Decision Making & Negotiations

A popular prediction in persuasion research is that decreased ability to process information increases reliance on peripheral cues and decreases reliance on central claims. This paper explains why this prediction does not necessarily hold when processing capacity is impaired by high arousal. Three experiments suggest that two types of processes underlie arousal effects on persuasion. Arousal induces selective processing of cues that are diagnostic at the expense of cues that are nondiagnostic - the selection effect.

The optimal number of items to be included in a service bundle for a profit-maximizing firm that uses pure components, pure bundling, or mixed bundling strategies is determined. When applied to Venkatesh and Mahajan's (1993) data, the number of events held is shown to have a substantial impact on firm profits. The pricing strategies of a nonprofit organization that seeks to maximize usage subject to a nondeficit constraint is also studied. Using the same data, it is shown that, compared to a profit maximizing firm, a usage-maximizing nonprofit organization 1. charges lower prices, 2.

This articles studies the design and valuation of debt contracts in a general dynamic setting under uncertainty. We incorporate some insights of the recent corporate finance literature into a valuation framework. The basic framework is an extensive form game determined by the terms of a debt contract and applicable bankruptcy laws. Debtholders and equityholders behave noncooperatively. The firm's reorganization boundary is determined endogenously. Strategic debt service results in significantly higher default premia at even small liquidation costs.

This study investigates the manner in which consumers make investment decisions for mutual funds. Investors report that they consider many nonperformance-related variables. When investors are grouped by similarity of investment decision process, a single small group appears to be highly knowledgeable about its investments. However, most investors appear to be naive, having little knowledge of the investment strategies or financial details of their investments. Implications for mutual fund companies are discussed.

Classical economic theory mainly examines decision making from a normative perspective. Social and cognitive psychology's view of decision making is more descriptive. This article presents a structured synthesis of a third stream of research, which intersects economics and psyhology, and is known as Behavioral Decision Theory. This stream of research shows that decision makers often deviate from prescritive norms. This article explains why such deviations occur and what they imply for marketing.

Many sequential planning problems can be represented as a shortest path problem in an acyclic network. This includes all deterministic dynamic programs as well as certain stochastic sequential decision problems. In this article, we identify a large class of shortest path problems for which a general efficient algorithm for the simultaneous solution and detection of minimal forecast horizons is developed.

We derive efficient and highly accurate approximations for the customer waiting-time distributions experienced in stochastic economic lot scheduling systems (SELSPs) that are governed by general base-stock policies under a cyclic or more general periodic item sequence. SELSPs involve settings where several items need to be produced in a common facility with limited capacity, under significant uncertainty regarding demands, unit production times, setup times, or combinations thereof.

Theoretical work on financing costs under asymmetric information has linked shifts in firms' internal funds and investment spending, holding constant investment opportunities. An impediment to convincing tests of these models is the lack of firm-level data on the relative cost of internal and external funds. We use a tax experiment, the surtax on undistributed profits in the 1930s, to identify firms' relative cost of internal and external funds by calculating surtax margins.