Herbert Simon was the apostle of bounded rationality. He very often illustrated bounded rationality in the context of the theory of the firm, and was, of course, a major contributor to organizational theory. However, in spite of Simon s efforts, I argue that bounded rationality has been only incompletely absorbed in the economics of organization, is little used for substantive purposes, and mos...

This paper examines the e¤ects of social ties on governance. Social ties are per se neutral and merely act as incentive bridges that transmit incentives between individuals. Whether such transmission of incentives improves or undermines governance depends on the particular incentives transmitted. We demonstrate this through a delegated monitoring model where the supervisor is friends with the a...

The present study estimates demand and supply functions of the UK market for 25-year maturity unitlinked (UL) personal pensions for the years 1998 to 2000. It exploits the unique information contained in the PIA disclosure surveys on reduction in yields and new business. The results suggest the popular view about the business of life offices “insurance products are sold, not bought” does not me...

I model inefficient resource allocations in M-form organizations due to influence activities by division managers that skew capital budgets in their favor. Corporate headquarters receives two types of signals about investment opportunities: private signals that can be distorted by managers, and public signals that are undistorted but noisy. Headquarters faces a tradeoff between the cost of atta...

Monetary incentives are often considered as a way to foster contributions to public goods in society and firms. This paper investigates experimentally the effect of monetary incentives in the presence of a norm enforcement mechanism. Norm enforcement through peer punishment has been shown to be effective in raising contributions by itself. We test whether and how monetary incentives interact wi...

This paper investigates the consequences of imperfect and uneven factor market development for farm efficiency in rural China. In particular, we estimate the extent to which an inverse relationship in farm productivity can be attributed to the administrative (instead of market) allocation of land, and the extent of unevenly developed non-agricultural opportunities. Using a recently collected ho...

In the hold-up problem incomplete contracts cause the proceeds of relation-specific investments to be allocated by ex-post bargaining. The present paper investigates the efficiency of incomplete contracts if individuals have heterogeneous preferences implying heterogeneous bargaining behavior and equally important preferences are private information. As the sunk investment costs can thus potent...

Recent research has shown that decision makers are less likely to accept an opportunity after failing to act on a previous o€er, an e€ect labeled inaction inertia. We extended the original research by examining the phenomenon in the domain of losses as well as in the domain of gains. A pattern consistent with the inaction inertia e€ect was found for gains but not for losses. We also manipulated...

Although an increasing number of studies of technological, institutional and organizational change refer to the concepts of path dependence and path creation, few attempts have been made to consider these concepts explicitly in their methodological accounts. This paper addresses this gap and contributes to the literature by developing a comprehensive methodology that originates from the concept...

One of Coase’s central insights is that distinguishing between the generator and recipient of an externality is of limited value because externality problems are reciprocal. We reconsider the relevance of the identity of the generator in a model with non-contractible investment ex ante but frictionless bargaining over the externality ex post. In this framework, a party may distort its investmen...