Organizations & Markets

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The current research investigates two factors that might moderate the effects of competitive demands and biased fairness perceptions on conflict resolution: the relationship between the negotiators and perspective taking. In an experiment, we found that negotiators in a positive relationship were more self-serving in aspirations and fairness judgments than negotiators in a negative relationship.

Past research has found that when people imagine how an outcome might have turned out differently, their "if only" thoughts consistently focus on particular types of antecedent conditions. The authors propose that one principle people follow is to focus on an antecedent that fails to correspond in magnitude to the imagined counterfactual outcome. Specifically, they propose that people focus on such antecedents and change them in the direction of increasing correspondence to the imagined counterfactual outcome.

This paper develops a model of the breakup or unification of nations. In each nation the decision to separate is taken by majority voting. A basic trade-off between the efficiency gains of unification and the costs in terms of loss of control on political decisions is highlighted. The model emphasizes political conflicts over redistribution policies.

We document extreme bias and dispersion in the small-sample distributions of four standard regression-based tests of the expectations hypothesis of the term structure of interest rates. The biases arise because of the extreme persistence in short interest rates. We derive approximate analytic expressions for the biases under a simple first-order autoregressive data generating process for the short rate.

This paper develops a model of growth and income inequalities in the presence of imperfect capital markets, and it analyses the tickle-down effect of capital accumulation. Moral hazard with limited wealth constraints on the part of the borrowers is the source of both capital market imperfections and the emergence of persistent income inequalities. Three main conclusions are obtained from this model. First, when the rate of capital accumulation is sufficiently high, the economy converges to a unique invariant wealth distribution.

We propose a procedure for representing a time series as the sum of a smoothly varying trend component and a cyclical component. We document the nature of the comovements of the cyclical components of a variety of macroeconomic time series. We find that these comovements are very different than the corresponding comovements of the slowly varying trend components.