Decision Making & Negotiations

Shopping is sometimes a source of stress, leading to avoidance coping behavior by consumers. Prior research suggests that store-induced stress makes shopping an adverse experience and thus negatively affects consumers' purchase likelihood. We propose that consumers' response to shopping stress depends on their motivational orientation. The greater the in-store stress, the more likely task-oriented consumers are to abandon the trip without making purchases. However, recreation-oriented consumers will be, up to a point, less likely to end the trip.

Ethics in business is a major topic both in the social sciences and in business itself. Anthropologists, long attendant to the intersection of ethics and practice, are particularly well suited to offer vital insights on the subject. This timely collection considers a range of ethical issues in business through the examination of anthropologically informed theory and case examples.

This research considers how marketers can encourage or 'nudge' consumers to transmit word of mouth (WOM), such as referrals or recommendations to friends, in a manner that helps reach, inform, or influence large numbers of consumers quickly, which is an outcome referred to as faster diffusion. Building on studies showing diffusion is faster when higher-connectivity people are involved; the authors propose a mechanism based on network externalities that encourages regular customers to select receivers who have higher levels of social connectivity.

The incentive contracts of delegated investment managers may have unintended negative consequences for asset prices. I show that managers who are compensated for relative performance optimally shift their portfolio weights towards those of the benchmark when volatility rises, putting downward price pressure on overweight stocks and upward pressure on underweight stocks. In quarters when volatility rises most (top quintile), a portfolio of aggregate-underweight minus aggregate-overweight stocks returns 3% to 8% per quarter depending on the risk adjustment.

We introduce a tractable dynamic monitoring technology into a continuous-time moral hazard problem and study the optimal long-term contract between principal and agent. Monitoring adds value by allowing the principal to reduce the intensity of performance-based incentives, reducing the likelihood of costly termination. We present a novel characterization of optimal dynamic incentive provision when performance-based incentives may decline continuously to zero. Termination happens in equilibrium only if its costs are relatively low.

We develop a tractable general equilibrium framework of housing and mortgage markets with aggregate and idiosyncratic risks, costly liquidity and strategic defaults, empirically relevant informational asymmetries, and endogenous mortgage design. We show that adverse selection plays an important role in shaping the form of an equilibrium contract. If borrowers' homeownership values are known, aggregate wages and house prices determine the optimal state-contingent mortgage payments, which efficiently reduces the costs of liquidity default.

A monopolist offers a product to a market of consumers with heterogeneous quality preferences. Although initially uninformed about the product quality, they learn by observing past purchase decisions and reviews of other consumers. Our goal is to analyze the social learning mechanism and its effect on the seller's pricing decision. This analysis borrows from the literature on social learning and on pricing and revenue management.

We examine short-horizon return predictability using a novel proprietary dataset of institutional traders with known identities. We estimate investor-specific short-term trading skill and find that there is pronounced heterogeneity in predicting short-term returns among institutional investors. Incorporating short-term predictive ability, our model explains much higher fraction of variation in asset returns. Ignoring the heterogeneity in short-term trading skill has major implications in modeling price impact.