Economics Insights @ CBS

We consider the Kiefer-Wolfowitz (KW) stochastic approximation algorithm and derive general upper bounds on its mean-squared error. The bounds are established using an elementary induction argument and phrased directly in the terms of tuning sequences of the algorithm. From this we deduce the non- necessity of one of the main assumptions imposed on the tuning sequences in the Kiefer-Wolfowitz paper and essentially all subsequent literature.

This research examines how consumers' spending on themselves versus others can be affected by temporary shifts in their states of power. Five experiments found that individuals experiencing a state of power spent more money on themselves than on others, whereas those experiencing a state of powerlessness spent more money on others than on themselves. This effect was observed using a variety of power manipulations (hierarchical roles, print advertisements, episodic recall, and mental role-playing), across spending intentions and actual dollars spent, and among college and national samples.

A major governance problem in closely-held corporations arising from the illiquidity of shares is the majority shareholders' expropriation of minority shareholders. As a solution, legal and finance research recommends that the main shareholder surrender some control to minority shareholders via ownership rights. We test this proposition on a large dataset of closely-held corporations. We find that shared-ownership firms report substantially larger return on assets (up to 14 percentage points) and lower expense-to-sales ratios.