Information Systems, Incentives and the Timing of Investment

The purpose of this paper is to study the effects of introducing information systems into a model featuring managerial incentive problems and investment opportunities that are mutually exclusive over time. In a principal-agent model in which a manager (agent) has superior information about investment costs, we introduce information systems, the signals from which are available to both the manager and the owner of the investment opportunity, which allow the owner to decrease the manager's informational advantage. We examine (i) the characteristics of the optimal information systems; (ii) the effects of such information systems on the owner's investment and compensation choices and on the value of the investment opportunity to the owner; (iii) the effects of such information systems on the timing of investment; (iv) the effects of such information systems on the overall probability of investment; and (v) when the owner might want to improve the information system at a particular point in time.Labor and Human Capital,

Incentive Problems and Investment Timing Options

We characterize optimal investment and compensation strategies in a model of an investment opportunity with managerial incentive problems, caused by asymmetric information over investment costs and the manager's desire to consume slack, and flexibility over the timing of its acceptance. The flexibility over timing consists of the opportunity to invest immediately, delay investment for one period, or not invest at all. The timing option provides an opportunity to invest when circumstances are most favorable. However, the timing option also gives the manager an incentive to influence the timing of the investment to circumstances in which he gets more slack. Under the assumption that investment costs are distributed independently over time, the optimal investment policy consists of a sequence of target costs, below which investment takes place and above which it does not. The timing option reduce optimal cost targets, relative to the case when no timing option is present. The first cost target is lowered because the compensation function calls for the payment of an amount equal to the manager's option to generate future slack, should investment take place. This increases the cost of investing at the first opportunity, thus reducing its attractiveness. In order to ease the incentive problem at the initial investment opportunity, the second target cost is also lowered, even though no further timing options remain. Making the additional assumption that costs are uniformly distributed, we generate additional insights. We find circumstances in which the profitability of investing initially exceeds the profitability of investing at the second opportunity, a result that is impossible in the first-best context. Second, we identify circumstances under which the initial target cost is increased by incentive effects. Third, we identify the conditions under which the option to wait is effectively shut down when incentive problems exist. The implications of relaxing several key assumptions, such as investment cost independence, the owner's commitment to the manager and not to renegotiate, are explored.Labor and Human Capital,

Children s Acceptance of a Collaborative Problem Solving Game Based on Physical Versus Digital Learning Spaces

[EN] Collaborative problem solving (CPS) is an essential soft skill that should be fostered from a young age. Research shows that a good way of teaching such skills is through video games; however, the success and viability of this method may be affected by the technological platform used. In this work we propose a gameful approach to train CPS skills in the form of the CPSbot framework and describe a study involving 80 primary school children on user experience and acceptance of a game, Quizbot, using three different technological platforms: two purely digital (tabletop and handheld tablets) and another based on tangible interfaces and physical spaces. The results show that physical spaces proved to be more effective than the screen-based platforms in several ways, as well as being considered more fun and easier to use by the children. Finally, we propose a set of design considerations for future gameful CPS systems based on the observations made during this study.Spanish Ministry of Economy and Competitiveness and the European Regional Development Fund (project TIN2014-60077-R); Spanish Ministry of Education, Culture and Sport (with fellowship FPU14/00136) and Conselleria d'Educacio, Cultura i Esport (Generalitat Valenciana, Spain) (grant ACIF/2014/214).Jurdi, S.; García Sanjuan, F.; Nácher-Soler, VE.; Jaén Martínez, FJ. (2018). Children s Acceptance of a Collaborative Problem Solving Game Based on Physical Versus Digital Learning Spaces. Interacting with Computers. 30(3):187-206. https://doi.org/10.1093/iwc/iwy006S18720630

Models of Capital Investments with Private Information and Incentives: a Selective Review

The purpose of this paper is to selectively review research that addresses capital budgeting decisions in settings characterized by dispersed information and incentive problems. The papers are theoretical; they formulate and analyze models that vary in the number of periods considered, the number of economic actors involved, and the number of alternative projects available. The aims of the review are to describe some of the formulations that have been studied, to highlight their key economic and mathematical properties, to reveal their common economic forces, and to collect and organize their basic results. Copyright Blackwell Publishers Ltd 1997.

Capital Rationing and Organizational Slack in Capital Budgeting

This paper reconciles three stylized facts about capital budgeting in firms and shows that they are tied to the presence of asymmetric information among the several members of the firm, each with his or her own objectives and decisions. The facts of interest are: 1. The existence of organizational slack. 2. The "rationing" of resources within organizations. 3. The stated "cut off rate" for accepting capital projects in firms is often greater than the market rate of interest. Organizational slack is defined as the excess of resources allocated over the minimum necessary to accomplish the tasks assigned. Resource rationing is defined as the under-allocation of resources; i.e., an increase in the amount allocated would generate revenues in excess of its costs. Rationing and slack are both manifestations of ex post inefficiencies. An LP model is used to show that these inefficiencies can occur in ex ante efficient organizational designs when asymmetric information is present. The optimal allocation policy involves a hurdle rate criterion in which the hurdle rate is strictly in excess of the cost of capital, thus inducing rationing in some states of the world. Typically, resources are optimally allocated such that slack exists in other states. The optimal allocation policy trades off these two inefficiencies.capital budgeting, capital rationing, organizational slack, agency theory

Incentive Problems and Investment Timing Options

We characterize optimal investment and compensation strategies in a model of an investment opportunity with managerial incentive problems, caused by asymmetric information over investment costs and the manager's desire to consume slack, and flexibility over the timing of its acceptance. The flexibility over timing consists of the opportunity to invest immediately, delay investment for one period, or not invest at all. The timing option provides an opportunity to invest when circumstances are most favorable. However, the timing option also gives the manager an incentive to influence the timing of the investment to circumstances in which he gets more slack. Under the assumption that investment costs are distributed independently over time, the optimal investment policy consists of a sequence of target costs, below which investment takes place and above which it does not. The timing option reduce optimal cost targets, relative to the case when no timing option is present. The first cost target is lowered because the compensation function calls for the payment of an amount equal to the manager's option to generate future slack, should investment take place. This increases the cost of investing at the first opportunity, thus reducing its attractiveness. In order to ease the incentive problem at the initial investment opportunity, the second target cost is also lowered, even though no further timing options remain. Making the additional assumption that costs are uniformly distributed, we generate additional insights. We find circumstances in which the profitability of investing initially exceeds the profitability of investing at the second opportunity, a result that is impossible in the first-best context. Second, we identify circumstances under which the initial target cost is increased by incentive effects. Third, we identify the conditions under which the option to wait is effectively shut down when incentive problems exist. The implications of relaxing several key assumptions, such as investment cost independence, the owner's commitment to the manager and not to renegotiate, are explored