Commitment Costs Research Articles

The Role of Temporal Shifts in Turnover Processes: It's About Time.

To better understand the process of organizational withdrawal, a turnover model incorporating dynamic predictors measured at 5 distinct points in time was examined by following a large occupationally and organizationally diverse sample over a 2-year period. Results demonstrated that turnover can be predicted by perceived costs of turnover, organizational commitment, and critical events measured soon after entry into the organization. Occupational unemployment rates, job satisfaction, and search for alternative jobs also become significant predictors when measured over time. Critical events predicted turnover in a manner distinct from the operation of attitudes, consistent with the unfolding model (Lee & Mitchell, 1994). The path to turnover was marked by consistently low perceived costs of turnover and satisfaction, decreases in commitment, and increases in job search over time.

Willingness to Pay, Compensating Variation, and the Cost of Commitment

Hicksian welfare theory is static in nature, but many decisions are made in a dynamic environment. We present a dynamic model of an agent's decision to purchase or sell a good under the realistic conditions of uncertainty, irreversibility, and learning over time. Her willingness to pay (WTP) contains both the intrinsic value of the good as in Hicksian theory plus a commitment cost associated with delaying to obtain more information. The Hicksian equivalence between WTP/Willingness to accept (WTA) and compensating and equivalent variations no longer holds. The WTP and WTA divergence may arise and observed WTP values are not always appropriate for welfare analysis.

Choosing Equity Stakes in Technology-Sourcing Relationships: An Integrative Framework

Although there has been an explosion in the number of technology sourcing relationships between firms—including alliances, acquisitions, and all intermediate levels of equity ownership—managers lack a comprehensive framework to guide them in equity ownership decisions meant to access technology. Higher levels of equity ownership can provide benefits such as exclusive access to and control over critical resources, alignment of interests between partners, and better coordination and control of partner interaction. On the other hand, equity ownership also entails costs associated with implementing changes to organizational structures, in addition to lower employee motivation as well as commitment costs due to market or technological uncertainty.

Outpatient civil commitment in Texas for management and treatment of sexually violent predators: a preliminary report.

Texas established in 1999 outpatient civil commitment for sexually violent predators discharged from prison with or without parole. These individuals suffer from a behavioral abnormality, have been convicted of two or more sexually violent crimes and are deemed likely to reoffend. Civilly committed individuals are managed by a team composed of case manager (supervision), treatment provider, public safety officer (global positioning satellite monitoring), and other professionals. Treatment consists of individual and group therapy using a standard workbook. Out of 21 committed individuals, 7 are in the treatment, 1 died, 10 are in custody after breaking conditions of commitment that constitute a felony, and 3 await release from prison. Cost of outpatient civil commitment is less than $20,000/person/year compared with more than $100,000 for inpatient commitment in other states. Texas has found outpatient civil commitment to be an effective and relatively low-cost way to protect the public and treat the offender.

The Cost of Commitment

Over the last half-century, the number of treaties that address issues of human rights has grown from a handful to hundreds. The majority of nations now belongs to a panoply of international agreements - some regional, some universal - that address human rights issues ranging from labor standards to the treatment of prisoners to gender equality. The last decade in particular has witnessed a concerted push from the United Nations to bring nations into the human rights fold through ratification of the six core United Nations human rights treaties. Yet despite the proliferation of treaties and the growing attention to countries' decisions to join them, little attention has been paid to what influences countries' decisions to join these treaties. In this Article, I focus on only a small part of the broader puzzle of human rights treaty membership. Putting to one side, for the moment, the ways in which countries benefit from joining human rights treaties, I seek insight into how the cost of committing to human rights treaties influences countries' decisions to join. I begin by proposing a new way of conceiving of the cost of consenting to be bound by a treaty. I argue that for treaties with minimal enforcement provisions - which includes most human rights treaties - understanding the cost of commitment requires taking into account not only the cost that would be entailed in bringing the country's practices into compliance with the treaty but also the likelihood that those costs will be realized. I then investigate whether countries appear to be influenced by this cost of membership when they decide whether or not to join particular treaties. The Article uses empirical evidence drawn from a database that covers 166 nations over a time span of forty years to shed some light on the decisions of nations to join human rights treaties. Do countries with better human rights practices ratify more readily than those with worse human rights practices? Is the propensity of nations to ratify treaties affected by the enforcement mechanisms used in the treaties? Do democratic nations ratify more readily than nondemocratic nations? Is there a difference in the willingness of democratic and nondemocratic nations to commit to a treaty when their practices are out of step with the treaty's requirements? These are a few of the questions that I ask in this Article. The empirical evidence, while far from conclusive, provides some preliminary answers that I hope will serve as a roadmap to future, more detailed investigation.

Auctions for Procuring Options

We examine the mechanism-design problem for a single buyer to procure purchase options for a homogeneous good when that buyer is required to satisfy an unknown future demand. Suppliers have two-dimensional types in the form of commitment costs and production costs. The efficient schedule of options depends on the distribution of demand. To implement an efficient outcome, we introduce a class of mechanisms which are essentially pivotal mechanisms (Vickrey-Clarke-Groves) with respect to the expected costs of the suppliers. We show that the computational task of running such mechanisms is not burdensome. Our discussion uses electricity markets as an example.

Value elicitation in retail and laboratory environments

An increasing number of studies have begun conducting economic experiments in field, rather than laboratory settings. We directly compare results from laboratory and field valuation experiments. After controlling for unengaged bidders, results indicate field valuations were greater than laboratory valuations. Results are discussed in the context of recent literature on commitment costs.

A new explanation for the WTP/WTA disparity

We propose a new explanation for the WTP/WTA disparity in experiments and surveys. Uncertainty, irreversibility and limited learning opportunities can generate commitment costs, driving a wedge between WTP and WTA. We present experimental evidence that supports our hypothesis.

Options Approach to Risk Analysis in Transportation Planning

The applicability of the real-options approach to risk management to the metropolitan transportation planning process is described. The options approach to risk analysis brings to investment decisions the insight that there is an inherent value in option-creating actions (by resolving uncertainty, enabling flexibility, or uncovering new and relevant information) and a cost associated with exercising options (irreversible commitments of resources and time). The options approach moves investment decision making from simply choosing whether to build a project to a regime that considers a range of possible decisions, with the potential value of each decision measured in terms of its option-creation value and irreversible commitment cost. This approach is specifically designed to maximize the value of investments having the characteristics of transportation projects that are subject to uncertainty and risk in their outcomes. Also described is the new options approach; examples that illustrate the value of different kinds of options are given. By recognizing the value of improved information—and actions to obtain it—the options approach can give real impetus to improved planning methods. Because the analysis tools provided by the options approach make it possible to value the additional information that improved planning can provide, recommendations are provided on how—and in what parts of the metropolitan transportation planning process—the new tools of risk analysis can most appropriately be applied.

Governance and uncertainty: the trade-off between administrative control and commitment

This study elaborates upon the motives for initiating equity-based collaborations vs. acquisition of another firm already having a desired technology. We characterize both minority direct investments and joint ventures as options to defer either internal development or acquisition of a target firm. In domains where learning about growth opportunities dominates investment activity, this incremental mode of governance economizes on the cost of committing resources to a technology with an uncertain value. Using a sample of 402 transactions in the biotechnology industry, we find strong support for the theoretical model. The findings suggest that the cost of commitment in the face of technological uncertainty may offset the administrative benefits of hierarchical governance. ? 1998 John Wiley & Sons, Ltd.

Strategic non-HRM— a viable alternative?

This article argues that the strategic management of people does not automatically involve the implementation of practices associated with human resource management (HRM), e.g. sophisticated selection methods, extensive communications, teamworking, extensive training, employee involvement and performance-related pay. The article begins by defining HRM and, in particular, the soft and hard variants of the concept. Soft HRM is defined as a bundle of practices aimed at securing high commitment and high performance from employees whereas hard HRM is defined as a group of practices based on the premise that human resources (HR) are a cost to be minimized. The empirical data are derived from a survey of personnel policy and practice amongst engineering companies in the east Midlands. Respondents are mainly from small and medium-sized establishments and the article concentrates on those who reported the existence of a formally-endorsed HR strategy. The survey finds evidence of bundles of practices that could be labelled as predominantly soft or hard HRM. However, the findings also identify a number of establishments that have an HR strategy but do not appear to have adopted either approach. The article goes on to identify the practices common to this middle approach, tentatively labelled ‘strategic non-HRM’. It concludes that firms may adopt a strategic approach to the management of HR which is neither commitment maximizing or cost minimizing but somewhere in between and suggests that this middle ground should be explored in its own right rather than dismissed as merely the ad hoc or piecemeal adoption of HRM. © 1998 John Wiley & Sons, Ltd.

The civil commitment of sex offenders.

The U.S. Supreme Court recently found the Kansas sexual predator statute constitutional. This statute permits the confinement, in mental hospitals, of sex offenders after the completion of their criminal sentences if they have a mental abnormality that might lead to future dangerous behavior. The broad definition of mental abnormality, includes both serious disorders and personality disorders that may reflect only antisocial traits, coupled with the fact that past behavior which occurred years before, is an adequate predicate for confinement. This represents a significant expansion of traditional civil commitment and a blurring of the boundaries of mental illness and deviance. The costs for this confinement are three to four times the cost of customary civil commitment and compete with costs for treatment of the seriously mentally ill.

Investment opportunities and corporate demand for lines of credit

The behavior of a risk neutral corporation in selection of a line of credit is modeled in a new framework where demand for credit lines by a firm arises from the stochastic arrival in continuous time of short-lived opportunities to capture investment projects. The firm needs speed and secrecy to capture projects before competitors. The firm chooses a credit line that balances its up-front commitment cost against the expected extra cost of borrowing in the spot market upon exhaustion of its credit line. The firm's demanded credit line depends upon both relative pricing within the contract and the nature of the firm's growth opportunities. Interestingly, while credit line demand is positively related to business growth prospects, it is potentially negatively related to uncertainty in those prospects.

Friendship: A Metaphor for Moral Advancement?

Latent in the moral teaching of the Catholic Church since Vatican II has been a conception of morality as a life project, a positive force for the shaping of human character. This marks a shift of focus beyond morality as a science of demarcations, separating good actions from evil, the permissible from the forbidden, a method of problem-solving when ambiguity confronts conscience about a particular choice. A broader vision has been sought in which subjects treated under the heading of the moral life can be concluded aptly only by connecting them to the life of holiness. While in some cases it can be difficult to observe a distinction between a treatment of morality and an exhortation to more serious spiritual life, this overlapping of subject matter is not unwelcome.Veritatis Splendor is a recent case in point. While the middle portion of the encyclical offers a very precise analysis of the relations among human acts, conscience, and the moral law, the encyclical begins and ends with meditative chapters in which the moral life is described as nothing less than the road to sanctity. These sections require little familiarity with moral theology to inspire personal response. The pages on martyrdom, for instance, in their evocation of the cost of moral commitment in the modem world, are a striking appeal to the heroic courage that produces saints.A less well-known example of this ‘spiritual’ approach to moral theology has been the incorporation of friendship as a thematic point of reference for the quality of a person’s moral life.

Distressing Aspects of Women's Roles, Vicarious Stress, and Health Consequences

Individuals internalize the roles they play and the statuses they occupy in their social networks. It logically follows that the benefits and costs of women's role commitments may be critically important to their physical and mental health. This literature review focuses on distressing or negative aspects of enacting the specific primary roles of workel wife, and mother. Vicarious stress and inadequate social support for women in these roles may contribute to immuno suppression and disease vulnerability. Some women may choose the sick role as a means of escape from taxing role responsibilities. Future directions for women's health research are suggested, along with adoption of an empowerment model of health.

The contractual nature of budgeting: A transaction cost perspective on the design of budgeting institutions

Viewing budgets as contracts, transaction cost theory focuses on the costs of negotiating and enforcing the myriad political agreements by which policymakers allocate the government's resources. This essay provides an overview of transaction cost theory and its implications for the design of budgeting institutions. It contrasts the behavioral premises (bounded rationality and opportunism) of the transaction cost approach with those of more traditional budgetary theories, and examines whether commitment and agency costs have structured budget actors' institutional choices. Investigation of the usage of key budget instruments- entitlements, multi-year appropriations, and tax expenditures - suggests that Congress has been more discriminating in its institutional choices than is commonly supposed. Sensitivity to the importance of transaction costs would increase the effectiveness of budget reforms.

A Reexamination of the Costs of Firm Commitment and Best Efforts IPOs

AbstractRitter [14] documents that best efforts IPOs are, on average, more costly to issue than firm commitment IPOs. This paper explains the phenomenon. Two component costs of going public are analyzed: underpricing and underwriter compensation. The model, based on a disagreement about firm value between underwriters and issuers, shows that underpricing is higher for firms using best efforts contracts as these firms, on average, are more speculative. Underwriter compensation is hypothesized to be higher for firms using best efforts contracts because of the high costs of market making for these firms in the aftermarket and the high distribution costs associated with the high risk of a failed offer. Empirical tests strongly support the propositions.

Flipper-bands on penguins: what is the cost of a life-long commitment?

Flipper-bands on penguins: what is the cost of a life-long commitment?

Competitive bidding in electricity supply

As significant additional capacity comes on line in the United Kingdom in the next few years [1, 2], a genuine commercially competitive electricity supply market will gradually replace the prevailing somewhat artificial ‘market’ conditions. In genuinely competitive conditions, several producers compete to win a share of the market and bid against each other to supply the grid. The prices bid by suppliers for blocks of generation offered to the grid would reflect what portions of the load curve a supplier hopes to win for each type of plant in its possession. This, in turn, depends on production cost estimates, temporal considerations of system demand variation, unit commitment costs, and commercial considerations such as profit or economic utility maximisation and expectations of competitor behaviour. This is a wholly new situation, and has not been theorised or modelled to any significant extent. The paper develops conceptual models and mathematical tools for a fuller understanding of these issues.

Quality in R&D: It All Began with a Customer's Request

In 1879, Corning people met with Thomas Edison in his laboratory to discuss his requirements for a glass bulb to be used in encasing his new incandescent electric filament. Within a few months, a Corning hand shop was blowing bulbs to Edison's specifications. The letters Edison wrote about the bulb project, which remain in the archives, illustrate the of implementing Corning's first and most important principle, and the definition of quality: Meet the customer's requirements. In the 1980s, as competition became increasingly intense, the company began to look at new ways of managing its affairs. In 1983, Corning's management system was introduced. This system serves to formalize the many activities done in order to the customer's requirements so that none slip through the cracks. It provides new, more challenging performance goals for meeting the customer's requirements 100 percent--on time, the first time and every time. In addition to meet the requirements, Corning's management committee articulated three other principles: error-free work, the new standard of performance; manage by prevention, a new way to think about work; and measure by the cost of Ten activities were also identified as necessary to achieving total quality. They are the action steps: education, recognition, corrective action, teams, cost of quality, events, communication, goals, measure/display, and commitment. Popular wisdom holds that deploying a management into a technical staff group such as Corning's Research, Development and Engineering (RD&E) division, also called the Technology Group, is a hopeless undertaking. The subject has provided much debate among professionals and technology managers alike. Some companies have questioned the value of a management for RD&E groups and have exempted those groups from their company's process. No such exemption was granted at Corning. Some individuals set out to be as invisible as possible, to do the minimum required and hope that the whole thing would go away. It did not. The technology organization at Corning is a highly diverse group, consisting of approximately 26 percent scientists (mostly Ph.D. level), 28 percent technical and administrative support, 26 percent engineers, and 20 percent unionized hourly workers. Implementing the principles and actions was thought to be impossible in such a complex group. But, with no exemption, an attempt had to be made. What follows is the story of the implementation of the 10 actions, what was tried, what was learned and where the organization is, as a result, today. TRAINING WAS VITAL In the beginning, the company realized that training. was vital to the start-up and maintenance of any process. A Quality Institute was formed at the level and six instructors were borrowed from the divisions to serve for two years and teach quality awareness and process to all employees. This two-day course was taught to 28,000 employees, in six languages, around the world. As a result of needs identified by employees in the awareness training, four more courses were developed and taught to all employees: problem solving, communications and group dynamics, and two statistical skills courses. All employees in the Technology Group attended. The scientists and engineers had some serious concerns about all these courses were going to help them do a better job of inventing new products and processes. By and large, the Technology Group was unsatisfied with the training, and some improvement teams (QITs) took matters into their own hands by forming education corrective action teams (EDUCATS). These teams have taught each other everything from how to operate a scanning electron microscope to corporate survival skills. There have been marketing seminars for scientists and science courses for plumbers. …