Risk taking of executives under different incentive contracts: experimental evidence

Classic financial agency theory recommends compensation through stock options rather than shares to counteract excessive risk aversion in agents. In a setting where any kind of risk taking is suboptimal for shareholders, we show that excessive risk taking may occur for one of two reasons: risk preferences or incentives. Even when compensated through restricted company stock, experimental CEOs take large amounts of excessive risk. This contradicts classical financial theory, but can be explained through risk preferences that are not uniform over the probability and outcome spaces, and in particular, risk seeking for small probability gains and large probability losses. Compensation through options further increases risk taking as expected. We show that this effect is driven mainly by the personal asset position of the experimental CEO, thus having deleterious effects on company performance.

Neuropsychological Assessment of Current and Past Crack Cocaine Users

Background: Cognitive changes due to crack cocaine consumption remain unclear Methods: For clarification, 55 subjects were assigned to three groups: control group, crack cocaine current users, and ex-users. Participants were submitted to Mini-Mental State Examination (MMSE) and tasks evaluating executive functioning and verbal memory Mood state was also measured. Intergroup comparisons were carried out. Results: Control group performance on the MMSE was better than that of users and ex-users. Verbal memory performance for logical memory of users was impaired. Ex-users scored lower on DSST and Trail Making Test (Part B). Conclusion: Chronic crack cocaine use seems to disrupt general cognitive functioning (MMSE), verbal memory, and attentional resources, but findings suggest that some of these effects could be reversed by abstinence.

Using Clickers to Teach Biology-Based Material in a Developmental Psychology Class

This talk will describe a study designed to assess if clicker technology during a lesson can improve learning relative to traditional lecture alone. A control group was exposed to the stages of prenatal development via traditional lecture, and an experimental group was exposed to the material via an exercise that used clickers. A pretest showed no difference before the intervention. A posttest showed that the clicker group had significant gains indicating clickers may facilitate learning of science-based material.

Does speed matter? : the impact of the EU membership incentive on rule adoption in minority language rights protection

Denna avhandling tar sin utgångspunkt i ett ifrågasättande av effektiviteten i EU:s konditionalitetspolitik avseende minoritetsrättigheter. Baserat på den rationalistiska teoretiska modellen, External Incentives Model of Governance, syftar denna hypotesprövande avhandling till att förklara om tidsavståndet på det potentiella EU medlemskapet påverkar lagstiftningsnivån avseende minoritetsspråksrättigheter. Mätningen av nivån på lagstiftningen avseende minoritetsspråksrättigheter begränsas till att omfatta icke-diskriminering, användning av minoritetsspråk i officiella sammanhang samt minoriteters språkliga rättigheter i utbildningen. Metodologiskt används ett jämförande angreppssätt både avseende tidsramen för studien, som sträcker sig mellan 2003 och 2010, men även avseende urvalet av stater. På basis av det \"mest lika systemet\" kategoriseras staterna i tre grupper efter deras olika tidsavstånd från det potentiella EU medlemskapet. Hypotesen som prövas är följande: ju kortare tidsavstånd till det potentiella EU medlemskapet desto större sannolikhet att staternas lagstiftningsnivå inom de tre områden som studeras har utvecklats till en hög nivå. Studien visar att hypotesen endast bekräftas delvis. Resultaten avseende icke-diskriminering visar att sambandet mellan tidsavståndet och nivån på lagstiftningen har ökat markant under den undersökta tidsperioden. Detta samband har endast stärkts mellan kategorin av stater som ligger tidsmässigt längst bort ett potentiellt EU medlemskap och de två kategorier som ligger närmare respektive närmast ett potentiellt EU medlemskap. Resultaten avseende användning av minoritetsspråk i officiella sammanhang och minoriteters språkliga rättigheter i utbildningen visar inget respektive nästan inget samband mellan tidsavståndet och utvecklingen på lagstiftningen mellan 2003 och 2010.

Therapeutic Discourse and the American Public Philosophy: On American Liberalism's Troubled Relationship with Psychology

I explore the main currents of postwar American liberalism. One, sociological, emerged in response to the danger of mass movements. Articulated primarily by political sociologists and psychologists and ascendant from the mid-fifties till the mid-seventies, it heralded the "end of ideology." It emphasized stability, elitism, positive science and pluralism; it recast normatively sound politics as logrolling and hard bargaining. I argue that these normative features, attractive when considered in isolation, taken together led to a vicious ad hominem style in accounting for views outside the postwar consensus. It used pseudo-scientific literature in labeling populists, Progressives, Taft conservatives, Goldwaterites, the New Left and others "pathological," viz. mentally ill. Hence, "therapeutic discourse." I argue that philosophical liberalism, which reasserts the role of political theory in working out norms and adjudicating disagreement, is a more profitable way of thinking about and defending from critics liberalism. I take the philosopher John Rawls as the tradition's modern representative. This inquiry is important because the themes of sociological liberalism are making a comeback in American public discourse, and with them perhaps the baggage of therapeutic discourse. I present a cautionary tale.

Incentives for Increased Graduate Enrollments: Incentive Types and Implementation Strategies

Institutions seeking to increase graduate enrollment consider incentivizing program growth. This report outlines ways that institutions allow graduate programs to keep surplus revenue, including tuition rebates, funding proportional to credit-hours, and decreased tax rates. It also examines scholarship programs created to increase admitted graduate student yield, new program offerings, and ongoing unit review.

Organizational design and incentive provision

We model the trade-off between the balance and the strength of incentives implicit in the choice between hierarchical and matrix or- ganizational structures. We show that managerial biases determine which structure is optimal: hierarchical forms are preferred when biases are low, while matrix structures are preferred when biases are high. Moreover, the results show that there is always a level of bias for which matrix design can achieve the expected profit obtained by shareholders if they could directly control the firm. We also show that the main trade-off, i.e., hierarchical versus matrix structure is preserved under asymmetric levels of bias among managers and when low-level workers perceive activities with complementary efforts.

Biased managers, organizational design, and incentive provision

We model the tradeoff between the balance and the strength of incentives implicit in the choice between hierarchical and matrix organizational structures. We show that managerial biases determine which structure is optimal: hierarchical forms are preferred when biases are low, while matrix structures are preferred when biases are high.

Contract enforcement and incentive compatibility in large economies with differential information: the role of exact feasibility

We consider exchange economies with a continuum of agents and differential information about finitely many states of nature. It was proved in Einy, Moreno and Shitovitz (2001) that if we allow for free disposal in the market clearing (feasibility) constraints then an irreducible economy has a competitive (or Walrasian expectations) equilibrium, and moreover, the set of competitive equilibrium allocations coincides with the private core. However when feasibility is defined with free disposal, competitive equilibrium allocations may not be incentive compatible and contracts may not be enforceable (see e.g. Glycopantis, Muir and Yannelis (2002)). This is the main motivation for considering equilibrium solutions with exact feasibility. We first prove that the results in Einy et al. (2001) are still valid without free-disposal. Then we define an incentive compatibility property motivated by the issue of contracts’ execution and we prove that every Pareto optimal exact feasible allocation is incentive compatible, implying that contracts of a competitive or core allocations are enforceable.

Contingent Edis: a new contractual framework for minimizing the risk of incentive failures

Granting economic development incentives (or “EDIs”) has become commonplace throughout the United States, but the efficiency of these mechanisms is generally unwarranted. Both the politicians granting, and the companies seeking, EDIs have incentives to overestimate the EDIs benefits. For politicians, ribbon–cutting ceremonies can be the highly desirable opportunity to please political allies and financiers, and the same time that they demonstrate to the population that they are successful in promoting economic growth – even when the population would be better off otherwise. In turn, businesses are naturally prone to seek governmental aid. This explains in part why EDIs often “fail” (i.e. don’t pay–off). To increase transparency and mitigate the risk of EDI failure, local and state governments across the country have created a number of accountability mechanisms. The general trait of these accountability mechanisms is that they apply controls to some of the sub–risks that underlie the risk of EDI failure. These sub–risks include the companies receiving EDIs not generating the expected number of jobs, not investing enough in their local facilities, not attracting the expected additional businesses investments to the jurisdiction, etc. The problem with such schemes is that they tackle the problem of EDI failure very loosely. They are too narrow and leave multiplier effects uncontrolled. I propose novel contractual framework for implementing accountability mechanisms. My suggestion is to establish controls on the risk of EDI failure itself, leaving its underlying sub–risks uncontrolled. I call this mechanism “Contingent EDIs”, because the EDIs are made contingent on the government achieving a preset target that benchmarks the risk of EDI failure. If the target is met, the EDIs will ex post kick in; if not, then the EDIs never kick in.

Performance of incentive contracts in highway PPP projects in Brazil

Private-Public Partnerships (P.P.P.) is a new contractual model institutionalized in 2004 that could be used to remedy to the infrastructure deficit in Brazil. In a context of a principal and agent relation, the public partner goal is to give incentives to the private partner in the contract so that their interests are aligned. This qualitative research presents the findings of an empirical study examining the performance of incentive PPP contracts in Brazil in the highway sector. The goal is to explain how the contracting parties can align their interests in an environment of asymmetric information. Literature identified the factors that can influence PPP design and efficient incentive contracts. The study assesses the contribution of these factors in the building of PPP contracts by focusing on the case of the first and only PPP signed in the highway sector in Brazil which is the MG-050. The first step is to describe the condition of the highway network and the level of compliance of the private partner with the contract PPP MG-050. The second step is to explain the performance of the private partner and conclude if the interests of both partners were aligned in contractual aspects. On the basis of these findings and the analysis of the contract, the study formulates suggestions to improve the draft of PPP contracts from the perspective of the incentive theory of contracts.

Financial distress as a collapse of incentive scheme

This paper explaina why workers lack motivation near bankruptcy, why they tend to leave companies in financiai distreas, and why thoae who remam require higher compensation. Theae indirect costa of financiai diatresa adie becauae the optimal combination of debt and incentive achem.ea, deaigned to minimize agency costa, ends up underpaying managers when there ia a bankruptcy threat. The paper a1so providea new empirica1 implications on the intera.ction between financiai reatructuring and changea in managerial compensation. Theae predictions are supported by the findings of Gilson and Vetsuypens (1992).