Abstracts of Rasmusen's Five Best Papers, 17 April 2008
Below is a list of what I think are my five best papers.
My Google Scholar results for April 2008 are
here. The give papers I list below come in with rankings 1, 4, 7,
18, and 23 in citation counts, so I guess I'd say "Explaining
Incomplete Contracts as the Result of Contract-
Reading Costs," and ``Managerial Conservatism and Rational Information
Acquisition" are my most underrated papers.
To see other abstracts, go to Abstracts of my
unpublished articles. To return to my homepage, go to www.rasmusen.org.
URL: www.rasmusen.org/papers/best.htm. Indiana University, Department of Business Economics
and Public Policy, in the Kelley School of
Business , BU 456, 1309 East Tenth Street,
Bloomington, Indiana 47405-1701, (812)855-9219. Comments: Erasmuse@Indiana.edu.
- "Explaining Incomplete Contracts as the Result of Contract-
Reading Costs," in the BE Press journal, Advances in
Economic Analysis and Policy. Vol. 1: No. 1, Article 2 (2001).
http://www.bepress.com/bejeap/advances/vol1/iss1/art2. Much real-
world contracting involves adding finding new clauses to add to a basic
agreement, clauses which may or may not increase the welfare of both
parties. The parties must decide which complications to propose, how
closely to examine the other side's proposals, and whether to accept
them. This suggests a reason why contracts are incomplete in the sense
of lacking Pareto-improving clauses: contract-reading costs matter as
much as contract-writing costs. Fine print that is cheap to write can be
expensive to read carefully enough to understand the value to the
reader, and especially to verify the absence of clauses artfully written
to benefit the writer at the reader's expense. As a result, complicated
clauses may be rejected outright even if they really do benefit both
parties, and this will deter proposing such clauses in the first place.
The working paper version with the two-period model, "A Model of
Negotiation, Not Bargaining: Explaining Incomplete Contracts, " is
available in PDF.
- Stigma and Self-Fulfilling Expectations of Criminality , Journal of Law and Economics 39: 519-544 (October
1996). In modelling crime, economists have focussed on the expected
cost of government sanctions to the criminal, but private sanctions---
notably economic or social stigma--- may be just as important. In the
model here, workers decide whether to commit crimes and employers decide
how much to pay ex- convicts. In one equilibrium, individuals refrain
from crime and economic stigma--- the wage loss from conviction--- is
high. In a second, pareto- inferior equilibrium, individuals commit
crimes and stigma is low, because employers realize that nonconviction
does not imply noncriminality. The model may help to explain large
shifts in crime, such as that between 1960 and 1980, in which decreases
and increases in government sanctions seem to have asymmetric effects.
- ``Managerial Conservatism and Rational Information Acquisition,
'' Journal of Economics and Management Strategy
(Spring 1992), 1: 175-202. Conservative managerial behavior can be
rational and profit-maximizing. If the valuation of innovations
contains white noise and the status quo would be preferred to random
innovation, then any innovation that does not appear to be substantially
better than the status quo should be rejected. The more successful the
firm, the higher the threshold for accepting innovation should be, and
the greater the conservative bias. Other things equal, more successful
firms will spend less on research, adopt fewer innovations, and be less
likely to advance the industry 's best practice.
- ``Naked Exclusion,'' American Economic Review
(December 1991) 81: 1137-1145 (with J. Mark Ramseyer and John Wiley ).
Exclusive-dealing contracts can be part of rational entry deterrence if
there is even a small positive minimum efficient scale. The excluder can
get the other side of the market to agree to his exclusive contract
without a side payment if they believe all others will sign too, and so
the excluder's rivals will cease to exist. Acrobat
- ``Stock Banks and Mutual Banks,'' Journal of Law and
Economics (October 1988), 31: 395-422. Reprinted in
Banking Law Anthology , Volume IV (1988), Bethesda, Md:
International Library. Because mutual banks do not allow shareholders to
discipline bad managers and so have higher costs, they have been
disappearing since bank entry deregulation in the 1980's. They were
common before regulation in the 1930's, and are more common in the 19th
century. I propose that this is because of the absence of deposit
insurance. Depositors wanted safety more than low operating costs, and a
mutual manager, in a cushy job he could not lose except by bankrupting
his firm, would also value safety.
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