Economics Insights @ CBS

Disputes by their nature involve contentious behavior. If one attributes such behavior to underlying personality traits, these attributions can be quite damning. The current research investigated negative trait attributions and their impact on dispute resolution decisions. We hypothesized that judging one's opponent to be low in agreeableness and high in emotionality (e.g. stubborn and volatile) shifts one?s preference towards more formal procedures ? formal in the sense that a third party judge controls the process and outcome.

This paper presents an approach to modeling workers where human performance has a significant impact on system productivity. Highly technical industries such as semiconductor manufacturing and service industries like banking are relying on fewer but more skilled workers. In these systems, productivity depends on worker availability and organization; therefore, modeling system performance may require accurate representations of individual worker behavior.

We model the trade-off between low-asset risk and low leverage to satisfy preferences for low-risk deposits and apply it to interwar New York City banks. During the 1920s, profitable lending and low costs of raising capital produced increased bank asset risk and increased capital, with no deposit risk change. Differences in the costs of raising equity explain differences in asset risk and capital ratios. In the 1930s, rising deposit default risk led to deposit withdrawals. In response, banks increased riskless assets and cut dividends.

This paper examines transfer pricing in multinational firms when individual divisions face different income tax rates. Assuming that a firm decouples its internal transfer price from the arm's length price used for tax purposes, we analyze the effectiveness of alternative pricing rules under both cost- and market-based transfer pricing. In a tax-free world, Hirshleifer (1956) advocated that the internal transfer price be set equal to the marginal cost of the supplying division.