Contracting still matters! Or: How to design a letter of intent

Any cooperation that profits from relation-specific investments suffers from the well-known hold-up problem. If investments are not enforceable by an outside authority, the gains fall prey to individual opportunism caused by a free-rider problem. If, in addition, individual investments exhibit positive cross effects, Che and Hausch (1999) provide a negative result and show that contracts cannot overcome the hold up due to a lack of verifiable commitment. This paper develops a mechanism that provides such a commitment device: (1) It introduces an acknowledgement game that procures reliable. (2) It embeds the original contracting problem into two institutional designs - a market based one and a private design - that support enforcement. These two devices reestablish efficient investments as enforceable results of a contract.

A Test chip approach to routine process control

A procedure for determining process control and yield prediction is presented which primarily serves to evaluate the quality and repeatability of critical fabrication steps, but also serves to quantify process capabilities and limitations for future design considerations. This can be accomplished through the use of a specially designed test chip. The test chip is designed for use in determining the process control and fabrication capability of the Microelectronic Engineering Department\u27s fabrication lab of Rochester Institute of Technology

Contracting still matters! Or: how to design a letter of intent

Any cooperation that profits from relation-specific investments suffers from the well-known hold-up problem. If investments are not enforceable by an outside authority, the gains fall prey to individual opportunism caused by a free-rider problem. If, in addition, individual investments exhibit positive cross effects, Che and Hausch (1999) provide a negative result and show that contracts cannot overcome the hold up due to a lack of verifiable commitment. This paper develops a mechanism that provides such a commitment device: (1) It introduces an acknowledgement game that procures reliable. (2) It embeds the original contracting problem into two institutional designs - a market based one and a private design - that support enforcement. These two devices reestablish efficient investments as enforceable results of a contract

State capacity and public goods: institutional change,human capital and growth in early modern Germany

What are the origins and consequences of the state as a provider of public goods? We study legal reforms that established mass public education and increased state capacity in German cities during the 1500s. These fundamental changes in public goods provision occurred where ideological competition during the Protestant Reformation interacted with popular politics at the local level. We document that cities that formalized public goods provision in the 1500s began differentially producing and attracting upper tail human capital and grew to be significantly larger in the long-run. We study plague outbreaks in a narrow time period as exogenous shocks to local politics and find support for a causal interpretation of the relationship between public goods institutions, human capital, and growth. More broadly, we provide evidence on the origins of state capacity directly targeting welfare improvement

The research university, invention and industry: evidence from German history

We examine the role of universities in knowledge production and industrial change using historical evidence. Political shocks led to a profound pro-science shift in German universities around 1800. To study the consequences, we construct novel microdata. We find that invention and manufacturing developed similarly in cities closer to and farther from universities in the 1700s and shifted towards universities and accelerated in the early 1800s. The shift in manufacturing was strongest in new and high knowledge industries. After 1800, the adoption of mechanized technology and the number and share of firms winning international awards for innovation were higher near universities

The Rate and Direction of Invention in the British Industrial Revolution: Incentives and Institutions

During the Industrial Revolution technological progress and innovation became the main drivers of economic growth. But why was Britain the technological leader? We argue that one hitherto little recognized British advantage was the supply of highly skilled, mechanically able craftsmen who were able to adapt, implement, improve, and tweak new technologies and who provided the micro inventions necessary to make macro inventions highly productive and remunerative. Using a sample of 759 of these mechanics and engineers, we study the incentives and institutions that facilitated the high rate of inventive activity during the Industrial Revolution. First, apprenticeship was the dominant form of skill formation. Formal education played only a minor role. Second, many skilled workmen relied on secrecy and first-mover advantages to reap the benefits of their innovations. Over 40 percent of the sample here never took out a patent. Third, skilled workmen in Britain often published their work and engaged in debates over contemporary technological and social questions. In short, they were affected by the Enlightenment culture. Finally, patterns differ for the textile sector; therefore, any inferences from textiles about the whole economy are likely to be misleading.

Pipeline Risk in Leveraged Loan Syndication

What is the economic role played by arrangers of leveraged loans, and what are the risks they face? We provide evidence that arrangers solve a demand discovery problem. Investors have incentives to feign little interest in the loan to obtain better terms. To deter such behavior, arrangers underprice hot deals and ration investors on cold deals. The risk associated with demand discovery is often shared between borrowers and arrangers. One implication is that to ration investors on cold deals, arrangers retain larger loan shares. This motive for retention is different from the monitoring incentive motive previously considered in the literature

How and when can economic skills enhance cooperation?

Conventional wisdom has it that economic training and education tends to produce less cooperative people - where cooperation means following group-oriented goals. This issue has attracted particular attention in discussions of the current economic crisis where it was asked if increasing marketization of societies has created an environment encouraging amoral selfish behavior of financial intermediaries and other economic agents. We provide some evidence against this claim with the help of an experiment, using an investment game with a public-goods character. Modest guidance of strategic abilities increases the degree of cooperation if the institutional setting permits reputation building. We thus conclude that economic practice can enhance cooperation in a socially stable environment

Correlation of brand experience and brand love using the example of FlixBus

Nowadays, companies face more and more difficulties to differentiate themselves from competitors. The strategical usage of brand experience, to evoke feelings of love towards the brand, can make a difference. The topic of brand experience and brand love has been researched in numerous papers. However, no decisive brand experience items were identified, which have the most impact on brand love and other connected concepts like satisfaction or brand trust. This study examines the theoretical concepts of brand experience and applies them to the mobility brand FlixBus. The research conducted in this study was of quantitative nature, in form of an online survey. Within 12 days, a survey was shared in social media networks, together with a five-euro FlixBus voucher for completing the survey. The survey was also distributed among FlixBus employees via the intranet for 12 days. Lastly, a FlixBus raffle was started on the companies’ Facebook page, where customers could win one out of five free rides. In total, n = 2,481 people participated in the study. The outcome of the study was, that brand experience directly impacts brand love. Satisfaction and brand trust were identified as connecting links between the two concepts. However, in this study brand loyalty is significantly less influenced by brand experience and brand love than stated in related literature. It was discovered that the quality of integrated processes, the relationship to the individual customer and the support of the relationship among customers had the greatest impact on derived concepts. It was also discovered that the touchpoints marketing, bus stop and the bus ride itself were most impactful for derived concepts

Anyone up for helping the fisherman's wife? More solidarity with accidental misery than with man-made misery

We examine the willingness to donate depending on whether “misery” is random generated or self-inflicted by too high demands in bilateral negotiations. We find that randomness has a positive influence on the total amount of donation. In case of self-inflicted “misery” we observe that the subject who may have caused the unfavourable situation receives significantly less than the perceived innocent subject