Decision Making & Negotiations

In modern equity markets, traders have a choice of many exchanges, each operating as an electronic limit order book that can be modeled as a pair of multi-class queues operating under the "time/price" priority rule. The dynamics of the exchanges are coupled via price protection mechanisms. We present mathematical models to study the order routing problem, characterize market equilibria, and derive insights about the queue, delay and adverse selection measures for different exchanges. We present some empirical data that supports our findings.

We examine how consumers update their confidences in ordinal (relative) judgments while evaluating sequential product-ranking and source-accuracy data in percentage versus frequency formats. The results show that when sequential data are relatively easier to mathematically combine (e.g., percentage data), consumers revise their judgments in a way that is consistent with an averaging model but inconsistent with the normative Bayesian model.

In this chapter, I describe the coordinates of the global application of public-private partnerships (PPP) and identify central commonalities of sector collaboration for both infrastructure development and urban redevelopment/regeneration projects. The comparison across these two types of "hard" asset-based initiatives will, I hope, highlight the central issues of implementation and underscore the need for policymakers to address the nature of risk sharing, which I believe is central to the PPP strategy at the project level.

We propose an origination-and-contingent-distribution model of banking, in which liquidity demand by short-term investors (banks) can be met with cash reserves (inside liquidity) or sales of assets (outside liquidity) to long-term investors (hedge funds and pension funds). Outside liquidity is a more efficient source, but asymmetric information about asset quality can introduce a friction in the form of excessively early asset trading in anticipation of a liquidity shock, excessively high cash reserves, and too little origination of assets by banks.

We examine early approaches to the agency problem by asking when captains owned ships in eigheenth and nineteenth century shipping, and how captain-ownership effected voyage success. For each ship we observe the identity of the owners, the identity of the ship captain, the route pursued for each voyage, and various outcome measures for each voyage. We also have information on vessel construction characteristics, the sailing history of each vessel, and the occupations of the owners.

The measurement and timing of reported revenue is critical to performance measurement and the development of accurate forecasting models. GM used incentives to get customers to buy its vehicles. This case asks students to consider how GM should report the sales so that the data is a valid indication of performance and can be used to accurately forecast future sales.