Decision Making & Negotiations

This research examines how the reliance on emotional feelings as a heuristic influences the proposal of offers in negotiations. Results from three experiments based on the classic ultimatum game show that, compared to proposers who do not rely on their feelings, proposers who rely on their feelings make less generous offers in the standard ultimatum game, more generous offers in a variant of the game allowing responders to make counteroffers, and less generous offers in the dictator game where no responses are allowed.

Much of the puzzle of underissuance of national bank notes can be resolved for the period 1880–1900 (the period when detailed, bank-level data are available) by disaggregating, taking account of regulatory limits, and considering differences in banks' opportunity costs cross-sectionally and over time. Banks with poor lending opportunities issued more, within regulatory limits. Banks tended to issue more when bond yields (the backing for notes) were high relative to lending opportunities.

We describe research on a supply chain contracting problem that was sponsored by a major semi-conductor manufacturer. The manufacturer sells products (semi-conductor parts) with varying quality levels through a network of distributors to end consumers (independent computer shops, system configurators, hobbyists, etc.) who have heterogeneous valuations for quality. Since production costs for semi-conductors are essentially independent of quality levels (within a part family), the manufacturer earns much more selling higher quality parts.

What is the effect of option categorization on choosers' satisfaction? A combination of field and laboratory experiments reveals that the mere presence of categories, irrespective of their content, positively influences the satisfaction of choosers who are unfamiliar with the choice domain. This "mere categorization effect" is driven by a greater number of categories signaling greater variety amongst the available options, which allows for a sense of self-determination from choice.

This paper considers a profit-maximizing make-to-order manufacturer that offers multiple products to a market of price and delay sensitive users, using a model that captures three aspects of particular interest: first, the joint use of dynamic pricing and lead-time quotation controls to manage demand; second, the presence of a dual sourcing mode that can expedite orders at a cost; and third, the interaction of the aforementioned demand controls with the operational decisions of sequencing and expediting that the firm must employ to optimize revenues and satisfy the quoted lead times.

Venture capitalists add value to portfolio firms by obtaining and transferring information about senior managers across firms over time. Information transfer occurs on a significant scale and takes place both among a single venture capitalist's portfolio firms and between different venture capitalists' firms via a network of venture capitalists, which venture capitalists use to locate and relocate managers. Cross-sectional differences are associated with differences in the intensity with which venture capitalists network.

I investigate the relationship between liquidity and market efficiency using data from short-horizon binary outcome securities listed on the TradeSports exchange. I find that liquidity does not reduce—and sometimes increases—deviations of prices from financial and sporting event outcomes. One explanation is that limit order traders are naïve about other traders' knowledge and unwittingly bet against them, which can slow the response of prices to information.

We consider a trader who aims to liquidate a large position in the presence of an arbitrageur who hopes to profit from the trader's activity. The arbitrageur is uncertain about the trader's position and learns from observed price fluctuations. This is a dynamic game with asymmetric information. We present an algorithm for computing perfect Bayesian equilibrium behavior and conduct numerical experiments. Our results demonstrate that the trader's strategy differs significantly from one that would be optimal in the absence of the arbitrageur.