Economics Insights @ CBS

This paper studies implementation in a principal-agent model of adverse selection. We explore ways in which the additional structure of principal-agent models (compared to general implementation models) simplifies the implementation problem. We develop a connection between the single crossing property and monotonicity conditions which are necessary for Nash and Bayesian Nash implementation. We also construct simple implementing mechanisms that rely on the single crossing property and on assumptions about the outcome set frequently made in the principal-agent literature.

In this study, 4 experiments demonstrated that priming effects depend on the context-appropriate meaning of the prime words. Most studies of semantic construct activation have presented prime words in contexts where the meaning of each word was invariant. The authors used words in contexts that supported either literal or figurative meanings, and found that only the context-appropriate meanings had subsequent priming effects on person-perception judgments.

This paper compares the performance of standard-cost with negotiated transfer pricing under asymmetric information. Negotiated transfer pricing generally achieves higher expected contribution margins, as this method tends to be more efficient in aggregating private information into a single transfer price. Standard-cost transfer pricing confers more bargaining power to the supplier and therefore generates better incentives for this division to undertake specific investments. The opposite holds for buyer investments.

We review progress in research attempting to model the influence of culture on judgments of justice. We review research on people’s reactions to resource allocation outcomes (the psychology of distributive justice), as well as on people’s reactions to the processes through which authorities make decisions (the psychology of procedural justice). We describe the progress from early work in which culture was equated with country differences to later work which focused on dimensions of values (e.g.