Organizations & Markets

We analyze a closely held corporation characterized by the absence of a resale market for its shares. We show that the founder of the firm can optimally choose an ownership structure with several large shareholders to force them to form coalitions to obtain control. By grouping member cash flows, a coalition internalizes to a larger extent the consequences of its actions and hence takes more efficient actions than would any of its individual members. The model has implications for the optimal bundling of cash flow and voting rights, and for the optimal number and size of shareholders.

Rapid comprehensive change in the physical pattern of a city is a minor revolution — as is the transformation of 42nd Street and Times Square. Two decades ago the agenda for change posed two big questions: Is it possible for cities to reshape what the market is likely to deliver in an area? Is large-scale redevelopment even a plausible political objective, especially when aggressive actions such as condemnation are deemed a necessary part of the strategy?

Technical analysis, also known as "charting," has been a part of financial practice for many decades, but this discipline has not received the same level of academic scrutiny and acceptance as more traditional approaches such as fundamental analysis. One of the main obstacles is the highly subjective nature of technical analysis — the presence of geometric shapes in historical price charts is often in the eyes of the beholder.

We review progress in research attempting to model the influence of culture on judgments of justice. We review research on people’s reactions to resource allocation outcomes (the psychology of distributive justice), as well as on people’s reactions to the processes through which authorities make decisions (the psychology of procedural justice). We describe the progress from early work in which culture was equated with country differences to later work which focused on dimensions of values (e.g.

Behavioral research on negotiation in recent years has been dominated by the decision-making research paradigm, which accords a relatively narrow role to emotions. Decision-making researchers have considered emotions primarily in terms of how an individual’s positive or negative affect impacts, and usually impedes, his or her information processing. Drawing on recent advances in psychology and other fields, we propose an alternative perspective that highlights more social and more functional aspects of emotion in negotiation.

We investigate how individuals learn from imagined might-have-been scenarios. We hypothesize that individuals are more likely to learn when they have responded to an event with upward-directed, self-focused counterfactual thoughts, and, additionally, that this learning process is inhibited by accountability to organizational superiors. Support for these hypotheses was obtained in two studies that assessed learning by aviation pilots from the experience of near accidents.

We study the economic consequences of alternative hedge accounting rules in terms of managerial hedging decisions and wealth effects for shareholders. The rules we consider include the "fair-value" and "cash-flow" hedge accounting methods prescribed by the recent SFAS No. 133. We illustrate that the accounting method used influences the manager's hedge decision. We show that under no-hedge accounting, the hedge choice is different from the optimal economic hedge the firm would make under symmetric and public information.

Low inventory, a crucial part of just-in-time (JIT) manufacturing systems, enjoys increasing application worldwide, yet the behavioral effects of such systems remain largely unexplored. Operations research (OR) models of low-inventory systems typically use a simplifying assumption that processing times of individual workers are independent random variables. This leads to predictions that low-inventory systems will exhibit production interruptions leading to lower productivity. Yet empirical results suggest that low-inventory systems do not exhibit the predicted productivity losses.