This paper tests the assumption that evaluators are biased to positively evaluate high-status individuals, irrespective of quality. Using unique data from Major League Baseball umpires' evaluation of pitch quality, which allow us to observe the difference in a pitch's objective quality and in its perceived quality as judged by the umpire, we show that umpires are more likely to overrecognize quality by expanding the strike zone, and less likely to underrecognize quality by missing pitches in the strike zone for high-status pitchers. Ambiguity and the pitcher's reputation as a “control pitcher” moderate the effect of status on umpire judgment. Furthermore, we show that umpire errors resulting from status bias lead to actual performance differences for the pitcher and team. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2014.1967 .

Theory posits that managerial holdings of debt (“inside debt”) align managers' incentives with those of outside debtholders. Executive pensions, consisting of rank-and-file (RAF) plans and supplemental executive retirement plans (SERPs), and other deferred compensation (ODC) have debt-like payoffs, and could therefore function as inside debt. However, whereas SERPs are often unfunded and unsecured, RAF plans are funded and secured to some extent, and ODC may be invested in equity and withdrawn flexibly before retirement. Special arrangements in executive debt-like compensation could hence weaken or even nullify any incentive-alignment effect. We find that higher CEO debt-like compensation leads to lower promised yield and fewer covenants in a sample of loans originated in 2006–2008. This effect is driven entirely by benefits accrued under SERPs, consistent with SERPs more closely resembling risky corporate debt; balances accrued under RAF and ODC plans do not provide similar effects. Furthermore, promised yields are lower when debt-like compensation claims can be withdrawn only after outside debt claims are expected to settle. Our findings persist after accounting for endogeneity using state personal income tax rates as an instrument for CEOs' willingness to defer compensation. Overall, the evidence suggests that executive debt-like compensation is only effective at resolving stockholder–debtholder conflicts when its payoffs are truly debt-like and that lenders' perceptions are affected not only by the magnitude of debt-like compensation but also by its seniority. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2013.1813 .

Organization theory highlights the spread of norms of rationality in contemporary life. Yet rationality does not always spread without friction; individuals often act based on other beliefs and norms. We explore this problem in the context of restaurants and diners. We argue that consumers potentially apply either of two social codes when forming value judgments about restaurants: (1) an apparently rational science-based code of hygiene involving compliance with local health regulations or (2) a context-activated code of authenticity involving conformity to cultural norms. We propose that violations of the hygiene code recede in importance when the authenticity code is activated. This claim is supported by empirical analyses of 442,086 online consumer reviews and 52,740 governmental health inspections conducted from 2004 to 2011.

This paper develops a new way to help solve difficult linear and nonlinear discrete-optimization decision models more efficiently by introducing a problem-difficulty metric that uses the concept of entropy from information theory. Our entropy metric is employed to devise rules for problem partitioning within an implicit enumeration method, where branching is accomplished based on the subproblem complexity. The only requirement for applying our metric is the availability of (upper) bounds on branching subproblems, which are often computed within most implicit enumeration methods such as branch-and-bound (or cutting-plane-based) methods. Focusing on problems with a relatively small number of constraints, but with a large number of variables, we develop a hybrid partitioning and enumeration solution scheme by combining the entropic approach with the recently developed improved surrogate constraint (ISC) method to produce the new method we call ISCENT. Our computational results indicate that ISCENT can be an order of magnitude more efficient than commercial solvers, such as CPLEX, for convex instances with no more than eight constraints. Furthermore, for nonconvex instances, ISCENT is shown to be significantly more efficient than other standard global solvers.