Economics Insights @ CBS

We identify gaps and propose several directions for future research in preference measurement. We structure our argument around a framework that views preference measurement as comprising three interrelated components: (1) the problem that the study is ultimately intended to address; (2) the design of the preference measurement task and the data collection approach; (3) the specification and estimation of a preference model, and the conversion into action. Conjoint analysis is only one special case within this framework.

This paper develops a simple and systematic approach for obtaining bounds on stationary expectations of Markov processes. Given a function f which one is interested in evaluating, the main idea is to find a function g that satisfies a certain "mean drift" inequality with respect to f, which in turn leads to bounds on the stationary expectation of the latter.

Business friendships are increasingly common. Research in organizational behavior has identified a number of benefits to career and organizational performance of these relationships. These instrumental benefits derive from the affective qualities of these relationships, through the mechanisms of trust, empathy and sympathy. Yet the combination of instrumentality and affect produces a number of difficulties for business friends.

This paper compares centralized and decentralized price setting by a firm that sells a single product in two markets, but is constrained to set one price (e.g., due to arbitrage). Each market is characterized by a different linear demand function, and demand conditions are privately observed by a local manager. This manager only cares about profits in his own market and, as a result, communicates his information strategically. Our main results link organizational design to market demand.

We examine the association between CEO reputation (proxied by the extent of press coverage) and the quality of the firm's earnings (proxied by two accruals-based measures). We test three explanations for an association between these constructs: the efficient contracting hypothesis suggests that reputed CEOs are associated with good earnings quality, while the rent extraction and matching explanations argue that reputed CEOs are associated with poor earnings quality.