Columbia Business School Research

We study the interaction between competitive markets and income redistribution that reallocates unequal pre-tax market incomes away from the rich to the poor majority. In one setup, participants earn their income by trading in a double auction (DA) with exogenous zero or full redistribution. In another setup, after trading, they vote on redistributive tax policies in a majoritarian election with two competing candidates. This results in virtually full redistribution, even when participants have the opportunity to influence taxes by transferring money to the candidates.

Integrating recent work on emotional communication with social science theories on unpredictability, we investigated whether communicating emotional inconsistency and unpredictability would affect recipients' concession-making in negotiation. We hypothesized that emotional inconsistency and unpredictability would increase recipients' concessions by making recipients feel less control over the outcome. In Experiment 1, dyads negotiated face-to-face after one negotiator within each dyad expressed either anger or emotional inconsistency by alternating between anger and happiness.

The current research examines the extent to which visual perception is distorted by one's experience of power. Specifically, does power distort impressions of another person's physical size? Two experiments found that participants induced to feel powerful through episodic primes (Study 1) and legitimate leadership role manipulations (Study 2) systematically underestimated the size of a target, and participants induced to feel powerless systematically overestimated the size of the target. These results emerged whether the target person was in a photograph or face-to-face.

As the debate over banking reform continues, the 800-pound gorilla in the room is the anemic market value of America's banks. The market-to-book value ratio of U.S. banks — an indicator of market perceptions of their future cash flow-generating potential — remains in the tank. This ratio averaged between 1.8 and 2.9 from 2000 until mid-2007, but then plunged to an average of between 0.9 and 1.3.

Epidemiological and animal studies often find that higher social status is associated with better physical health outcomes, but these findings are by design correlational and lack mediational explanations. In two studies, we examine neurobiological reactivity to test the hypothesis that higher social status leads to salutary short-term psychological, physiological, and behavioral responses. In Study 1, we measured police officers' subjective social status and had them engage in a stressful task during which we measured cardiovascular and neuroendocrine reactivity.

Six studies explored the overlap between racial and gender stereotypes, and the consequences of this overlap for interracial dating, leadership selection, and athletic participation. Two initial studies captured the explicit and implicit gender content of racial stereotypes: Compared with the White stereotype, the Asian stereotype was more feminine, whereas the Black stereotype was more masculine.

What is the role of leaders in large organizations? We propose a model in which a leader helps to overcome a misalignment of followers' incentives that inhibits coordination while adapting the organization to a changing environment. Good leadership requires vision and special personality traits such as conviction or resoluteness to enhance the credibility of mission statements and to effectively rally agents around them.

The Attachment-Aversion (AA) Relationship model offers a unifying model of customer-brand relationships. To develop it further as a relevant consumer-psychology model, future research should examine three key factors: how brand perception differs from person perceptions; what role brand experiences play as determinants of customer-brand relationships, and how the AA Relationship model fits with other brand frameworks. The author offers insights and suggestions on how to address these three tasks.

This paper studies the "confidential holdings" of institutional investors, especially hedge funds, where the quarter-end equity holdings are disclosed with a delay through amendments to Form 13F and are usually excluded from the standard databases. Funds managing large risky portfolios with nonconventional strategies seek confidentiality more frequently. Stocks in these holdings are disproportionately associated with information-sensitive events or share characteristics indicating greater information asymmetry.

This paper studies the "confidential holdings" of institutional investors, especially hedge funds, where the quarter-end equity holdings are disclosed with a delay through amendments to Form 13F and are usually excluded from the standard databases. Funds managing large, risky portfolios with nonconventional strategies seek confidentiality more frequently. Stocks in these holdings are disproportionately associated with information-sensitive events or share characteristics indicating greater information asymmetry.

It is often asserted that a flexible exchange rate regime would facilitate current account adjustment. Using data on over 170 countries over the 1971–2005 period, we examine this assertion systematically. We find no strong, robust, or monotonic relationship between exchange rate regime flexibility and the rate of current account reversion, even after accounting for the degree of economic development and trade and capital account openness. This finding presents a challenge to the Friedman (1953) hypothesis and a popular policy recommendation by international financial institutions.

Should advertising be approached differently in emerging than in developed markets? Using data from 256 TV commercial tests conducted by a multinational FMCG company in 23 countries, we consider two routes of persuasion: a functional route, which emphasizes the features and benefits of a product, and an experiential route, which evokes sensations, feelings, and imaginations. Whereas in developed markets the experiential route mostly drives persuasion, the functional route is a relatively more important driver in emerging markets.

In this paper, we develop an account of the failure of private market-governance institutions to maintain market order by highlighting how control of their distributional function by powerful elites limits their regulatory capacity. We examine the New York Clearing House Association (NYCHA), a private market-governance institution among commercial banks in Manhattan that operated from 1853 to 1913.

A common cliché and system-justifying stereotype is that power leads to misery and self-alienation. Drawing on the power and authenticity literatures, however, we predicted the opposite relationship. Because power increases the correspondence between internal states and behavior, we hypothesized that power enhances subjective well-being (SWB) by leading people to feel more authentic.

This paper provides a theoretical analysis of the efficiency of prepayment penalties in a dynamic competitive lending model with risky borrowers and costly default. When considering improvements in the borrower's creditworthiness as one of the reasons for refinancing mortgages, we show that refinancing penalties can be welfare improving, and that they can be particularly beneficial to riskier borrowers in the form of lower mortgage rates, reduced defaults, and increased availability of credit.

In this paper, we develop an account of the failure of private market-governance institutions to maintain market order by highlighting how control of their distributional function by powerful elites limits their regulatory capacity. We examine the New York Clearing House Association (NYCHA), a private market-governance institution among commercial banks in Manhattan that operated from 1853 to 1913.

We measure price elasticity across 19 grocery categories over 24 quarters. For each category we estimate a separate random coefficients logit model with quarter-specific price covariates and control functions to address endogeneity. Our specification yields a novel set of 456 elasticities across categories and time that were generated using the same method and therefore can be directly compared. The majority of categories are countercyclical — price sensitivity rises when the macroeconomy weakens.

A high quality customer database is a cornerstone of successful interactive marketing strategies and tactics. Based on the notion that customer data quality is not only a technical but also an organizational problem, this study develops and tests an organizational learning framework of the relationship between organizational processes, customer data quality and firm performance. The findings show that high quality customer data impact both customer and business performance and that the most important driver of customer data quality comes from the executive suite.

We review the literature on recent changes to US employment relationships, focusing on the causes of those changes and their consequences for inequality. The US employment model has moved from a closed, internal system to one more open to external markets and institutional pressures. We describe the growth of short-term employment relationships, contingent work, outsourcing, and performance pay as well as the success of social identity movements in shaping employment benefits.

Negative social feedback is often a source of distress. However, self-verification theory provides the counterintuitive explanation that negative feedback leads to less distress when it is consistent with chronic self-views. Drawing from this work, the present study examined the impact of receiving self-verifying feedback on outcomes largely neglected in prior research: implicit responses (i.e., physiological reactivity, facial expressions) that are difficult to consciously regulate and downstream behavioral outcomes.

Motivated by recent empirical work, this paper formalizes a theory of competitive savings — an arms race in household savings for mating competition that is made more fierce by an increase in the male-to-female ratio in the pre-marital cohort. Relative to the empirical work, the theory can clarify a number of important questions: What determines the strength of the savings response by males (or households with a son)? Can women (or households with a daughter) dis-save? What are the conditions under which aggregate savings would go up in response to a higher sex ratio?

This paper explores the links between firms' voluntary disclosures and their cost of capital. Existing studies investigate the relation between mandatory disclosures and cost of capital, and find no cross-sectional effect but a negative association in time-series. In this paper, I find that when disclosure is voluntary firms that disclose their information have a lower cost of capital than firms that do not disclose, but the association between voluntary disclosure and cost of capital for disclosing and non-disclosing firms is positive in aggregate.

We estimate advertising effects in the context of presidential elections. This setting not only provides an important empirical context to study advertising's effects, but it also helps overcome two common challenges in previous advertising studies. First, the gap between elections depreciates past advertising stocks such that large advertising investments are concentrated within a relatively short period.

Social scientists have spent decades studying how individuals achieve status within organizational groups — that is, how they gain respect, prominence, and influence in the eyes of others. We know, for example, that demographics matter: People of the historically dominant race and gender and a respected age (white men over 40 in the western corporate world) are typically afforded higher status than everyone else.

Studies of social judgment found that the way bicultural individuals respond to cultural cues depends on their cultural identity structure. Biculturals differ in the degree to which they represent their two cultural identities as integrated (vs. nonintegrated), which is assessed as high (vs. low) bicultural identity integration (BII), respectively. High BII individuals assimilate to cultural cues, yet low BII individuals contrast to these cues. The current studies reveal that this dynamic extends to consumer behavior and elucidate the underlying psychological mechanism.

We propose and test a framework that describes the relationship between network structures and job performance. We provide an integration of the current conceptualizations of social capital as they pertain to job performance outcomes by taking a multi-dimensional view of job performance. We break down job performance into creativity, decision-making, task execution, and teamwork, and distinguish the effect of structural holes within and across the organizational boundary on these four job performance domains.

Traditional advertising, such as TV and print advertising, primarily builds awareness of a firm's product among consumers, whereas sponsored search advertising on a search engine can target consumers closer to making a purchase because they reveal their interest by searching for a relevant keyword.

This chapter provides a critical review of the emerging field of consumer experience and experiential marketing.

An interview with Gilles Fontaine, deputy chief executive officer (CEO) of IDATE, and economics professor Eli Noam of Columbia Business School is presented. When asked to define cord-cutting from a U.S. or European perspective, Noam says it refers to the dropping by consumers of expensive cable television (TV) subscriptions in exchange for online TV access. Fontaine explains why cord-cutting is not happening in Europe. Noam discusses his outlook for the triple-play model of cable firms.

Using data from a major mortgage bank, we examine the predictive power of mortgage delinquency models as an aggregate measure of the quality of information recorded at loan origination. We measure model predictive power using an out-of-sample prediction criterion and compare predictive power of delinquency models over time and across loans of different documentation levels and origination channels.

Many policymakers and economists argue that financial literacy is key to financial well-being. Why do many individuals remain financially illiterate despite the apparent importance of being financially informed?

We show that counting downward while performing a task shortens the perceived duration of the task compared to counting upward. People perceive that less time has elapsed when they were counting downward versus upward while using a product (Studies 1 and 3) or watching geometrical shapes (Study 2). The counting direction effect is obtained using both prospective and retrospective time judgments (Study 3), but only when the count range begins with the number “1” (Study 2).

Five studies explore observers' condemnation of passive victims. Studies 1 and 2 examine the role of observers' behavioral forecasts in condemning passive victims of sexual harassment. Observers generally predicted that they would engage in greater confrontation than victims typically do. More importantly, the more confrontation participants predicted they would engage in, the more they condemned the passive victim, and the less willing they were to recommend the victim for a job and to work with her.

We present a method that dynamically designs elicitation questions for estimating preferences, focusing on the parameters of cumulative prospect theory and time discounting models. Typically these parameters are elicited by presenting decision makers with a series of choices between alternatives, gambles or delayed payments. The method dynamically (i.e., adaptively) designs such choices to optimize the information provided by each choice, while leveraging the distribution of the parameters across decision makers (heterogeneity) and capturing response error.

We provide insights into earnings quality from a survey of 169 CFOs of public companies and in-depth interviews of 12 CFOs and two standard setters.

Previous research finds that consumers classify in-group (but not out-group) members as integral to their social-self. The present research is the first to propose and find that consumers also classify owned (but not unowned) objects as integral to their personal-self (Experiment 1).