MANAGERIAL ECONOMICS & DECISION SCIENCES; SOCIAL ENTERPRISE
Wendell Hobbs Professor of Managerial Economics & Decision Sciences
Director of Social Enterprise at Kellogg Program
Crisis Management
Political Economy/Design
Public Management
Strategy in Non-Market Environments
Voting Systems
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Wall Street Journal: Top Small Workplaces 2009 - 9/28/2009
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Economist Intelligence Unit: Executive Briefing: Rationalization in decision making - 8/17/2009
New York Times: When Duty Calls: The Value of Voting, Beyond Politics - 11/5/2008
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Full speed ahead - 10/2/2009
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Kellogg student and alum awarded for outstanding service - 5/22/2008
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Steiner’s principal objection to our paper is that deliberators in a committee are permitted to speak strategically whereas deliberative theory requires ‘that actors do not lie but are truthful and authentic in their statements’. In this response we observe that such a prescription is relevant only to the extent that individuals might be expected to behave otherwise. Our paper explores conditions under which deliberators’ strategic (descriptive) incentives are aligned with the (prescriptive) advice to tell the truth.
This paper focuses on developing a new methodology adding an incentive to behave ethically into a standard voting game. In this paper, we relax one of the central assumptions in game theory: that agents' payoffs are exogenously determined by the outcomes of the game. We develop a methodology in which agents' payoffs in a game are partly determined by endogenously generated preferences over actions. In order to predict outcomes we develop a solution concept we call consistency linking agents' preferences with actual behavior in a manner analogous to Nash equilibrium. We use this methodology to analyze a model of participation in elections in which voting is costly and no vote is ever pivotal. The resulting model delivers high turnout and comparative statics that are consistent with strategic behavior.
This project applies the basic ethical game methodology we developed in an earlier paper to the problem of voting in large elections with asymmetric information. We will show that the same basic insights about voting derived in the game-theoretic literature also occur in ethical games with the advantage of a sensible micro-level model of participation in elections.
Papers by Feddersen and Sandroni (2005a and 2005b) and Coate and Colin (2005) provide an explanation for turnout in large elections. These papers introduce ethical agents who are motivated to participate when they determine that agents of their type are morally obligated to do so. Unlike previous duty-based models of participation, ethical agents' moral obligation to vote is determined endogenously as a function of the behavior of other agents. In order to predict outcomes, a solution concept called consistency links agents' preferences with actual behavior in a manner analogous to Nash equilibrium. In this paper, we address the foundational problems in ethical participation models. We show the restrictions consisteny imposes on the central notion of group identity, the incentive constraints on ethical reasoning, and the existence and uniqueness of consistent profiles.
Reviews several books examining the relationship between congressional institutions, legislative organizations and outcomes. `Minority Rights, Majority Rule: Partisanship and the Development of Congress,' by Sarah A. Binder; `Turning the Legislative Thumbscrew: Minority Rights and Procedural Change in Legislative Politics,' by Douglas Dion; `Pivotal Politics: A Theory of U.S. Lawmaking,' by Keith Krehbiel; `Congressional Caucuses in National Policy Making,' by Susan Webb Hammond.
We analyze two-candidate elections in which voters are uncertain about the realization of a state variable that affects the utility of all voters. Each voter has noisy private information about the state variable. We show that the fraction of voters whose vote depends on their private information goes to zero as the size of the electorate goes to infinity. Nevertheless, elections fully aggregate information in the sense that the chosen candidate would not change if all private information were common knowledge. Equilibrium voting behavior is to a large extent determined by the electoral rule, i.e., if a candidate is required to get at least x percent of the vote in order to win the election, then in equilibrium this candidate gets very close to x percent of the vote with probability close to one. Finally, if the distribution from which preferences are drawn is uncertain, then elections will generally not satisfy full information equivalence and the fraction of voters who take informative action does not converge to zero.
We analyze two-candidate elections in which voters are uncertain about the realization of a state variable that affects the utility of all voters. Each voter has noisy private information about the state variable. We show that the fraction of voters whose vote depends on their private information goes to zero as the size of the electorate goes to infinity. Nevertheless, elections fully aggregate information in the sense that the chosen candidate would not change if all private information were common knowledge. Equilibrium voting behavior is to a large extent determined by the electoral rule, i.e., if a candidate is required to get at least x percent of the vote in order to win the election then in equilibrium this candidate gets very close to x percent of the vote with probability close to one. Finally, if the distribution from which preferences are drawn is uncertain, then elections will generally not satisfy full information equivalence and the fraction of voters who take informative action does not converge to zero.
We analyze two-candidate elections in which some voters are uncertain about the realization of a state variable that affects the utility of all voters. We demonstrate the existence of a swing voter's curse: less informed indifferent voters strictly prefer to abstain rather than vote for either candidate even when voting is costless. The swing voter's curse leads to the equilibrium result that a substantial fraction of the electorate will abstain even though all abstainers strictly prefer voting for one candidate over voting for another.
Entry on strategic voting.
We provide support for the claim that large elections may exhibit a moral bias, i.e., controlling for the distribution of preferences within the electorate, alternatives understood by voters to be morally superior are more likely to win in large elections than in small ones. . Using laboratory experiments we show that ethical expressive voters (voters who receive a payoff from taking an action they believe to be ethical) will have a disproportionate impact on election outcomes for two reasons. First, the choice of how to vote in a large election confronts voters with an essentially hypothetical choice --- when ethical expressive types face hypothetical choice situations they are more likely to choose outcomes on the basis of ethical considerations than on the basis of narrow self-interest. Second, as pivot probabilities decline the set of people who participate will increasingly consist of ethical expressives.
The public revelation of organizational wrongdoing by insiders, whistleblowing, is widely reported, economically significant and can be extremely costly to the whistleblowers. We develop a model of whistleblowing involving a manager and an employee. Each has a privately known type that specifies the relative weight placed on social rather than personal payoffs. The manager chooses a whistleblowing policy consisting of conditional penalties for various employee actions; the employee observes the policy and chooses between saying nothing, revealing a (privately observed) socially costly violation to the manager, or whistleblowing. Given common knowledge of manager types we characterize equilibrium whistleblowing policies and employee behavior. We show that there may be a nonmonotonic relationship between the severity of the violation and the likelihood of whistleblowing. When manager types are private information we provide sufficient conditions for a separating equilibrium. Managerial choice of whistleblowing policies thus serves a dual purpose: providing incentives for reporting violations and providing information to employees regarding the willingness of the manager to fix violations that are privately reported.
Because U.S. legislators are often most attentive to the issues raised by people who create jobs in their states, Bob Epstein, a local business owner, has been asked by activists to help lobby for a bill that would mandate the reduction of greenhouse gas emissions in California. Before deciding whether he should work to establish the business community’s backing for this bill, Epstein must weigh the pros and cons of supporting measures that might put his business (and standing in the community) at risk.
In this case, students will use the 4 I’s framework to evaluate the nonmarket environment, assess the political impact of the potential coalitions in favor of and opposed to the bill, identify the type of politics that characterizes the situation, and describe the strategies each side will likely use in contesting the bill.
The spread of bird flu outside of Asia, particularly in Africa and Europe, topped headlines in 2006. The migration of wild birds brought the virus to Europe, where for the first time it spread to productive livestock, bringing it closer to the Western world. Due to today’s globalized and highly interconnected world, the consequences of a potential bird flu pandemic are expected to be much more severe than those of the Spanish flu, which killed 50–100 million people between 1918 and 1921. A vaccine for the bird virus is currently not available. As of July 2006, 232 cases of human infection had been documented, mostly through direct contact with poultry. Of those, 134 people died. The best medication available to treat bird flu was Roche’s antiviral drug Tamiflu®. However, Tamiflu was not widely available; current orders of government bodies would not be fulfilled until the end of 2008. Well aware that today’s avian flu might become a global pandemic comparable to the Spanish flu, Roche CEO Franz Humer had to decide how Roche should respond. While the pharmaceutical industry continued its research efforts on vaccines and medications, Tamiflu could play an important role by protecting healthcare workers and helping to contain the virus—or at least slow down its spread. Due to patent protection and a complicated production process with scarce raw ingredients, Roche had been the only producer of the drug. Partly in response to U.S. political pressure, in November 2005 Roche allowed Gilead to produce Tamiflu as well. Even so, it would take at least until late 2007 for Roche and Gilead to meet the orders of governments worldwide. The issue was a difficult one for Roche: What were the risks; what were the opportunities? If a pandemic occurred before sufficient stockpiles of Tamiflu had been built up, would Roche be held responsible? What steps, if any, should Roche take with respect to patent protection and production licensing in the shadow of a potential pandemic?
In October 2005 the Bush administration was considering a dramatic change to the U.S. Food Aid program that would take 25 percent of the budget that would otherwise be used to buy food domestically and instead send direct cash transfers that could be used to buy food in or close to the countries in desperate need. The U.S. Food Aid program traditionally enjoyed support in Congress because it provided support to American farmers, agribusiness, and U.S. shipping interests in addition to nongovernmental organizations like Catholic Relief Services and CARE. The case considers the proposal from the perspective of four different stakeholders: Cargill, USAid, Catholic Relief Services, and Oxfam. Each must come up with a response to the proposal.
This course counts toward the following majors: Biotechnology Management, International Business
This course offers students an opportunity to learn about non-U.S. business environments within an innovative and flexible framework that combines traditional classroom-based learning with structured in-country field research. From its inception in 1989 as one class of 34 students covering the Soviet Union, the program has grown to become a cornerstone of the Kellogg experience for many students. The school currently sponsors 13 GIM courses composed of approximately 400 students traveling to 15 countries. Evanston full-time students gain admission to GIM classes through the bidding process in the fall quarter. Classroom instruction is held during the winter quarter, followed by two weeks of field research abroad and seminar presentations of written student reports during the spring quarter. (TMP and EMP GIM classes sometimes follow different schedules.) GIM courses are organized by student leaders under the guidance of a faculty adviser. If you would like to become a GIM student leader, please contact the IBMP office for more information.
Values and Crisis Decision Making (SEEK-440-A)
This course counts toward the following majors: Social Enterprise
In recent decades corporations have increasingly become the dominant source for political and social change. Increased globalization and technological progress have further accelerated this process. Businesses are now held accountable by standards other than legal compliance or financial performance. Successful business leaders have recognized that these challenges are best mastered by a commitment to values-based management. However, simply "doing the right thing" is not enough. Rather, companies increasingly find themselves as targets of aggressive legal action, media coverage and social pressure. Organizations must be prepared to handle rapidly changing environments and anticipate potential threats. This requires a deep understanding of the strategic complexities in managing various stakeholders and constituencies. To confront students with these challenges in a realistic fashion, the class is structured around a rich set of challenging case studies and crisis simulation exercises.
Values-Based Leadership (SEEK-460-0)
This course counts toward the following majors: Management & Organizations, Social Enterprise.
The first issue a leader in the role of manager, entrepreneur, investor or stakeholder must address about an organization concerns its "value proposition," whether deciding to enter an industry or to begin an undertaking. However, this analysis is incomplete if leaders fail to consider the wider impact of the organization's actions on its own employees and on society. This course focuses on the problem of incorporating a wide variety of value perspectives into decision-making. Values-based leadership involves the ability to take the disparate value propositions of various stakeholders and integrate them into a coherent vision. We explore how recognizing and incorporating competing values claims throughout the organization is often facilitated and hindered by a number of psychological, organizational and cultural processes. Students will come to understand the variety of underlying mechanisms managers of organizations typically have at their disposal to successfully implement values objectives and select among different approaches, while anticipating the constraints placed on choice by the organization's market and non-market environments.
Strategic Crisis Management provides conceptual tools for managers in high-pressure, complex crisis situations. Topics include management and media, dealing with activists and interest groups, and surviving legal, legislative and regulatory challenges.
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Jacobs Center Room 514