Coordination problems resembling weakest-link games with multiple Pareto ranked equilibria are ubiquitous in the economy and society. This makes it important to understand if and when agents are able to coordinate efficiently. Existing research on weakest-link games shows an overwhelming inability of people to coordinate on efficient equilibria, especially in larger groups. We show experimentally that freedom of neighbourhood choice overcomes the problem and leads to fully efficient coordination. This implies substantial welfare effects with achieved welfare being about 50% higher in games with neighbourhood choice than without it. We identify exclusion of low effort providers who in response start providing high effort as the simple but effective mechanism enforcing efficient coordination. A variety of other treatments show that the efficiency result as well as the identified mechanism are robust to changes in the information condition, payoff specification, and a substantial increase in group size. Moreover, we find that neighbourhood choice boosts efficiency even when exclusion does not materially affect the excluded agent. Our results are widely applicable on the societal and organizational level, e.g . containment of diseases, fight against terrorism, and co-authorship networks.

Agency theories predict that older firms make value‐destroying acquisitions to benefit managers. Neoclassical theories predict instead that such firms make wealth‐increasing acquisitions to exploit underutilized assets. Using IPO cohorts, we establish that, while younger firms make more related and diversifying acquisitions than mature firms, the acquisition rate follows a U‐shape over firms’ life cycle. Consistent with neoclassical theories, we show that acquiring firms have better performance and growth opportunities and create wealth through acquisitions of nonpublic firms throughout their life. Consistent with agency theories, older firms experience negative stock price reactions for acquisitions of public firms.

This article presents a unique test of the effectiveness of technical analysis in different sentiment environments by focusing on its usage by perhaps the most sophisticated and astute investors, namely, hedge fund managers. We document that during high-sentiment periods, hedge funds using technical analysis exhibit higher performance, lower risk, and superior market-timing ability than nonusers. The advantages of using technical analysis disappear or even reverse in low-sentiment periods. Our findings are consistent with the view that technical analysis is relatively more useful in high-sentiment periods with larger mispricing, which cannot be fully exploited by arbitrage activities because of short-sale impediments.

Cash- and stock-financed takeover bids induce strikingly different target revaluations. We exploit detailed data on unsuccessful takeover bids between 1980 and 2008, and we show that targets of cash offers are revalued on average by +15% after deal failure, whereas stock targets return to their pre-announcement levels. The differences in revaluation do not revert over longer horizons. We find no evidence that future takeover activities or operational changes explain these differences. While the targets of failed cash and stock offers are both more likely to be acquired over the following eight years than matched control firms, no differences exist between cash and stock targets, either in the timing or in the value of future offers. Similarly, we cannot detect differential operational policies following the failed bid. Our results are most consistent with cash bids revealing prior undervaluation of the target. We reconcile our findings with the opposite conclusion in earlier literature (Bradley, Desai, and Kim, 1983) by identifying a look-ahead bias built into their sample construction.

This study provides strong evidence of a causal effect of risk-taking incentives provided by option compensation on corporate risk management. We utilize the passage of Financial Accounting Standard (FAS) 123R, which required firms to expense options, to investigate how chief executive officer option compensation affects the hedging behavior of oil and gas firms. Firms that did not expense options before FAS 123R significantly reduced option pay, which resulted in a large increase in their hedging intensity compared with firms that did not use options or expensed their options voluntarily prior to FAS 123R.

The transition from school to work is typically a period in which many young workers experience a wide range of different jobs and experience some of their most rapid wage growth over their working life. Robert Hall (1982) has estimated that the first 10 years of an individual's working career will include approximately two-thirds of all lifetime job changes. Robert Topel and Michael Ward (1988) found that over half of young male new entrants held six or more jobs over the first 10 years of their work experience. Only one young male worker in twenty held a single job for 10 years in their sample. All of this suggests that young workers' early years in the labor market involve several employment transitions. The purpose of this paper is to examine for young workers in their first years of work the determinants of leaving an employer. In particular, this paper focuses on the role of different types of training on the probability of leaving an employer. In previous work (1990) I have examined the impact of private-sector training on the determination of wages and wage growth of young workers and reached the following conclusions. First, formal company-provided onthe-job training (ON-JT) appears to be highly firm-specific in the United States and, therefore, is not portable from employer to employer. Company-provided training raises wages in the current job but has no effect on the wages earned in subsequent employment. Second, formal off-the-job training (OFF-JT) received from proprietary institutions has little effect on the wages earned on the current job, but it does raise the expected wage in subsequent employment. Finally, there are important differences by race, gender, and education level in the probability of receiving different types of formal training and in the impact this training has on wages and wage growth. These findings have several implications for the impact of training on mobility. One implication is that if company-provided training is primarily firm-specific, then the probability of leaving an employer should decline if a young worker has experienced some ON-JT. An additional implication is that if a worker participates in an OFF-JT program, it appears that the worker should be more likely to leave the current employer. In this case, OFF-JT allows a young worker to change career paths and find a better match. Using data from the National Longitudinal Survey Youth (NLSY) cohort, this paper examines in detail the factors that influence the probability of new entrants leaving their first job, including the differential effects of company-provided training, apprenticeships, and training from for-profit proprietary institutions.

Economists have been measuring, developing theories for, and explaining the sex-based wage differential for several decades. Some theories, such as human capital theory, have focused exclusively on the characteristics and progress of individuals. Institutional approaches, such as dual labor market and occupational sex segregation theories, look solely at the structure of the labor market. However, examining average earnings by sex, occupational titles, or sectors masks another fundamental cause of the wage gap: the lack of career advancement by women in both femaleand male-dominated occupations. The reason is that women are on a lower or different occupational ladder, what can be called an internal labor market, than men. This paper combines the insights of earlier approaches by highlighting the effect that internal job structures and career ladders have in shaping individuals' opportunities. The hypothesis is that unions play a major role in altering the structure of opportunities, creating ladders, and allowing women access to higher-level jobs, as they have done for men.