Decision Making & Negotiations

This paper evaluates the specification errors of several empirical asset pricing models that have been developed as potential improvements on the CAPM. We use the methodology of Hansen and Jagannathan (J. Finance 51 (1997) 3), and the test assets are the 25 Fama-French (J. Financial Econom. 52 (1997) 557) equity portfolios sorted on size and book-to-market ratio, and the Treasury bill. We allow the parameters of each model's pricing kernel to fluctuate with the business cycle. While we cannot reject correct pricing for Campbell's (J. Political Econom.

This article tests 2 competing explanations for the truth effect, the finding that repeated statements are believed more than new statements. Previous research has put forth 2 explanations for this effect, subjective familiarity and perceived source variability. The subjective familiarity explanation holds that repeated statements feel more familiar and are therefore believed more than new statements. This explanation has received strong support in the literature.

We analyze a unique data set on multiunit auctions, which contains the actual demand schedules of the bidders as well as the auction awards in over 400 Swedish Treasury auctions. First, we document that bidders vary their prices, bid dispersion, and the quantity demanded in response to increased uncertainty at the time of bidding. Second, we find that bid shading can be explained by a winner's curse driven model in which each bidder submits only one bid, despite the fact that the bidders in our data set use much richer bidding strategies.

In this chapter we first explore contexts in which people may actually prefer to have choices made for them by others, showing, for example, that members of more interdependent cultures may be more motivated when significant others make choices for them than when they choose for themselves. Then, we examine situations in which a limited choice set may prove more motivating than a more extensive choice set, showing, for example, that even members of highly independent cultures can sometimes find too much choice demotivating.

Pricing is one of the most crucial determinants of sales. Besides the actual price, how the price offering is presented to consumers also affects consumer evaluation of the product offering. Many studies focus on "price framing," i.e., how the offer is communicated to the consumer?is the offered price given along with a reference price, is the reference price plausible, is a price deal communicated in dollar or percentage terms. Other studies focus on "situational effects," e.g., is the evaluation for a national brand or a private brand, is it within a discount store or a specialty store.

This paper studies how to assign monitors to productive agents in order to generate signals about the agents' performance that are most useful from a contracting perspective. We show that if signals generated by the same monitor are negatively (positively) correlated, then the optimal monitoring assignment will be focused (dispersed). This holds because dispersed monitoring allows the firm to better utilize relative performance evaluation.

Minton, Schrand and Walther (2002) (MSW) investigate whether cash flow (earnings) volatility helps predict subsequent levels of cash flow (earnings). Price is the present value of expected future cash flows, so if cash flow volatility forecasts future cash flows (the numerator in the present value calculation), it should have valuation implications. A similar motivation applies to earnings, which may be viewed as a proxy for cash flow.

The Bretton Woods Institutions were established just over 50 years ago to aid in the reconstruction of Europe after World War II and to make it less likely that another global calamity such as the Great Depression would occur again. Much has happened in the world since then. The author re-examines the role of these institutions today.

From the publisher: This powerful, unsettling book gives us a rare glimpse behind the closed doors of global financial institutions by the winner of the 2001 Nobel Prize in Economics. Renowned academic economist Joseph E. Stiglitz served seven years in Washington, as chairman of President Clinton's Council of Economic Advisers and as chief economist at the World Bank. In this book, Stiglitz recounts his experiences in such places as Ethiopia, Thailand, and Russia.