Showing papers by "Roland Strausz published in 2010"
TL;DR: In this article, it was shown that, if one considers the buyers' buying decision explicitly, a separating equilibrium with imperfect certification does exist, and that imperfect certification prevents unraveling so that equilibrium with full separation does not exist.
Abstract: Viscusi (1978) shows how, in markets with quality uncertainty, perfect certification results in separation from top down due to an unraveling process similar to Akerlof (1970). De and Nabar (1991) argue that imperfect certification prevents unraveling so that equilibria with full separation do not exist. This note shows that, if one considers the buyers' buying decision explicitly, a separating equilibrium with imperfect certification does exist.
3 citations
TL;DR: In this article, the authors study the optimal hierarchical structure of an organization under limited commitment, where the organization cannot make a long term commitment to wages and output levels, while it can commit to its hierarchical structure.
Abstract: We study the optimal hierarchical structure of an organization under limited commitment. The organization cannot make a long term commitment to wages and output levels, while it can commit to its hierarchical structure. We show that the optimal hierarchical structure is horizontal when it is highly likely that the employees are efficient or inefficient. By contrast, when such likelihood is intermediate or output does not expand very fast over time, the optimal hierarchical structure is vertical - with a vertical hierarchy, the organization can mitigate dynamic incentive problems linked to limited commitment.
2 citations