November 2009

The Effects of Health On Wealth
Americans without health insurance are one major illness away from financial catastrophe. David Dranove and his co-authors found uninsured middle aged people suffer lose nearly half their assets if they experience a major illness.

Keziah Cook

David Dranove

Andrew Sfekas

November 2009

Losing Touch
Why are some managers seemingly incapable of understanding their subordinates’ points of view? Adam Galinsky finds that high-power individuals anchor too heavily on their own perspectives and demonstrate a diminished ability to correctly perceive the perspective of others.

Adam D. Galinsky

Joe C Magee

M. Ena Inesi

Deborah Gruenfeld

November 2009

Beneficial or Detrimental Legislation?
Responding to reports of corrupt business behavior by Enron, Tyco, and other large corporations, the U.S. Congress passed the Sarbanes-Oxley Act in 2002. Thomas Lys suggests that the legislation has fallen short of its goal of controlling illegal business practices.

Daniel Cohen

Aiyesha Dey

Thomas Lys

October 2009

Is Accounting that’s Good for General Motors Good for Detroit?
People interested in government organizations have different information needs than investors in for-profit businesses. Allan Drebin maintains that the objectives of financial reporting for business and government should also be different.

Allan Drebin

October 2009

Tort Reform No Miracle Cure
The lawyers can relax. There’s no need to follow Shakespeare’s advice to kill them after all.

Ronen Avraham

Leemore S. Dafny

Max M. Schanzenbach

August 2009

Beware the Siren’s Song
Most people overestimate their capacity to control their impulses. According to Loran Nordgren, they miscalculate the amount of temptation they can really handle, which in turn leads to a greater likelihood of indulging impulsive or addictive behavior.

Loran Nordgren

Joop van der Pligt

Frenk van Harreveld

July 2009

Rationalization in Decision Making
Our inability to rationalize can constrain our ability to pick a favored option. Timothy Feddersen shows how rationalization impacts choices and can help economists understand why people make decisions that violate standard economic theories.

Vadim Cherepanov

Timothy Feddersen

Alvaro Sandroni

July 2009

Walking Away
With more than 20 percent of U.S. homeowners realizing negative equity, strategic defaults are on the rise. Paola Sapienza notes that moral and social considerations play a crucial role in dissuading householders from taking that route—that is, until potential losses reach a certain threshold.

Luigi Guiso

Paola Sapienza

Luigi Zingales

June 2009

Driven Offshore
In 2002 the U.S. Congress responded to the corporate governance crisis that followed the scandal-ridden behavior of Enron, Tyco, WorldCom, and other high-profile corporations by passing the Sarbanes-Oxley Act (SOX). The legislation set out to restore investors’ confidence in financial markets by improving corporate governance. However, in the case of at least one group of companies, the act seems to have produced unexpected results. A study co-authored by Thomas Lys (Professor of Accounting Information & Management at the Kellogg School of Management) indicates that the managements of poorly governed foreign-domiciled firms responded to the act by closing shop in the United States.

Peter Hostak

Emre Karaoglu

Thomas Lys

Yong Yang

May 2009

The Teddy Bear Effect
Diapers in the boardroom—though surely the topic of a few off-color attempts at office humor—are not hallmarks of corporate excellence. But a cherub-cheeked babyface in the executive office? Depending on its hue, that face may be a naturally-endowed but subtle tool of an accomplished leader atop a seemingly impenetrable hierarchy.

Robert W. Livingston

Nicholas Pearce

April 2009

Growing Socially Responsible Markets
There is an assumption that companies start producing environmentally friendly or “green” products when consumers demand them. As gas prices soar, truck and sport utility vehicle plants close down, and fuel-efficient vehicles become the rage in today’s markets, the reality of this truth is hard to dispute.

Klaus Weber

Kathryn Heinze

Michaela De Soucey

April 2009

The Global “Idea” Market
When we imagine international trade, we conjure up images of supertankers and massive container ships, or maybe ships laden with exotic cargoes of rum, coffee, and spices. But international trade today involves much more than crude oil and bananas. We live in a global marketplace of ideas, when trademarks, patents, and research are moving from Argentina to Tanzania at the speed of light. In the Internet age, people are trading ideas around the world.

Daniel Spulber

April 2009

Why Boycotts Succeed – and Fail
What factors determine whether a boycott will succeed in changing the behavior of its corporate target? And how can activists attack the weak points of their adversaries most effectively?

Brayden King

March 2009

Reforming Credit Reform
The federal budget deficit will nearly triple to a historically unprecedented $1.2 trillion for the 2009 budget year, grim Congressional Budget Office figures reported in January. Thanks to all of the bailouts in the financial industry and the assumption of Fannie Mae and Freddie Mac, the deficit for the first four months of fiscal 2009 exceeded all of 2008.

Deborah Lucas

Marvin Phaup

March 2009

Uncertainty Principles
History has not been kind to price controls. During the French Revolution, caps on food prices that were lower than the cost of production encouraged merchants to keep their wares for themselves or sell them on the black market.

Robert Earle

Karl Schmedders

Tymon Tatur

February 2009

To Sell but not to Missell
Imagine you are at a major electronics chain store, finally ready to purchase that plasma television that would be just perfect for your recreation room. But when you tell the salesperson which model you want to take home, she asks you a few questions about your television room and viewing habits.

Roman Inderst

Marco Ottaviani

February 2009

Predicting Politics
Political prediction markets—in which participants buy and sell “contracts” based on who they think will win an election—accurately predicted Barack Obama’s 2008 victory. New research by Daniel Diermeier (Managerial Economics and Decision Sciences) and colleagues shows that these markets behave similar to financial markets, except when traders’ partisan feelings get in the way.

Saikat Ray Majumdera

Daniel Diermeier

Thomas A Rietz

Luís A. Nunes Amaral

January 2009

When Does One Good Deed Deserve Another?
Rationality suggests that trust should build slowly and that people should proceed cautiously when building a relationship. But what if you only have one chance to decide whether to trust someone?

Madan M. Pillutla

Deepak Malhotra

J. Keith Murnighan

November 2008

Transparent Barriers
In the last days of 2001 a Midwestern university hired an African American coach for its college football team. He was the first African American coach hired for any sport in the university. This decision led to numerous talks and rumors on campus and in the press about the race of the coach and how it may affect the team’s reputation.

Ashleigh Shelby Rosette

Geoffrey J. Leonardelli

Katherine W. Phillips

October 2008

Science as Team Sport
The Large Hadron Collider, accelerating subatomic particles to light speed before crashing them together in spectacular fashion 100 meters beneath the Franco-Swiss border, unites thousands of physicists and engineers from dozens of nations and hundreds of universities in one of the world’s largest scientific collaborations. But calculus, a cornerstone of mathematics that is wielded en masse in the collider’s humming tunnels and glowing control rooms, was developed by just two men, Gottfried Wilhelm Leibniz and Sir Isaac Newton, each of whom worked independently in the latter half of the 17th century.

Benjamin F. Jones

Stefan Wuchty

Brian Uzzi

October 2008

Brand Scandal Spillover
Many of us remember the 1993 Jack-in-the-Box scandal involving tainted hamburger meat: An outbreak of E. coli food poisoning left more than 700 people ill and four dead (New York Times, 1993). In the wake of the scandal, sales at Jack-in-the-Box plummeted. Although this outcome is not surprising, it is less obvious how the scandal affected competitors such as McDonald's and Burger King.

Michelle L. Roehm

Alice M. Tybout

October 2008

Stacking the Deck Against Racism
America prefers to envision itself as a land of equality, where people coexist in a melting pot or a rainbow of colors and cultures. As a society, we value freedom and fairness for all, and we work to fight prejudice and discrimination in our government, our neighborhoods, and wherever else it may hide.

Robert W. Livingston

Brian B. Drwecki

September 2008

Strategic Activism and Nonmarket Strategy
In 1987 Rainforest Action Network (RAN) initiated a nationwide boycott against Burger King. At the core of their demands was the accusation that the contracts with Central American countries for exports of cheap hamburger beef resulted in “rainforests being denuded to provide pasture for cattle” (RAN 2007). The result: a 12 percent drop in Burger King’s sales and the cancellation of $35 million worth of contracts with the tropical countries. This example reflects a trend: activist organizations ceasing to direct their demands to governments and, according to David Baron and Daniel Diermeier, “increasingly turning to private politics to advance their agenda.”

David P. Baron

Daniel Diermeier

August 2008

The Impact of the 2008 Tax Rebates on Consumer Spending
Between May and July of this year, the U.S. Federal Government has distributed more than 90 billion dollars worth of economic stimulus payments, or tax rebates, to American households. Despite much recent concern that households would save the money, we find that households are doing a significant amount of extra spending because of the stimulus payments. The typical family increased their spending on food, mass-merchandise and drug products by 3.5 percent when their rebate arrived, relative to a family yet to receive its rebate. Based on these estimates and on results from previous analysis, we forecast that demand for overall non durable consumption in the second quarter of 2008 has been boosted by 2.4 percent as a direct result of the stimulus payments, and will be held up by around 4.1 percent in the third quarter of 2008. We also study who spent their rebates and on what. We find that low income and low asset households increased their spending at nearly double the rate of the average household. We also find that shoppers are spending a higher share of their rebate in supercenters –like Walmart and Target– relative to their usual behavior. Most people report that they are not spending much of their rebates to increase or maintain their purchases of apparel or groceries, but are instead spending more of their rebates on durable goods and personal services. Finally, the rebates are having different effects in different parts of the country, with people in the Greater Los Angeles and South East regions spending more than people in major metropolitan areas in the rest of the country. Our findings underscore the potency of the economic stimulus payments in stabilizing consumer spending during recessions.

Christian Broda

Jonathan A. Parker

August 2008

Does Malpractice Liability Keep the Doctor Away?
It seems self-evident: states that pass laws protecting doctors from large malpractice awards will attract more doctors than states without malpractice liability limitations. Accordingly, the U.S. Department of Health and Human Services favors limiting the monetary damages available to patients affected by medical malpractice, arguing that the supply of doctors will shrink in states without damage caps and increase in states that enact damage caps. Furthermore, President George W. Bush has proposed a nationwide cap on noneconomic damages available in malpractice lawsuits.

David A. Matsa

July 2008

Professional Forecasters
Imagine you are the chief operating officer for a Fortune 500 technology company and you have to sign off on a major pricing increase for your firm's best-selling product line in two days. All the internal data you have—labor costs, product sales/growth trends, competitors' and vendors' anticipated pricing—support the price increase. But you are still hesitant.

Marco Ottaviani

Peter Norman Sørensen

June 2008

Women and Math, the Gender Gap Bridged
Nine years before the 19th Amendment granted American women the right to vote, a committee of Swedish scientists in 1911 awarded a second Nobel Prize to Marie Curie, a French Pole, in recognition of her discovery of the elements radium and polonium. Nine years before Title IX cracked down on gender discrimination in American education, Soviet cosmonaut Valentina Tereshkova became the first woman to rocket into space, piloting Vostok 6 in 1963. Across generations and cultures, women have reached remarkable levels of scientific and social achievement. Yet five years into the 21st century, the leader of one of the world's most elite universities, in one of the oldest democracies, opined upon "the unfortunate truth" that women probably are not as mentally equipped for work in math and science as men (Summers 2005).

Luigi Guiso

Ferdinando Monte

Paola Sapienza

Luigi Zingales

June 2008

Meeting Strangers and Friends of Friends
To many people, the years spent tangled in the twisted realm of high school romance may have seemed like hard time served in prison. New work by Brian Rogers (Professor of Managerial Economics and Decision Sciences at the Kellogg School of Management) and Matthew Jackson (Professor of Economics at Stanford University) shows that patterns of social relationships found in these and other seemingly distinctive worlds are in fact surprisingly similar.

Matthew O. Jackson

Brian W. Rogers

May 2008

Lobbyists Speak in Numbers
Although the Sarbanes-Oxley Act has come to be known as SOX, it has nothing to do with baseball teams or fancy foot coverings. Like sports teams, however, the law spurs heated debates because it addresses a hot-button topic: corporate accountability. Since SOX was passed in 2002, people have argued whether or not it will indeed improve operations, decrease corporate mismanagement, and thus benefit shareholders. Some insist it will prove detrimental because of high compliance costs and be ineffective in preventing corporate misconduct, and that it will drive companies to list on foreign exchanges.

Yael Hochberg

Paola Sapienza

Annette Vissing-Jørgensen

April 2008

Concrete Threats
During the summer of 2007, a couple of months after finishing a draft of a paper on the Brazilian cement industry, Alberto Salvo, Assistant Professor of Management and Strategy, received a phone call from Elizabeth Farina, President of Brazil's Administrative Council for Economic Defense, an antitrust authority that is part of the Ministry of Justice.

Alberto Salvo

April 2008

A Borderline Question
Snaking 1,900 miles from Tijuana to Matamoros, San Diego to Brownsville, the border between Mexico and the United States might seem large. But its physical size is dwarfed by the passions that it evokes among hundreds of millions of people spread to its north and south. As anxiously scrutinized as they are heavily traversed, those miles of desert, rivers, and fences symbolize to some a gateway to everything that is great about America, while to others they are a gaping leak on a sinking ship. Even the most casual observer of America's front-page headlines or late-night TV monologues knows of big city rallies, millions of immigrants strong, and of the volunteer army of Minutemen, rifle-toting citizens intent on locking down the border. That border and its issues recently brought Congress to a standstill, and may help decide the next American President.

David A. Besanko

Brad Wible

March 2008

Averting a Recession
In the words of Aldous Huxley, “Experience teaches only the teachable.” As United States policymakers attempt to halt the economy’s careening express train to recession, the $168 billion question is: Will the fiscal stimulus plan enacted last month really work? Income tax rebates and business tax breaks trigger déjà vu, with the response to today’s flagging economy bearing striking resemblance to action taken in the dog days of 2001. But this time around, lawmakers are armed with more than just blind faith that putting money in the hands of millions of Americans could make a difference.

David S. Johnson

Jonathan A. Parker

Nicholas S. Souleles

January 2008

Big Fish, Little Fish—Choose Your Pond
"Stockholder and public disapproval of executive pay levels is growing and could lead to government intervention unless directors and managers confront the executive pay issue squarely and come to grips with it," wrote David Kraus in a 1980 Harvard Business Review article. At that time, an average chief executive officer (CEO) earned 42 times more than an average worker, and the ratio had been fairly stable for decades.

Bård Harstad

December 2007

Healthy Choices
Which tactic would motivate you to obey instructions for taking a prescribed medicine: fear of harmful health consequences of not taking the drug or confidence in the eventual health benefits bestowed by the drug?

Angela Y. Lee

Jennifer L. Aaker

November 2007

Treasury Debt and Corporate Bond Rates
The authors relate the yield spread between AAA-rated corporate bonds and Treasury securities to the U.S. government debt-to-GDP ratio—that is, the ratio of the face value of publicly held U.S. government debt to U.S. gross domestic product (GDP). They find that the corporate bond spread is high when the stock of government debt is low while the spread is low when the stock of debt is high. The demand for “convenience” provided by Treasury debt depends on this yield spread, and they provide estimates of the elasticity of demand.

Arvind Krishnamurthy

Annette Vissing-Jørgensen

October 2007

The Value of a Cabinet Position
On May 28, 2007, Japan’s Minister of Agriculture, Toshikatsu Matsuoka, hanged himself in his residence. Accused of corruption and about to face an inquiry in Parliament, Mr. Matsuoka committed suicide. Were the accusations related to the power that his position conveyed? Mr. Matsuoka was facing corruption charges brought about by undeclared political donations.

Takanori Adachi

Yasutora Watanabe

October 2007

Collaboration and Creativity
“What a small world!” is a common response to discovering that a new acquaintance knows someone you do. The small world phenomenon is so common, in fact, that scholars and researchers who specialize in network analysis study what they call “small world networks” to explain the dynamics of various social systems, including friendships, corporate alliances, scientific collaborations, the Internet, and business production teams.

Brian Uzzi

Jarrett Spiro

中文
Français
Español
Deutsch

September 2007

Are Large CEO Severance Packages Justified?
Research supports three motivations behind executive severance agreements: to encourage risk-taking, to provide job insurance, and to compensate CEOs in the instance of confidentiality requirements. While the question of whether or not CEO severance packages are excessive will certainly remain controversial, it is clear that the existence of substantial CEO severance packages has a theoretical foundation.

Thomas Lys

Tjomme O. Rusticus

Ewa Sletten

August 2007

Trust Required Here
Buying a used car is always a difficult experience, in large part because potential buyers have trouble trusting sellers. Trust is an elusive but important component in market transactions. New work by Kent Grayson, a marketing professor at the Kellogg School of Management, and his colleagues focuses on the pension industry in the United Kingdom and Taiwan, and shows that a buyer requires two types of trust: trust in the particular seller (narrow-scope trust) and trust in the broader social context (the market) in which the transaction takes place (broad-scope trust).

Kent Grayson

Devon Johnson

Der-Fa Chen

July 2007

How to Map and Compare Culture Across Firms
Klaus Weber explores how to analyze systematically the language used by companies to communicate with diverse audiences. Comparing the "cultural toolkits" of U.S. and German pharmaceutical companies, he finds that since the 1980s, companies from both countries diverge more in terms of their position in the industry and less on the basis of their country of origin.

Klaus Weber

June 2007

“Acting White,” or Just Acting Rationally?
It is painfully well known that in America, black students lag behind white students in essentially all measures of academic achievement. Especially distressing is that many black students who might otherwise succeed are discouraged from doing so by peers who accuse them of “acting white” in their pursuit of education. David Austen-Smith (Kellogg School’s Department of Managerial Economics & Decision Sciences) and his colleague Roland Fryer Jr. (Harvard University) show that rather than reflecting some inherent dysfunction in individuals or communities, this phenomenon could result from perfectly rational individuals responding in the best way possible to their social and economic realities.

David Austen-Smith

Roland G. Fryer Jr.

June 2007

Do Leaders Matter?
The degree to which leaders matter is an old and unsettled question. Despite centuries of thought and study, this issue remains divisive. What none can doubt, however, is this: leaders die. And when they do, national economies can change in major, unexpected ways, according to research by Benjamin Jones, assistant professor of management and strategy at Kellogg, and his colleague Benjamin Olken (Harvard Society of Fellows). Their report in The Quarterly Journal of Economics provides clear evidence that unpredictable changes in a country’s leadership, due to the executive’s death by accident or illness, can trigger changes in gross domestic product (GDP) growth. In this new light, the grip of massive political institutions on economies appears much less commanding than was previously thought.

Benjamin F. Jones

Benjamin A. Olken

May 2007

Are Healthcare "Report Cards" Good for Patients?
Report cards may improve access to information in the market for healthcare, but also give doctors and hospitals incentives to decline to treat more difficult, severely ill patients. Whether the net impact for society is positive or detrimental depends on whether their financial and health benefits outweigh their costs in terms of quantity, quality, and the appropriateness of the medical treatment they induce.

David Dranove

Daniel Kessler

Mark McClellan

Mark Satterthwaite

May 2007

When What You Know Is Not Enough
Is expertise, like beauty, in the eye of the beholder? Recent work by Professor Katherine Phillips (Kellogg School of Management) and Melissa Thomas-Hunt (Cornell University) explores the role of gender dynamics in the expression of expertise. In particular, Phillips and Thomas-Hunt find that gender expectations interfere with the expression, perception, and use of expertise, harming both the experts and the groups that depend upon them. This research explores the possibility that the possession of expertise lies in the eye of the beholder.

Melissa Thomas-Hunt

Katherine W. Phillips

May 2007

The Rhetoric of Restructuring
How does the language of business describe the ways inherent organizational problems are addressed? Is the decrease in a firm’s workforce size from “restructuring” really an opportunity for those remaining? Or does this language of increased opportunity just sugarcoat the idea of people losing their jobs?

Paul Hirsch

Michaela De Soucey

April 2007

Uncertainty and Independence
Motel chain affiliation is more common than independent ownership when there is greater uncertainty about the prospects for an individual outlet’s success. Factors that contribute to uncertainty for a given motel location include proximity to an interstate highway, room capacity, competition, resident income, traffic volume, and the industry’s economic fluctuation. Under conditions of uncertainty, chain affiliation is beneficial because it helps to stabilize demand for an individual outlet. This research is extendable to the retail sector and service industries, as well as managers analyzing business partnerships and negotiating with suppliers.

Michael J. Mazzeo

April 2007

Can geography affect your bank account?
Do Koreans save more than the British? Are Eastern Europeans more reluctant to invest in stocks? Do Brazilians mistrust financial markets? While modern commerce may be global and pay little attention to national borders, people can retain a kind of economic heritage based on culture that influences their views in provincial ways.

Luigi Guiso

Paola Sapienza

Luigi Zingales

April 2007

Majority Rules
Incentives to share or suppress information arise in a range of small-group deliberations, from one-on-one conversations to corporate committees, juries and Congressional hearings. The factors behind the half-truths, truth modifications and cheap talk are the focus of the Earl Dean Howard Distinguished Professor of Political Economy's current research.

David Austen-Smith

Timothy Feddersen

April 2007

Healthcare Gets a Check-up
At issue is the reality that today's Americans are part of a healthcare system ridden with maladies, says Dranove, whose upcoming book takes readers on a journey through the barriers that prevent many from accessing quality care at reasonable cost. Employing an economic framework, Dranove chronicles the rise and fall of managed care, discusses ongoing changes (for better or worse, as he puts it) and concludes with his recommendations.

David Dranove

April 2007

Learning Curve
There are those who argue that intelligence, as reflected in test scores, is fixed and immutable. No need for additional schooling, they say; if a student performs poorly on standardized tests, not much can help. Kellogg School Professor Karsten Hansen begs to differ. In an award-winning paper published recently in the Journal of Econometrics, Hansen found evidence that an additional year of schooling can indeed boost test scores by up to 2 to 4 percent.

Karsten Hansen

James J. Heckman

Kathleen Mullen

April 2007

Judging the Jury Vote
The Sixth Amendment to the Bill of Rights states that in criminal court cases defendants shall enjoy the right to trial by an "impartial jury of the State." Today, the unanimous vote helps courts to abide by American ideals. Clearly, if any juror has a doubt about a defendant’s guilt, the unanimity rule will protect the subject from wrongful punishment, right? Maybe not.

Timothy Feddersen

Wolfgang Pesendorfer

April 2007

Clause and Effect
Record companies were incensed two years ago by a judge's decision to award $50 million to Universal Music Group. The judge had ruled that MP3.com, an online music service, had violated Universal's copyright by allowing users to listen to music online. Universal, along with four other record companies, had sued the Internet upstart. But Universal's rivals had settled when MP3 presented them with an apparently unbeatable deal.

Kathryn Spier