The Politics of Compromise

An organization must select among competing projects that differ in their payoff consequences for its members. Each agent chooses a project and exerts effort affecting its completion time. When one or more projects are complete, the agents select which one to adopt. The selection rule for multiple projects that maximizes ex post welfare leads to inefficiently high polarization; rules that favor later proposals improve upon ex post optimal selections. The optimal degree of favoritism increases in the cost of effort and discount rate. This trade-off informs the design of process rules in standard-setting organizations and helps explain their performance. (JEL C78, D23, D71, D72, D83, L15

The art of brevity

We analyze a class of sender-receiver games with quadratic payoffs, which includes the communication games in Alonso, Dessein and Matouschek (2008) and Rantakari (2008) as special cases, for which the receiver's maximum expected payoff when players have access to arbitrary, mediated communication protocols is attained in one-round of face-to-face, unmediated cheap talk. This result is based on the existence for these games of a communication equilibrium with an infinite number of partitions of the state space. We provide explicit expressions for the maximum expected payoff of the receiver, and illustrate its use by deriving new comparative statics of the quality of optimal communication. For instance, a shift in the underlying uncertainty that reduces expected conflict can worsen the quality of communication

Uncertainty, Delegation and Incentives

Abstract How does imperfect contractibility of preferences in ‡uence the governance of a contractual relationship? We analyze a two-party decision-making problem where the optimal decision is unknown at the time of contracting. In consequence, instead of contracting on the decision directly, the parties need to design a contract that will induce good decision-making in the future. We examine how environmental uncertainty, quality of available performance measures and interim access to information in ‡uence the joint determination of the allocation of authority, use of performance pay and direct controls. We use the results from the model to cast light on (i) the con ‡icting empirical evidence on the risk-incentives tradeo¤ found in work on executive compensation and franchising, (ii) complementarities in organizational design and (iii) the determinants of the choice to delegate

Essays in organizational economics

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2007.Includes bibliographical references (p. 137-143).This thesis consists of three theoretical essays that examine the role of organizational architecture in facilitating organizational adaptation to a changing environment. Chapter 1 develops a model of coordinated adaptation where .an organization needs to respond to incoming information about its environment while at the same time retaining coordination between its activities. It analyzes how the allocation of decision rights inside the organization impacts the quality of decision-making and the accuracy of information transmission when information is both soft and distributed inside the organization. The results show that, contrary to the common intuition, the performance differential between centralized and decentralized decision-making is non-monotone in the importance of coordination. Further, both of these common structures are dominated by asymmetric structures in sufficiently asymmetric environments. Finally, if the incentive conflicts between the participants can be made sufficiently small, centralized decision-making is always dominated by decentralized decision-making. Chapter 2 extends the model developed in Chapter 1 to account for the endogeneity of incoming information and the use of monetary incentives to manage incentive conflicts inside the organization.(cont.) Focusing on the distinction between centralized and decentralized decision-making, the chapter examines how monetary incentives and the allocation of decision rights can be used to together to motivate information acquisition, support accurate communication and to guide decision-making. The results illustrate the robustness of the conclusions of Chapter 1 to the introduction of monetary incentives. In particular, centralization of decision-making authority is preferred only when coordination is sufficiently important and incentive alignment is too costly in terms of the compromised quality of incoming information. Chapter 3 analyzes a simplified two-party decision-making problem with a single decision and examines how environmental uncertainty, quality of available performance measures and interim access to information influence the joint determination of the allocation of authority, use of performance pay and direct controls. It uses the results from the model to cast light on (i) the conflicting empirical evidence on the risk-incentives trade-off found in work on executive compensation and franchising, (ii) complementarities in organizational design and (iii) the determinants of the choice to delegate.by Heikki Rantakari.Ph.D

Fenestral diaphragms and PLVAP associations in liver sinusoidal endothelial cells are developmentally regulated

Endothelial cells contain several nanoscale domains such as caveolae, fenestrations and transendothelial channels, which regulate signaling and transendothelial permeability. These structures can be covered by filter-like diaphragms. A transmembrane PLVAP (plasmalemma vesicle associated protein) protein has been shown to be necessary for the formation of diaphragms. The expression, subcellular localization and fenestra-forming role of PLVAP in liver sinusoidal endothelial cells (LSEC) have remained controversial. Here we show that fenestrations in LSEC contain PLVAP-diaphragms during the fetal angiogenesis, but they lose the diaphragms at birth. Although it is thought that PLVAP only localizes to diaphragms, we found luminal localization of PLVAP in adult LSEC using several imaging techniques. Plvap-deficient mice revealed that the absence of PLVAP and diaphragms did not affect the morphology, the number of fenestrations or the overall vascular architecture in the liver sinusoids. Nevertheless, PLVAP in fetal LSEC (fenestrations with diaphragms) associated with LYVE-1 (lymphatic vessel endothelial hyaluronan receptor 1), neuropilin-1 and VEGFR2 (vascular endothelial growth factor receptor 2), whereas in the adult LSEC (fenestrations without diaphragms) these complexes disappeared. Collectively, our data show that PLVAP can be expressed on endothelial cells without diaphragms, contradict the prevailing concept that biogenesis of fenestrae would be PLVAP-dependent, and reveal previously unknown PLVAP-dependent molecular complexes in LSEC during angiogenesis

The Optimality of Heterogeneous Tournaments

We investigate the effect of employee heterogeneity on the incentive to put forth effort in a market-based tournament. Employers use the tournament's outcome to estimate employees' abilities and accordingly condition their wage offers. Employees put forth effort, because by doing so they increase the probability of outperforming the rival, thereby increasing their ability assessment and thus the wage offer. We demonstrate that the tournament outcome provides more information about employees' abilities in case they are heterogeneous. Thus, employees get a higher incentive to affect the tournament outcome, and employers find it optimal to hire heterogeneous contestants