Decision Making Under Information Asymmetry: Experimental Evidence on Belief Refinements

We explore how individuals make decisions in an operations management setting when there is information asymmetry between the firm and an outside investor. A common assumption in the signaling game literature is that beliefs among the participants in the game are refined using the Intuitive Criterion refinement. Our experimental results provide evidence that the predictive power of this refinement is quite low, and that the Undefeated refinement better captures actual choice behavior. This is surprising because the Intuitive Criterion refinement is the most commonly utilized belief refinement in the literature while the Undefeated refinement is rarely employed. Our results have material implications for both research and practice because the Undefeated and Intuitive Criterion refinements often produce divergent predictions. Our results demonstrate that conformance to the Undefeated and Intuitive Criterion refinements is influenced by changes in the underlying newsvendor model parameters. We also show that adherence to the Undefeated refinement is especially pronounced among subjects who report a high level of understanding of the game and that subjects whose choices conformed with the predictions of the Undefeated refinement were rewarded by investors with higher payoffs in the game. Finally, we demonstrate, through a reexamination of Cachon and Lariviere (2001), how the application of the Undefeated refinement can substantively extend the implications of extant signaling game theory in the operations management literature

Lifting the Veil: The Benefits of Cost Transparency

A firm’s costs are typically tightly-guarded secrets. However, across a field study and six laboratory experiments we identify when and why firms benefit from revealing unit cost information to consumers. A natural field experiment conducted with an online retailer suggests that cost transparency boosts sales. Six subsequent controlled lab experiments replicate this basic effect (Studies 2-6) and provide evidence for why it occurs: just as interpersonal disclosure of intimate information increases attraction, cost transparency by a firm increases brand attraction, in turn boosting consumer purchase interest. This relationship persists even after controlling for perceptions of price fairness and product quality (Study 3). Study 4 suggests that the beneficial effect of cost transparency holds when firms spend more on “less desirable” costs relative to “more desirable” costs. Studies 5-6 show that the effect of cost transparency weakens when high profit margins are made salient. Finally, Study 7 shows that the beneficial effect reverses (i.e. cost transparency backfires) when it is revealed that a firm’s profit margins are high relative to those of its competitors

Creating Reciprocal Value Through Operational Transparency

We investigate whether organizations can create value by introducing visual transparency between consumers and producers. Although operational transparency has been shown to improve consumer perceptions of service value, existing theory posits that increased contact between consumers and producers may diminish work performance. Two field and three laboratory experiments in food service settings suggest that transparency that 1) allows customers to observe operational processes and 2) allows employees to observe customers not only improves customer perceptions, but also increases service quality and efficiency. In our fully specified models, the introduction of reciprocal operational transparency contributed to a 22.2% increase in customer- reported quality and reduced throughput times by 19.2%. Laboratory studies revealed that customers who observed employees engaging in labor perceived greater effort, better appreciated that effort, and valued the service more. Employees who observed customers felt that their work was more appreciated and more impactful, and thus were more satisfied with their work and more willing to exert effort. We find that transparency, by visually revealing operating processes to consumers and beneficiaries to producers, generates a positive feedback loop through which value is created for both parties

'Last-place Aversion': Evidence and Redistributive Implications

We present evidence from laboratory experiments showing that individuals are "last-place averse." Participants choose gambles with the potential to move them out of last place that they reject when randomly placed in other parts of the distribution. In modified-dictator games, participants randomly placed in second-to-last place are the most likely to give money to the person one rank above them instead of the person one rank below. Last-place aversion suggests that low-income individuals might oppose redistribution because it could differentially help the group just beneath them. Using survey data, we show that individuals making just above the minimum wage are the most likely to oppose its increase. Similarly, in the General Social Survey, those above poverty but below median income support redistribution significantly less than their background characteristics would predict

Broadband Multi-wavelength Properties of M87 during the 2017 Event Horizon Telescope Campaign

Abstract: In 2017, the Event Horizon Telescope (EHT) Collaboration succeeded in capturing the first direct image of the center of the M87 galaxy. The asymmetric ring morphology and size are consistent with theoretical expectations for a weakly accreting supermassive black hole of mass ∼6.5 × 109 M ⊙. The EHTC also partnered with several international facilities in space and on the ground, to arrange an extensive, quasi-simultaneous multi-wavelength campaign. This Letter presents the results and analysis of this campaign, as well as the multi-wavelength data as a legacy data repository. We captured M87 in a historically low state, and the core flux dominates over HST-1 at high energies, making it possible to combine core flux constraints with the more spatially precise very long baseline interferometry data. We present the most complete simultaneous multi-wavelength spectrum of the active nucleus to date, and discuss the complexity and caveats of combining data from different spatial scales into one broadband spectrum. We apply two heuristic, isotropic leptonic single-zone models to provide insight into the basic source properties, but conclude that a structured jet is necessary to explain M87’s spectrum. We can exclude that the simultaneous γ-ray emission is produced via inverse Compton emission in the same region producing the EHT mm-band emission, and further conclude that the γ-rays can only be produced in the inner jets (inward of HST-1) if there are strongly particle-dominated regions. Direct synchrotron emission from accelerated protons and secondaries cannot yet be excluded