Economics Insights @ CBS

It is widely accepted that entrepreneurial creation affects destruction, as new and better organizations, technologies and transactions replace old ones. This phenomenon is labeled creative destruction, but it might more accurately be called destructive creation, given the driving role of creation in the process. We reverse the typical causal ordering, and ask whether destruction may drive creation. We argue that economic systems may get stuck in suboptimal equilibria due to path dependence, and that destruction may sweep away this inertia, and open the way for entrepreneurship.

We present a novel linear program for the approximation of the dynamic programming cost-to-go function in high- dimensional stochastic control problems. LP approaches to approximate DP have typically relied on a natural “projection” of a well-studied linear program for exact dynamic programming. Such programs restrict attention to approximations that are lower bounds to the optimal cost-to-go function.

While traditional finance theory holds that managers with option-laden incentive contracts may favor equity at the expense of debt, a risk-averse manager may be more likely to retain vested in-the-money options if the manager has private information that the firm's risk-adjusted performance will be better. It follows that vested option holdings should be positively associated with credit quality.

The game of golf involves many different types of shots: long tee shots (typically hit with a driver), approach shots to greens, shots from the sand, putts on the green, and others.  While it is easy to determine the winner in a golf tournament by counting strokes, it is not easy to assess which factors most contributed to the victory.  In this paper we apply an analysis based on strokes gained (previously termed shot value) to assess the performance of golfers in different parts of the game of golf.  Strokes gained is a simple and intuitive measure of the contribution 

Do situational cues to individuals' social identities shift the way they look at objects? Do such shifts hinge on the structure of individuals' self-concept? We hypothesized individuals with integrated identities would exhibit attentional biases congruent with identity cues (assimilative response), whereas those with nonintegrated identities would exhibit attentional biases incongruent with identity cues (contrastive response).