Education as advertisement

The paper perceives education as a type of money burning activity, much like advertisement, and examines its effect on social welfare. In a model where the employer's job assignment also functions as a signal a la Waldman (1984), there exists a separating equilibrium in which education credibly conveys information even when the single-crossing property fails to hold. Moreover, we also show that education as advertisement can actually be welfare-improving. This result indicates that education can be meaningful and even socially desirable even if its sole role is simply to waste resources.

Contracting with Self-Esteem Concerns

It is widely accepted in social psychology that the need to maintain and enhance self-esteem is a fundamental human motive. We incorporate this factor into an otherwise ordinary principal-agent framework and examine its impact on the optimal incentive scheme and the agent's behavior, especially focusing on a form of intrapersonal strategy known as self-handicapping. Incorporating self-esteem concerns into a contracting situation yields an implication that goes against the conventional wisdom: the standard tradeoff between risk and incentives may break down in the presence of self-esteem concerns because uncertainty mitigates the need for self-handicapping, providing a potential reason for why we do not empirically observe this tradeoff in a robust manner. We characterize an intuitive condition for this anomaly to arise and present a set of testable implications. Along the way, we also show that the fragility of self-esteem (the variance) is just as important as its level (the mean) in selecting agents. Finally, this simple logic is applied to a team problem to show why and how people are better motivated under team production than under individual production.Self-esteem, Bayesian learning, Tradeoff between risk and incentives, Contract

Autonomy and Motivation: A Dual-Self Perspective

This paper provides a simple autonomy-based model of human motivation in which a decision maker with divided selves must perform some task. The key presumption of the model is that the brain is not a unitary system which is equipped to achieve a single goal in a systematic manner; rather, it is more like an organization which is hampered by several constraints such as preference incongruence and incomplete exchange (or imperfect recall) of information. Due to these constraints, the model yields behavioral patterns that are consistent with various stylized facts of human motivation, mostly found in social psychology. The main findings of the paper are: (i) more autonomy induces more motivation; (ii) complex tasks are susceptible to motivation crowding out; (iii) small rewards are detrimental to motivation; (iv) intrinsically interesting tasks are susceptible to motivation crowding out.

Decisiveness

This paper investigates how the presence of strong leadership influences an organization's ability to acquire and process information. The key concept is the leader's decisiveness. A decisive leader can make a bold move in response to a large change in the underlying landscape, whereas an indecisive leader biases her position excessively towards the status quo. An organization led by an indecisive leader needs to accumulate unrealistically strong evidence before it changes the course of action, thereby hindering the organization's ability to adapt to a changing environment. The analysis identifies several attributes and environmental factors that impair one's decisiveness and illuminates how leadership emerges or fades in organizations. The paper also sheds light on a classical issue of whether leaders can be made, rather than are born: our answer is partially `yes' in that mutual trust among members of the organization is a critical ingredient of effective leadership.Decisiveness, Transformational leadership, Charismatic leadership, Information acquisition, Career concerns.

FDI may help rival firms

This paper presents a two-country model of duopolistic market with vertical relations which leads to a paradoxical result: when upstream firms possess sufficient bargaining power, cost-reducing FDI may actually enhance the rival firm's profit.Cournot competition

Domestic Competition and Foreign Direct Investment in Unionized Oligopoly

It is often argued, though mostly informally, that outward foreign direct investment (FDI) is a synonym for the export of employment and thus detrimental to the home economy. To see whether and under what conditions this intuition indeed holds true, we construct a model of unionized duopoly and examine welfare implications of outward FDI by paying special attention to the role of domestic competition. We find that the welfare effect of FDI is largely non-monotonic, and there are indeed such things as gexcessive FDI.h We also show that, when FDI reduces welfare, this negative effect arises more at the expense of consumers rather than the unions: in fact, quite contrary to the popular belief, FDI may actually benefit the unions because it serves to soften price competition between them. The paper points out that welfare effects of outward FDI hinges crucially on the nature of domestic competition, and policymakers must carefully take this aspect into consideration.