Columbia Business School Research

In settings such as investing for retirement or choosing a drug plan, individuals typically face a large number of options. In this paper, we analyze how the size of the choice set influences which alternative is selected. We present both laboratory experiments and field data that suggest larger choice sets induce a stronger preference for simple, easy-to-understand options.

In the customer expectations arena, relatively little attention has been paid to the impact on expectations of variation in cultural variables unique to a country. Here the authors focus on one country, India, and a major cultural influence there — the extent of belief in karma. Prior research in the United States suggests that disconfirmation sensitivity lowers expectations. Here the authors examine whether belief in karma and, consequently, having a long-term orientation, counteracts the tendency to lower expectations in two studies that measure and prime respondents' belief in karma.

We present a broad-based, consumer-centric view of innovation — referred to as "perceived firm innovativeness" (PFI). PFI is conceptualized as the consumer's perception of an enduring firm capability that results in novel, creative, and impactful ideas and solutions. We develop and validate a PFI scale and show that PFI impacts consumer loyalty via two processing routes: a functional-cognitive route and an affective-experiential route.

This article studies optimal mortgage design in a continuous-time setting with volatile and privately observable income, costly foreclosure, and a stochastic market interest rate. We show that the features of the optimal mortgage are consistent with an option adjustable-rate mortgage (option ARM). Under the optimal contract, the borrower is given discretion of how much to repay until his balance reaches a certain limit. The default rates and interest rate payment on the mortgage correlate positively with the market interest rate.

On a visit to any major U.S. department store, consumers can observe vendor shops (typically for cosmetics, apparel, apparel accessories, electronics, and toys), each selling a particular brand exclusively and designed to reflect the image of that brand. For these vendor shops, also called boutiques or "stores within a store," retailers rent out retail space to the respective manufacturers and give them complete autonomy over retail-level decisions, such as pricing and in-store service.

Discussion of different marketing strategies to employ during difficult times.  (Reprinted from "Marketing in Difficult Times," Effective Executive, July, 2009, pp. 11-18.)

As the largest and fastest growing transition economy in the world, China's entrance onto the global stage has been swift and dramatic. As such, almost every facet of entrepreneurship, from the identification of nascent opportunities to the challenges of managing triple-digit growth to the transformation of firms from dying to emerging industries, can be studied as natural experiments. The four papers in this issue are dedicated to exploring entrepreneurial innovation in the Chinese private economy.

Behavioral endocrinology research suggests that testosterone may play a role in moral decision making. Studies involving human and nonhuman animals indicate that high basal testosterone is associated with decreased aversion to risk and an increased threshold for conflict, fear, stress, and threat. We tested the role of testosterone in moral decision making. We predicted and found that individuals high in testosterone are more likely to make utilitarian decisions—specifically when doing so involves acts of aggression and social cost.

We develop a structural demand model that endogenously captures the effect of out-of-stocks on customer choice by simulating a time-varying set of available alternatives. Our estimation method uses store-level data on sales and partial information on product availability. Our model allows for flexible substitution patterns, which are based on utility maximization principles and can accommodate categorical and continuous product characteristics.

The authors consider how uncertainty over protest occurrence shapes the strategic interaction between companies and activists. Analyzing Wal‐Mart, the authors find support for their theory that companies respond to this uncertainty through a “test for protest” approach. In Wal‐Mart’s case, this consists of low‐cost probes in the form of new store proposals. They then withdraw if they face protests, especially when those protests signal future problems. Wal‐Mart is more likely to open stores that are particularly profitable, even if they are protested.

Communicators' tuning of a message to suit their audience's attitude about a target can bias their subsequent memory of the target. Research shows that this effect occurs to the extent that the message serves the creation of a shared reality with the audience. In two experiments we investigated the motivational processes underlying such audience-tuning memory biases. Experiment 1 found that when audience tuning was motivated by a shared-reality motive (vs.

Negotiators in regulatory fit report feeling right about an upcoming negotiation more than those in non-fit, and this intensifies their responses to negotiation preparation (Appelt et al. in Soc Cogn 27(3), 365-384, 2009). High assessors emphasize critical evaluation and being right (Higgins et al. in Advances in experimental social psychology, Vol 35, pp 293-344, 2003).

Valuation involves forecasting payoffs and discounting expected payoffs for risk. Forecasting is often seen as the province of the statistician, risk determination the province of asset pricing. This paper elaborates on the idea that financial forecasting, risk determination and valuation are a matter of accounting. Accounting not only provides information to forecast payoffs but also specifies the payoffs to be forecasted.

We present evidence that reassigning tasks among agents can alleviate moral hazard in communication. A rotation policy that routinely reassigns loan officers to borrowers of a commercial bank affects the officers' reporting behavior. When an officer anticipates rotation, reports are more accurate and contain more bad news about the borrower's repayment prospects. As a result, the rotation policy makes bank lending decisions more sensitive to officer reports.

This paper argues that the monetary policy that is appropriate during an episode of financial market disruption is likely to be quite different than in times of normal market functioning. When financial markets experience a significant disruption, a systematic approach to risk management requires policymakers to be preemptive in responding to the macroeconomic implications of incoming financial market information, and decisive actions may be required to reduce the likelihood of an adverse feedback loop.

We document the market response to an unexpected announcement of proposed sales of government-owned shares in China. In contrast to the "privatization premium" found in earlier work, we find a negative effect of government ownership on returns at the announcement date and a symmetric positive effect in response to the announced cancellation of the government sell-off.

The interest in social networks among marketing scholars and practitioners has sharply increased in the last decade. One social network of which network scholars increasingly recognize the unique value is the academic collaboration (coauthor) network.

Two studies examined the impact of self-reported use of promotion- and prevention-related strategies when making “risky” or “conservative” decisions about economic reform. Chronic strength of prevention focus (Study 1) or experimentally induced prevention focus (Study 2) was associated with using strategic vigilance in decision making, whereas chronic strength of promotion focus (Study 1) or experimentally induced promotion focus (Study 2) was associated with using strategic eagerness (when economic conditions were perceived as not so good).

Previous investigators argued that increasing 5-year survival for cancer patients should not be taken as evidence of improved prevention, screening, or therapy, because they found little correlation between the change in 5-year survival for a specific tumor and the change in tumor-related mortality. However, they did not control for the change in incidence, which influences mortality and is correlated with 5-year survival. The purpose of this study was to reexamine the question of whether increasing 5-year survival rates constitute evidence of success against cancer.

The paper explores the conditions that determine the effect of rule enforcement policies that imply an attempt to punish all the visible violations of the rule. We start with a simple game theoretic analysis that highlights the value of gentle COntinuous Punishment (Gentle COP) policies. If the subjects of the rule are rational, Gentle COP can eliminate violations even when the rule enforcer has limited resources. The second part of the paper uses simulations to examine the robustness of Gentle COP policies when the subjects of the rule are adaptive learners.

Trade reform conditions are common in IMF supported programs. Of the 99 countries that had IMF programs during 1993–2003, 77 had trade reform conditions in their programs. Since the WTO has not been found especially effective in promoting trade openness for most developing countries, it is of great interest to see if the IMF has been more effective as it combines carrots and sticks not available to the WTO. Yet, the effectiveness of these trade conditions has not been systematically studied. Using a unique dataset, this paper provides such an assessment.

Background: It has been shown that fairness perceptions have a strong impact on health, especially under conditions of great work stress. The aim of this study was to extend previous research in studying whether working in high justice workplace would protect from health effects following environmental stressors outside work.

Despite the major advances in information technology that have shaped the recent wave of globalization, openness to trade is still a political choice, and trade policy can change with shifts in domestic political equilibria. This paper suggests that a particular threat and a limiting factor to globalization and its future developments may be militarist sentiments that appear to be on the rise among many nations around the globe today.

We study the distortions of industrial organization caused by entry regulation. We take advantage of heterogeneity across industries in their natural barriers and growth opportunities to examine whether industries are differentially affected in countries according to entry regulation. First, we consider the effect of entry regulation on the (static) industry structure. We find that regulation has a greater impact in industries with lower natural barriers to entry, both on the number of firms and on the average size of firms.

We study the structure of optimal wedges and capital taxes in a dynamic Mirrlees economy with endogenous distribution of skills. Human capital is a private, stochastic state variable that drives the skill process of each individual. Building on the findings of the labor literature, we construct a tractable life-cycle model of human capital evolution with risky investment and stochastic depreciation.

In this paper, we measure the extent to which subjective and objective evaluations of new teachers in New York City can predict their future impacts on student achievement. Specifically, we examine evaluations of applicants to an alternative certification program, evaluations of new teachers by mentors that work with them during their first year, and evaluations based on student achievement data from their first year of teaching. We use a large sample, relative to prior work, and, unlike other studies (with the exception of John H. Tyler et al.

We consider an agent interacting with an unmodeled environment. At each time, the agent makes an observation, takes an action, and incurs a cost. Its actions can influence future observations and costs. The goal is to minimize the long-term average cost. We propose a novel algorithm, known as the active LZ algorithm, for optimal control based on ideas from the Lempel-Ziv scheme for universal data compression and prediction.

We establish that the min-sum message-passing algorithm and its asynchronous variants converge for a large class of unconstrained convex optimization problems, generalizing existing results for pairwise quadratic optimization problems. The main sufficient condition is that of scaled diagonal dominance. This condition is similar to known sufficient conditions for asynchronous convergence of other decentralized optimization algorithms, such as coordinate descent and gradient descent.

Social commerce is an emerging trend in which sellers are connected in online social networks, and where sellers are individuals instead of firms. This paper examines the economic value implications of a social network between sellers in a large online social commerce marketplace. In this marketplace each seller creates his or her own shop, and network ties between sellers are directed hyperlinks between their shops.

If an investor wants to form a portfolio of risky assets and can exert effort to collect information on the future value of these assets before he invests, which assets should he learn about? The best assets to acquire information about are ones the investor expects to hold. But the assets the investor holds depend on the information he observes. We build a framework to solve jointly for investment and information choices, with general preferences and information cost functions.

Differentiated product models are predicated on the belief that a product's utility can be derived from the summation of utilities for its individual attributes. In one framed field experiment and two natural field experiments, we test this assumption by experimentally manipulating the order of attribute presentation in the product customization process of custom-made suits and automobiles.

The standard analysis of the efficient management of income taxes and debt assumes a benevolent government and ignores potential distortions arising from rent-seeking politicians. This paper departs from this framework by assuming that a rent-seeking politician chooses policies. If the politician chooses extractive policies, citizens throw him out of power. We analyze the efficient sustainable equilibrium. Unlike in the standard economy, temporary economic shocks generate volatile and persistent changes in taxes along the equilibrium path.