Internal Hierarchy and Stable Coalition Structures

When an agent decides whether to join a coalition or not, she must consider both i) the expected strength of the coalition and ii) her position in the vertical structure within the coalition. We establish that there exists a positive relationship between the degree of inequality in remuneration across ranks within coalitions and the number of coalitions to be formed. When coalition size is unrestricted, in all stable systems the endogenous coalitions must be mixed and balanced in terms of members' abilities, with no segregation. When coalitions must have a fixed finite size, stable systems display segregation by clusters while maintaining the aforesaid feature within clusters.Stable Systems, Abilities, Hierarchy, Cyclic Partition

Socially Structured Games and their Applications

In this paper we generalize the concept of a non-transferable utility game by introducing the concept of a socially structured game.A socially structured game is given by a set of players, a possibly empty collection of internal organizations on any subset of players, for any internal organization a set of attainable payo.s and a function on the collection of all internal organizations measuring the power of every player within the internal organization.Any socially structured game induces a non-transferable utility game.In the derived nontransferable utility game, all information concerning the dependence of attainable payo.s on the internal organization gets lost.We show this information to be useful for studying non-emptiness and re.nements of the core. For a socially structured game we generalize the concept of p-balancedness to social stability and show that a socially stable game has a non-empty socially stable core.In order to derive this result, we formulate a new intersection theorem that generalizes the KKM-Shapley intersection theorem.The socially stable core is a subset of the core of the game.We give an example of a socially structured game that satis.es social stability, whose induced non-transferable utility game therefore has a non-empty core, but does not satisfy p-balanced for any choice of p.The usefulness of the new concept is illustrated by some applications and examples.In particular we de.ne a socially structured game, whose unique element of the socially stable core corresponds to the Cournot-Nash equilibrium of a Cournot duopoly.This places the paper in the Nash research program, looking for a unifying approach to cooperative and non-cooperative behavior in which each theory helps to justify and clarify the other.game theory

Group Stability of Hierarchies in Games with Spillovers

In a recent paper, Demange (2004) has shown that hierarchical organizations can guarantee the existence of stable cooperative outcomes by appropriately allocating the blocking power to a subset of coalitions, the “teams”. This paper extends the analysis of Demange to cooperative problems with spillovers. We show that if blocking coalitions have “pessimistic expectations” on the reaction of outsiders, in all cooperative problems there exists an allocation which is blocked by no team. We also study the case of ”passive expectations”, for which the same result holds in all games with negative spillovers, while stable allocations may fail to exist in games with positive spillovers. In the latter class of games, however, hierarchies are shown to be the most stable organizational forms.Organizational design, networks, group stability, spillovers.

On group stability in hierarchies and networks

A hierarchical structure is a widespread organizational form in many areas. My aim in this paper is to provide a rationale for this fact based on two premises. First, a group organizes itself so as to achieve efficient coordination. Second, efficient coordination is achieved only if subgroups as well as individuals agree to cooperate. Even in situations in which there are gains to coordination, the agreement of each possible subgroup may be impossible to reach, resulting in instabilities. I argue that a hierarchical organization avoids such instabilities by distributing in an optimal way autonomy and blocking power to a restricted set of subgroups. Comparisons with nondirected networks are drawn.Efficient Coordination; Instabilities; Hierarchical structure

Policy entrepreneurship in UK central government: The behavioural insights team and the use of randomized controlled trials

What factors explain the success of the UK Cabinet Office’s Behavioural Insights Team? To answer this question, this article applies insights from organizational theory, particularly accounts of change agents. Change agents are able—with senior sponsorship—to foster innovation by determination and skill: they win allies and circumvent more traditional bureaucratic procedures. Although Behavioural Insights Team is a change agent—maybe even a skunkworks unit—not all the facilitating factors identified in the literature apply in this central government context. Key factors are its willingness to work in a non-hierarchical way, skills at forming alliances, and the ability to form good relationships with expert audiences. It has been able to promote a more entrepreneurial approach to government by using randomized controlled trials as a robust method of policy evaluation

Other People\u27s Money: The Effects of Ownership on Compensation Strategy and Executive Pay

In this paper we develop and test hypotheses based on agency theory and managerial capitalism to address the question of whether firms\u27 compensation strategies are designed to motivate actions in the interests of equity holders or those of management. We examined differences in the organizational incentive structure of lower-level executives in management-controlled, owner controlled, and owner-managed firms. We found that when managers controlled the firm, there was pervasively weak incentive alignment for managers within the hierarchy and that, beyond base pay, they were able to extract compensation premiums through bonuses and long-term incentives, in spite of the fact that their firms did not demonstrate better economic performance than other types of firms. We were also able to demonstrate that equity holders pay substantial agency costs in management-controlled firms compared with owner-controlled firms. We end with a discussion of the organizational context for rationalizing executive compensation and the role of compensation consultants

Rationalizability for Social Environments

Social environments constitute a framework in which it is possible to study how groups of agents interact in a society. The framework is general enough to analyse both non-cooperative and cooperative games. We identify a number of shortcomings of existing solution concepts that are used for social environments and propose a new concept called social rationalizability. The concept aims to identify the consequences of common knowledge of rationality and farsightedness within the framework of social environments. The set of socially rationalizable outcomes is shown to be non-empty for all social environments and it can be computed by an iterative reduction procedure. We introduce a definition of coalitional rationality for social environments and show that it is satisfied by social rationalizability