Publication records

We provide experimental evidence of behavior consistent with the sunk cost effect. Subjects who earned a lottery via a real-effort task were given an opportunity to switch to a dominant lottery; yet 23% chose to stick with their dominated lottery.The endowment effect accounts for roughly only one third of the effect. Subjects’ capacity for cognitive reflection is a significant determinant of sunk cost behavior.We also find stocks of knowledge or experience (crystallized intelligence) predict sunk cost behavior, rather than algorithmic thinking (fluid intelligence) or the personality trait of openness. We construct and validate a scale, the “SCE-8”, which encompasses many resources individuals can spend, and offers researchers an efficient way to measure susceptibility to the sunk cost effect.

The codetermination principle – as seen in the German corporate governance system – provides a solid foundation for achieving climate and sustainability goals. The involvement of employees needs to be coupled with more diversification parameters used for appointing non-executive directors as well as building sustainability expertise and proper incentives for acting sustainably. The Climate Governance Initiative in Germany among others can help non-executive directors in becoming stronger and even more capable sustainability ambassadors within their companies.

The literature on resource allocation under adverse selection has focused on models in which the resource being allocated is such that the privately informed agent always prefers more of it to less. We analyze a firm’s optimal resource allocation mechanism when this assumption does not hold and show that the resulting mechanism has a number of novel characteristics. For example, first best may be achievable even with nontrivial information asymmetry; when first best cannot be achieved, it is always optimal to overinvest relative to first best, and the most efficient agent may not earn rents, even when a less efficient agent does.

© 2020, INFORMS

We consider a setting where online advertisers seek to acquire impressions from an advertising exchange through a multi-tier network of intermediaries, and study the mechanisms offered by the ad exchange and intermediaries when the advertisers’ values are private. As opposed to traditional manufacturer/retailer settings, intermediaries in display advertising auction off contingent goods which they only purchase when downstream buyers have signaled interest. Thus motivated, we determine how intermediaries should bid on behalf of their customers in the mechanism of an upstream intermediary and study how the structure of the intermediation network affects the profits of its participants. We provide a game theoretic model to study the mechanisms offered by the ad exchange and intermediaries within a practically relevant class of mechanisms. We characterize a subgame perfect equilibrium of the game among intermediaries and the seller, and show that the equilibrium mechanisms have a simple and appealing structure: intermediaries bid the virtual value associated with the maximum downstream report in the upstream intermediary’s mechanism, whenever this quantity is positive. We show that economic incentives are not necessarily aligned along the network and the position in the intermediation network has a significant impact on the profits of the intermediaries. Besides, we analyze the impact of different network structures on the seller’s revenue and investigate whether intermediaries have an incentive to merge horizontally or vertically.

Copyright © 2020, INFORMS

Automation Surprise or Ambiguous Cockpit Information manifests itself as a miscommunication between man and machine and may lead to serious incidents and accidents. Focusing on factual communication between crew members as well as using training scenarios that specifically address the lesser known, less critical malfunctions may prepare pilots for dealing with losses in automation.

With permission of the German Armed Forces Aviation Office (Luftfahrtamt der Bundeswehr)

From pandemics to populism, new weapons to the rise of artificial intelligence, and gaping inequalities to climate change, humanity faces unprecedented challenges that threaten our very existence. In FRAMERS: Human Advantage in an Age of Technology and Turmoil, the authors offer a reason to be optimistic: humans have a unique ability to frame—or think in mental models—and so come up with solutions that meet our moment in history.

To frame is to make a mental model that enables us to see patterns, predict how things will unfold, and make sense of new situations. Frames guide the decisions we make and the results we attain. People have long focused on traits like memory and reasoning leaving framing all but ignored. But with computers becoming better at some of those cognitive tasks, framing stands out as a critical function—and only humans can do it. This book is the first guide to mastering this innate human ability.
Framers shows how framing is not just a way to improve how we make decisions in the era of algorithms—but why it will be a matter of survival for humanity in a time of societal upheaval and machine prosperity.

The article examines the first decisions issued by Facebook's newly established Oversight Board that deal with the exacerbating problem of health misinformation. In this context, it is questioned whether the Board's applied standard of 'imminent harm' is suitable for the problem at hand given the viral proliferation of potentially consequential false and misleading information about public health policies amid a pandemic.

Taking on a substantial new role without a change in title or authority is hard, but there are ways to manage this transition.