Assumption In Prior Work Research Articles

Monopoly, Heterogeneous Beliefs and Imperfect Information: The Insurance Market

Abstract This paper questions how heterogeneity of beliefs about the probability of loss affects equilibrium insurance contracts, firm behavior, and welfare focusing especially on the effect of optimism when a monotonicity property, which is a major assumption of prior work, is violated. This paper shows that optimistic individuals could result in insurance driving out individuals who exert effort, if the fraction of such optimistic individuals is significantly large. In addition, this paper shows that optimism could have negative effects on profits of the firm even though both parties realize the asymmetry in beliefs. These results are not only consistent with empirical evidence from several insurance markets on correlation of risk and coverage, but also simply align themselves with empirical evidence on the tendencies of people to be unrealistically optimistic.

Minimally Sufficient Conditions for the Evolution of Social Learning and the Emergence of Non-Genetic Evolutionary Systems

Social learning, defined as the imitation of behaviors performed by others, is recognized as a distinctive characteristic in humans and several other animal species. Previous work has claimed that the evolutionary fixation of social learning requires decision-making cognitive abilities that result in transmission bias (e.g., discriminatory imitation) and/or guided variation (e.g., adaptive modification of behaviors through individual learning). Here, we present and analyze a simple agent-based model that demonstrates that the transition from instinctive actuators (i.e., non-learning agents whose behavior is hardcoded in their genes) to social learners (i.e., agents that imitate behaviors) can occur without invoking such decision-making abilities. The model shows that the social learning of a trait may evolve and fix in a population if there are many possible behavioral variants of the trait, if it is subject to strong selection pressure for survival (as distinct from reproduction), and if imitation errors occur at a higher rate than genetic mutation. These results demonstrate that the (sometimes implicit) assumption in prior work that decision-making abilities are required is incorrect, thus allowing a more parsimonious explanation for the evolution of social learning that applies to a wider range of organisms. Furthermore, we identify genotype-phenotype disengagement as a signal for the imminent fixation of social learners, and explain the way in which this disengagement leads to the emergence of a basic form of cultural evolution (i.e., a non-genetic evolutionary system).

Target Ratcheting and Achievability of Earnings Targets

A fundamental problem of incentive contracting, often referred to as the ratchet effect, is that good performance in one period may be penalized by next-period targets that are more difficult to achieve. Several studies provide evidence that favorable performance relative to target is associated with target increases in the next period. The maintained assumption in much of this literature is that target revisions upward render targets more difficult to achieve. In contrast, our study uses data from a unique survey panel to directly examine whether favorable performance relative to target leads to next-period targets that are more difficult to achieve. First, we replicate prior results that favorable performance relative to target is associated with next-period target increases. Second, and contrary to the maintained assumption in prior work, we show that favorable performance relative to target is also associated with increases in the likelihood that next-period targets will be achieved. Thus, our results suggest that firms revise performance targets in a way that allows well-performing managers to repeatedly meet their targets. This is consistent with the theory that commitment facilitates multi-period contracting and allows firms to overcome the adverse incentive consequences of the ratchet effect.

Accounting Decentralization and Performance Evaluation of Business Unit Managers

ABSTRACTWe use survey data to examine firms' propensity to rely on financial measures in evaluating local business unit managers. We find that firms rely less on financial measures (and more on nonfinancial measures or subjective evaluations) in determining local managers' bonuses when those managers have greater influence over the design of internal accounting systems. At the same time, we find no significant association between the choice of performance measures and local managers' authority to make operating decisions. Instead, we find that local authority to make operating decisions is positively associated with local managers' influence over accounting systems. Taken together, our findings suggest that the design of internal accounting systems is an important dimension of overall organizational design. Our findings also cast doubt on the maintained assumption in prior work that major organizational design choices are complementary.Data Availability: Data used in this study cannot be made public due to confidentiality agreements with participating firms.

Desorption studies of hydrogen and carbon monoxide from nickel surfaces using thermal desorption spectroscopy

The adsorption of hydrogen and carbon monoxide at room temperature on nickel samples was studied with thermal desorption spectroscopy. Desorption from nickel foil was studied using a mass spectrometric method in an ultrahigh vacuum system, while desorption from nickel powder was studied with a microreactor system using a thermal conductivity detector. Two hydrogen desorption peaks are observed at low heating rates (less than 3 K/s). These peaks correspond to the β1 and β2 states observed in single crystals studies. An activation energy of 7–10 kcal/mol is obtained for the low temperature peak (β1 state), assuming first order kinetics, while an energy of 28–30 kcal/mol is obtained for the higher temperature peak (β2 state) with second order kinetics. Desorption spectra using the two different experimental methods are very similar, and the kinetic data derived from the spectra agree well. When the heating rate is high (larger than 12 K/s) only one hydrogen desorption peak is observed, indicating that experimental resolution decreases for very fast heating rates. Kinetic analysis of this spectra yields an activation energy similar to the β2 state. The two H2 desorption features (β1 and β2) obtained for Ni powder and foil agree well with previously reported studies on Ni single crystals, indicating that the presence of the two desorption states is insensitive to surface structure. The activation energy and order of the desorption for the β2 state obtained in this work is in general agreement with values reported for single crystals studies. The activation energy and order for the β1 state is in agreement with some studies performed with Ni single crystals, largely due to the assumption in prior work that desorption proceeds as a second order process for this state. Three carbon monoxide desorption peaks are observed for low heating rates (less than 3 K/s). Presumably, the two low temperature peaks which are associated with adsorbed molecular CO correspond to on-top and bridge site adsorption. The activation energy for the weakest bonding (on-top site/dominant peak) was obtained and corresponded to 6–10 kcal/mol. The activation energy for dissociated CO (high temperature peak) corresponded to 30–36 kcal/mol. Our ability to resolve the two types of adsorbed molecular CO is lost when very fast heating rates are used (12 K/s).