Brief Descriptions of some of my current work in progress


Consistent Good News and Inconsistent bad News

with Rick Harbaugh (Indiana University) and Kelly Shue (Yale University)

Good news is more persuasive when it is more consistent, and bad news is less damaging when it is less consistent. We formalize this idea and apply it to distortion of performance news by a manager of multiple projects. If the news is generally good, boosting relatively bad projects increases consistency across projects and provides a stronger signal that the manager is skilled. But if the news is generally bad, instead boosting relatively good projects reduces consistency and offers some hope that the manager is unlucky rather than incompetent. We test for evidence of such “contrarian news distortion” by examining the consistency of reported segment earnings across different units in firms. As predicted by the model, managers appear to shift discretionary cost allocations to help underperforming segments when overall earnings are above expectations and overperforming segments when overall earnings are below expectations. The “mean-variance news preferences” that we identify extend to other situations including media bias and p-value hacking, and differ from standard preferences in that more variance sometimes helps while a higher mean sometimes hurts.



Activist campaigns as contest models

with Guy Holburn (U of Western Ontario) and Jean-Phillipe Bonardi (U of Lausanne)

Empirical research on firm responses to NGO/activist attacks has largely focused on how firm characteristics shape their strategy, essentially treating activists and their campaigns as homogenous factors. An activist campaign, however, represents a competition between a targeted firm and activist to win over key decision makers such as consumers, suppliers, the general public, and government. As such, activist attributes are likely also to have an important impact on firm behavior during a campaign. Using a formal contest model to analyze the interaction between a firm and an activist, we highlight two key factors that influence both firm and activist strategies during a campaign: the relative benefit of victory and the relative organizational effectiveness of marshaling resources to sway decision makers. In a single period model we develop testable predictions about firm and activist effort levels, campaign intensity, campaign duration and winning probabilities. Recognizing that activists often target several firms within an industry to achieve broader change, we extend the model in a novel way to incorporate sequential targeting of two competing firms. We generate further predictions about firm behavior that take account of competitor and activist characteristics in potential future conflicts. Our theoretical analysis implies that empirical research should incorporate activist characteristics in equal measure as firm characteristics, and that campaign heterogeneity should be examined.



But what does it Mean? Green Labels, COnsumer Learning and the Adoption of Clean Technology

with Peter Kennedy (U of Victoria), Anthony Heyes (U of Ottawa) and Stephen Martin (U of Ottawa)

Programs that certify the environmental attributes of products are common. But the proliferation of labels makes it hard for consumers to know what each label implies - how green does a firm or product have to be for the firm to be allowed to place the label on its product? We provide a model of consumer learning in which effort is needed to understand the meaning of a particular label. We characterize technology choice, label adoption, and pricing decision of competing firms. The relationship between information acquisition costs, the pattern of technology choices across industry and environmental outcomes are complex. In general consumer uncertainty can lead to greater environmental benefit from labeling than would exist under full information. in plausible cases a reduction in the costs of consumer learning decreases environmental benefit. Our results call into question the presumption that efforts to educate consumers in this area will necessarily raise social welfare or protect the environment.