hard for market participants to circumvent and credibly enforced by supervisors.

Two very different contractual structures are commonly observed in service industries with congestion effects: service level guarantees (SLGs) and best effort (BE) service. We analyze the impact of these contractual agreements on market outcomes in oligopolistic industries. First, we consider a model where firms compete by setting prices and SLGs simultaneously. The SLG is a contractual obligation on the part of the service provider: regardless of how many customers subscribe, the firm is responsible for investing so that the congestion experienced by all subscribers is equal to the SLG.