This paper applies the theory of aspiration adaptation to industrial economics. It is motivated by the question, frequently raised in the context of theoretical and empirical research on industrial innovation, of what triggers a firm's innovative activity. We develop a model of the management's...

A model of new-product diffusion is proposed in which a site-percolation dynamics represents socially-driven diffusion of knowledge about the product's characteristics in a population of potential buyers. A consumer buys the new product if her valuation of it is not below the price of the...

Incentives are widely used to increase people's effort and thus performance. Whileacademic achievement depends heavily on effort, there is little empirical evidence onhow students respond to incentives other than grades and monetary rewards. We drawon two natural experiments that occurred at a...

We benefit from the Bologna reform to show how course and program policies affect academic achievement. We examine two similar programs at the business school of a major European university, which were both reformed. Time lags in the reforms allow us to estimate the difference in the differences...

We examine in a lab experiment whether people are more honest in public than in private. We find that outcome-minded subjects lie less in public to conform with expectations about others' behavior, which are ironically false. Rule-minded subjects, in turn, do not respond to public scrutiny....

We conducted a laboratory experiment to examine how honesty depends on social distance. Participants cast dice and reported the outcomes to allocate money between themselves and fellow students or the socially distant experimenter. They could lie about outcomes to earn more money. We found that...

Capital rationing and reporting are often combined to allocate resources in firms. Trust in managers' honest reports and distrustful control create an interesting tension. How do managers respond to this ambivalence of trust and control? We develop an analytical model to predict, first, that...

The present note shows that the concept of a distribution economy (Hildenbrand (1974)) is closely related to a framework of an exchange economy in which the agents’ individual characteristics (i.e. preferences and endowments) are random (Hildenbrand (1971), Bhattacharya and Majumdar (1973),...

In the context of standard two-period pure-exchange economies with sequential trade, this paper proposes a decentralized coordination mechanism for equilibriumexpectations, facilitated by local interactions between agents. Interactions are modelled stochastically by specifying a family of...