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Faculty & Research


Distinguished Speaker Series


Matthew Costello


Beats by Dre at Apple


Chief Operating Officer

April 16, 2015


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Research Colloquia



The Research Colloquium provides a forum for interaction among faculty, students, and visitors interested in the applications of business and management. The colloquium includes presentations by faculty from UC Irvine and other universities, as well as research institutes.

Colloquia Events are open to the public unless otherwise noted; please see event description for more details. 




(Host: Luyi Gui) 


Friday, April 3, 2015


"Mitigate Supplier Responsibility Risk in Emerging Economies: An Ethical Sourcing Framework"

Sponsored by: The John S. & Marilyn Long U.S. - China Institute for Business and Law and the Operations and Decision Technologies Group


SPEAKER: Dr. Li Chen

UNIVERSITY: Duke University

TIME: 2:00 pm - 3:30 pm



Sourcing from emerging economies may yield direct cost savings, but companies often face greater risk of supplier responsibility problems due to many factors, with lax regulatory enforcement in these regions being one of them.  Intuitively, to mitigate such risks, companies can design incentive schemes in sourcing contracts and invest in screening mechanisms for supplier sourcing. However, the relative effectiveness of these actions is often not known. To address this problem, we first develop a model that captures the supplier's rational decision making. Under this model, the supplier responsibility risk is endogenized and can be influenced by various factors, including the supplier's intrinsic ethical level. We then propose to use a delayed payment contract to mitigate supplier responsibility risk. When the supplier's intrinsic ethical level is unobservable to the buyer, we study the optimal screening mechanism based on the delayed payment contract. Surprisingly, we find that, when the buyer anticipates a high cost impact as a result of supplier responsibility problems, the optimal screening mechanism collapses to a random selection.  To remedy this problem, we further consider screening mechanisms involving voluntary or mandatory supplier certification.  We show that both certification mechanisms can help mitigate supplier responsibility risk in certain cases. Specifically, a properly designed mandatory certification can help the buyer to achieve the first-best performance when the cost impact from supplier responsibility problems is high.




(Host: Terry Shevlin)

Friday, April 3, 2015


Compensation Contract Design to Mitigate Adverse Selection: Inducement Grants and New CEO Announcements


SPEAKER: Brian Cadman

UNIVERSITY: University of Utah

TIME: 3:00 pm - 4:30 pm


Selecting and identifying a new CEO that matches the needs of a firm is a difficult task because of asymmetric information. We examine how firms design compensation contracts to mitigate adverse selection problems related to new CEO appointments. We focus on inducement grants, initial compensation schemes that vary in the degree to which their values are sensitive to new CEO announcement returns.




(Host: Mireille Jacobson) 


Tuesday. March 31, 2015


Uncovering Waste in U.S. Healthcare 


SPEAKER: Joe Doyle

UNIVERSITY: Massachusetts Institute of Technology

TIME: 3:30 pm - 5:00 pm



There is widespread agreement that the US healthcare system wastes as much as 5% of GDP, yet little consensus on what care is actually unproductive. This partly arises because of the endogeneity of patient choice of treatment location. This paper uses the effective random assignment of patients to ambulance companies to generate comparisons across similar pa- tients treated at different hospitals. We find that assignment to hospitals whose patients receive large amounts of care over the three months following a health emergency do not have meaningfully better survival outcomes compared to hospitals whose patients receive less. Outcomes are related to different types of treatment intensity, however: patients as- signed to hospitals with high levels of inpatient spending are more likely to survive to one year, while those assigned to hospitals with high levels of outpatient spending are less likely to do so. This adverse effect of outpatient spending is predominately driven by spending at skilled nursing facilities (SNF) following hospitalization. These results offer a new type of quality measure for hospitals based on utilization of SNFs. We find that patients quasi- randomized to hospitals with high rates of SNF discharge have poorer outcomes, as well as higher downstream spending once conditioning on initial hospital spending.




(Host: Chong Huang) 


Friday, March 20, 2015


The In-State Equity Bias of State Pension Plans 


SPEAKER: Scott Weisbenner

UNIVERSITY: University of Ilinois at Urbana-Champaign

TIME: 2:00 pm - 3:30 pm



We examine the interplay between two important decisions that impact environmental performance in a production setting: inspections performed by a regulator and noncompliance disclosure by a production firm. To preempt the penalty that will be levied once a compliance violation is discovered in an inspection, the firm dynamically decides whether it should disclose a random occurrence of noncompliance. Anticipating this, the regulator determines inspection frequency and penalty amounts to minimize environmental and social costs, performing either random inspections or periodic inspections.We study this problem by developing a novel analytical framework that combines features from reliability theory and law enforcement economics. We find that, contrary to common belief, surprising the firm with random inspections is not always preferred to inspecting the firm periodically according to a set schedule. We also find that the firm’s opportunistic disclosure timing behavior may lead to a partial disclosure equilibrium in which the substitutable relationship between inspection intensity and penalty is reversed; a threat of increased penalty is accompanied by more frequent inspections.




(Host: Libby Weber)


Thursday, March 19, 2015

"A Resource-Based View of Openness"


SPEAKER: Joel West

UNIVERSITY: Keck Graduate Institute

TIME: 2:00 pm - 3:30 pm



Given that the resource-based view (RBV) holds that firms should control valuable, rare, and inimitable resources, strategic openness—voluntarily forfeiting control over resources—seems like a direct contradiction. Linking the RBV and its advances on customer-centric definitions of value, we show how openness represents a strategic trade-off: firms decrease rarity and inimitably of resources as they hope to increase customer value and improve their ability to organize for value capture. We show how openness can shape the dynamics of entire industries, identify when firms are most likely to employ it, and define boundary conditions of its potential impacts. In doing so, we extend the RBV on endogenously changing the nature of competition, the origin of value, and the role of openness in firm strategy.




 (Host: Jone Pearce)


Wednesday, March 18, 2015

The Perception of Status: How Third Party Observers Infer Status From Network Position


SPEAKER: Sarah Otner

UNIVERSITY: University of Oxford

TIME: 3:30 pm - 5:00 pm



We explore whether, how, and when TPOs’ perceptions of the social relationships of other individuals influence their (TPOs’) identification of other’s social status. We contend that an attributional process informs these inferences. In this context, the TPO attributes an event - the social relationship between two persons – either to its cause, or to the respect and admiration that one member of a dyad has for another. We propose that a TPO may attempt to construct a causal explanation for the presence and direction of an observed tie between ego and alter. 

By conceptualizing the information-processing mechanism underlying the TPO’s inference of status as an attributional process, our theoretical framework can account for differences in the accuracy of a TPO’s perception of ego’s ties, which may help to explain variance in how a TPO determines the status of Ego. We explore these questions in a series of laboratory experiments.




(Host: Chong Huang) 


Friday, March 13, 2015


Adverse Selection and Intermediation Chains


SPEAKER: Vincent Glode

UNIVERSITY: University of Pennsylvania 

TIME: 200 pm - 3:30 pm



We propose a parsimonious model of over-the-counter trading with asymmetric information to rationalize the existence of intermediation chains that stand between buyers and sellers of assets.Trading an asset through several heterogeneously informed intermediaries can preserve the efficiency of trade by reallocating an information asymmetry over many sequential transactions.Such an intermediation chain ensures that the adverse selection problems counterparties face in each transaction are small enough to allow for socially efficient trading strategies by all parties involved.Our model makes novel predictions about network formation and rent extraction when adverse selection problems impede the efficiency of trade.




(Host: Chong Huang)


Friday, February 27, 2015


Evolutionary Foundations of Economic Behavior, Bounded Rationality, and Intelligence


SPEAKER: Andrew Lo

UNIVERSITY: Massachusetts Institute of Technology (MIT)

TIME: 2:00 pm - 3:30 pm



In a simple evolutionary model with one-period agents making binary choices that determine their reproductive success, we show that natural selection is capable of generating several behaviors that have been observed in organisms ranging from ants to human subjects, including risk-sensitive foraging, risk aversion, loss aversion, probability matching, randomization, and diversification. Given an initial population of individuals, each assigned a purely arbitrary behavior with respect to a binary choice problem, and assuming that offspring behave identically to their parents, only those behaviors linked to reproductive success will survive, and less reproductively successful behaviors will disappear at exponential rates. When the uncertainty in reproductive success is systematic, natural selection yields behaviors that may be individually sub-optimal but are optimal from the population perspective; when reproductive uncertainty is idiosyncratic, the individual and population perspectives coincide. The simplicity and generality of our model imply that these derived behaviors are primitive and universal within and across species.  This framework also suggests a natural definition of intelligence---any behavior positively correlated with reproductive success---and links physiological and environmental constraints to the degree of intelligence that emerges, i.e., bounded rationality.  



(Host: Shuya Yin)


Friday, January 30, 2015


Price Matching Negotiation in Competitive Channels


SPEAKER: Gangshu (George) Cai

UNIVERSITY: Leavey School of Business, Santa Clara University

TIME:10:00 a.m. - 11:30 a.m.



In price matching negotiation, a channel matches the resulting wholesale price bargained earlier by the other channel. We investigate this negotiation mechanism and compare it with two benchmarks, simultaneous negotiation and sequential negotiation. Through a common-seller two-buyer channel model, we find that in price matching the seller prefers to negotiate with the less powerful buyer, whereas in sequential negotiation the seller prefers to negotiate with more powerful buyer first. Firms have different preferences between price matching negotiation and the benchmarks, and their discrepancy is irreconcilable. With side payment, however, price matching negotiation can emerge as a mutually beneficial choice for all firms as compared to simultaneous negotiation and sequential negotiation. We also explore the impact of asymmetric market size and coownership, compare Bertrand competition to Cournot competition, and study seller collusion in a bilateral channel model.



(Host: Robin Keller)


Friday, January 23, 2015

Self-Sustaining Supply Chains


SPEAKER: Jay Simon

UNIVERSITY: Defense Resources Management Institute, The Naval Postgraduate School

TIME: 10:30 am - 12:00 pm



Developing accurate estimates of logistics costs and resource requirements has been a major challenge in recent international operations.  The primary difficulty is that the supply chains are often “self-sustaining,” i.e. the supply chains themselves consume resources that are not locally available.  In this stream of work, we develop a model to estimate fuel requirements for a self-sustaining supply chain (SSSC), we analyze the relationship between SSSCs and complexity of humanitarian aid and disaster relief operations, and we expand the initial model to allow for self-sustainment with respect to multiple resources.



(Host: Luyi Gui)


Thursday, November 13, 2014

Acquisition vs Monetization in the Design of Digital Goods


SPEAKER: Christopher T. Ryan

UNIVERSITY: Booth School of Business, University of Chicago

TIME: 12:00 pm - 1:30 pm



Finding ways to both attract new users and extract revenue from existing users of digital goods and services is an important consideration. A key determinant of the effectiveness of both attraction and extraction is the design of the good itself. For instance, a simple and easy-to-learn design attracts new users to adopt the good. On the other hand, such designs may leave little room for monetizing committed users. We propose a dynamic optimal control model that examines the tradeoff between acquisition and monetization in design. Our analysis provides insight into how the population of users and the accessibility of the design evolve over time to balance this tradeoff and how this evolution depends the nature of the good. We focus particular attention on whether and how long a design should focus on acquisition, an important decision for many designers in digital markets. In particular, we characterize when a designer optimally includes an acquisition period, provide analytical guidelines on when to time the start of monetizing, and explore the sensitivity of this timing to exogenous factors, such as the social nature of the good and the competitive environment. 



(Host: Shuya Yin)


Friday, November 7, 2014

Inducing Environmental Disclosures: A Dynamic Mechanism Design Approach


SPEAKER: Shouqiang (Qiang) Wang

UNIVERSITY: College of Business and Behavioral Science, Clemenson University

TIME: 10:00 am - 11:30 am



This paper studies the design of voluntary disclosure regulations for a profit-maximizing firm that faces a stochastic environmental noncompliance such as hazardous substances leaking to the environment. Whether such a hazard has occurred is known only to the firm, and the regulator decides (possibly randomly) at any given time instant whether to inspect the firm. If the regulator detects the noncompliance, it inflicts a penalty on the firm. Because inspections are costly and may not be perfectly accurate, the regulator also offers a reward (or subsidy) for voluntarily reporting the hazard. The regulator's objective is to dynamically determine the subsidy and inspection policy that maximizes the long-run expected discounted societal payoff, which takes into account economic outputs as well as environmental and regulatory costs. We model this problem as a dynamic adverse selection problem with costly state verification in continuous time, and we fully characterize the optimal policy in closed form. Our analysis reveals the key role of inspection accuracy in designing voluntary disclosure regulations. Specifically, when the inspection accuracy is higher than a fixed threshold, the optimal regulation policy follows a cyclic structure alternating between subsidy and random inspection periods. During a subsidy period, the subsidy level for self-disclosure decreases over time. When the subsidy level reaches zero, an inspection occurs after an exponentially distributed random time interval. If the inspection does not reveal any hazard, the subsidy level is reset to a positive value, which restarts the cycle. By contrast, when inspection accuracy is lower than the threshold, the regulator inspects the firm with certainty at fixed time intervals. Our results further reveal new insights into designing voluntary disclosure regulations. In particular, the optimal inspection frequency increases with the non-disclosure penalty when inspection accuracy is low.



(Host: Luyi Gui)


Friday, October 24, 2014

Supplier Evasion of a Buyer's Audit: Implications for Motivating Supplier Social and Environmental Responsibility

Sponsored by: The John S. & Marilyn Long U.S. - China Institute for Business and Law and the Operations and Decision Technologies Group


SPEAKER: Terry Taylor

UNIVERSITY: University of California, Berkeley

TIME: 2:00 pm - 3:30 pm



Recently, some prominent buyers’ brands have been damaged by a supplier’ deadly factory fire or release of toxic chemicals. This paper provides guidance to buyers as to how to motivate their suppliers to exert more care to prevent such harm to workers and the environment. Obvious approaches (increasing auditing, publicizing negative audit reports, providing a loan to the supplier) can be counterproductive. Less obvious approaches (squeezing the supplier's margin by reducing the price paid to the supplier or increasing wages for workers, pre-commitment to a low level of auditing) might better motivate supplier responsibility. Even if the buyer ensures that the supplier's facility is safe, e.g., through direct investment in the facility, the supplier may outsource some production of the buyer's order to unauthorized subcontractors, exposing the buyer to risk of brand damage. The results in the paper also apply to mitigation of unauthorized subcontracting. (Joint with Erica Plambeck.)



April 18, 2014

Mark Grinblatt, UCLA 

More details later.


April 11, 2014

Diego Garcia, UNC

More details later.


(Host: Siew Hong Teoh)


Monday, August 11, 2014

Short Selling Risk

SPEAKER: Joseph Engelberg

UNIVERSITY: University of California, San Diego

TIME: 12:00 pm - 1:15 pm



Short sellers face a number of unique risks, such as the risk that stock loans become expensive and the risk that stock loans are recalled. We show that these short selling risks affect prices among the cross-section of stocks. Stocks with more short selling risk have lower returns, less price efficiency, and less short selling. Overall, short selling risk adds to the limits of arbitrage and may help explain the low short-interest puzzle (Lamont and Stein (2004)) and the short interest return anomaly (Boehmer, Huszar and Jordan (2009)). 



 (Host: Siew Hong Teoh)


Monday, August, 11, 2014

The Geography of Financial Misconduct

SPEAKER: Christopher Parsons

UNIVERSITY:  University of California, San Diego

TIME: 12:00 pm - 1:15 pm



We find that a frim's tendency to engage in financial misconduct increases with the misconduct rates of neighboring firms. This appears to be caused by peer effects, rather than exogenous shocks like regional variation in enforcement. Effects are stronger among firms of comparable size, and among CEOs of similar age. Moreover, local waves of financial misconduct correspond with local waves of non-financial corruption, such as political fraud.