Publications

Publications
Publications
We strongly believe in open source and giving to our community. We work directly with researchers in academia and seek out new perspectives with our intern and fellowship programs. We generalize our solutions and release them to the world as open source projects. We host discussions and publish our results.

Publications

American Economic Review Papers and Proceedings 92, no. 2 (2002): 433-437

Complexity, Flexibility and the Make-or-Buy Decision

Steve Tadelis

65 years ago, Ronald Coase (1937) asked what determines whether production will be organized in a firm or through the market, later coined the "make-or-buy" decision. This question was put center stage by Oliver Williamson (1975, 1985) who further developed Transaction Costs Economics(TCE), arguing that incomplete contracts and specific relationships overshadowed by opportunism, asymmetric information and bounded rationality, will lead vertical processes to integrate.

Benjamin Klein et al. (1978) enhanced TCE with the "hold-up" problem: in the face of incomplete contracts, specificity and opportunistic behavior, integration can help promote ex ante investment incentives. Sanford Grossman and Oliver Hart (1986) (followed by Hart and John Moore (1990)) developed the Property Rights Theory (PRT) of the firm (See Hart, 1995).

PRT formally model the hold-up problem, offered a precise definition of integration via ownership and residual control rights, and analyzed the costs and benefits of integration in a unified manner. However, PRT narrowed the focus of the make-or-buy question on one type of transaction cost - the hold up problem.

This paper focuses attention on a different kind of transaction cost: haggling and friction due to ex post changes and adaptations when contracts are incomplete. The level of a transaction's complexity, which is associated with contractual incompleteness, will be the shifting parameter that determines both incentive schemes and integration decisions.

This focus is motivated by a careful examination of procurement decisions in industry, and has strong empirical content since the exogenous shifter (complexity) seems easier to measure than specificity.

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Journal of Political Economy 110, no. 4 (2002): 854-882

The Market for Reputations as an Incentive Mechanism

Steve Tadelis

Reputational career concern provide incentive for short lived agent to work hard, but it is well known that these incentive disappear as an agent reaches retirement. This paper investigates the effect of a market for firm reputation on the life-cycle incentives of firm owners to exert effort.

A dynamic general equilibrium model with moral hazard and adverse selection generates two main results. First, incentives of young and old agents are quantitatively equal, implying that incentives are "ageless" with a market for reputations.

Second, good reputations cannot act as effective sorting devices: in equilibrium, more able agent cannot outbid lesser ones in the market for good reputations. In addition, welfare analysis shows that social surplus can fall if clients observe trade in firm reputation. (JELC70, D82, L14, L15)

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Interfaces and Free Boundaries. 4, no. 1, pp. 89-109. 2002

A numerical scheme for axisymmetric solutions of curvature driven free boundary problems, with applications to the Willmore Flow

Uwe Mayer, Gieri Simonett

We present a numerical scheme for radially symmetric solutions to curvature driven moving boundary problems governed by a local law of motion, e.g. the mean curvature flow, the surface diffusion flow, and the Willmore flow. We then present several numerical experiments for the Willmore flow. In particular, we provide numerical evidence that the Willmore flow can develop singularities in finite time.

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Archiv der Mathematik, 77, issue 5, pp. 434-448. 2001

Loss of convexity for a modified Mullins-Sekerka model arising in diblock copolymer melts

Joachim Escher, Uwe Mayer

This modified (two-sided) Mullins-Sekerka model is a nonlocal evolution model for closed hypersurfaces, which appears as a singular limit of a modified Cahn-Hilliard equation describing microphase separation of diblock copolymer.

Under this evolution the propagating interfaces maintain the enclosed volumes of the two phases. We will show by means of an example that this model does not preserve convexity in two space dimensions.

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Comput. Appl. Math., 20, no. 3, pp. 361-379. 2001

Numerical solutions for the surface diffusion flow in three space dimensions

The surface diffusion flow is a moving boundary problem that has a gradient flow structure. This gradient flow structure suggests an implicit finite differences approach to compute numerical solutions.

The resulting numerical scheme will allow to compute the flow for any smooth orientable immersed initial surface. Observations include the loss of embeddedness for some initially embedded surface, the creation of singularities, and the long term behavior of solutions.

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Rand Journal of Economics 32, no. 3 (Autumn 2001): 387-407

Incentives versus Transaction Costs: A Theory of Procurement Contracts

Patrick Bajari

Inspired by facts from the private-sector construction industry, we develop a model that explains many stylized facts of procurement contracts.

The buyer in our model incurs a cost of providing a comprehensive design and is faced with a tradeoff between providing incentives and reducing ex post transaction costs due to costly renegotiation. We show that cost-plus contracts are preferred to fixed-price contracts when a project is more complex.

We briefly discuss how fixed-price or cost-plus contracts might be preferred to other incentive contracts. Finally, our model provides some microfoundations for ideas from Transaction Cost Economics.

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Science, Volume 293, pp. 2051-2055, September 14, 2001

Machine learning for science: state of the art and future prospects

E. Mjolsness, Dennis DeCoste, E. Mjolsness, Dennis DeCoste

Recent advances in machine learning methods, along with successful applications across a wide variety of fields such as planetary science and bioinformatics, promise powerful new tools for practicing scientists.

This viewpoint highlights some useful characteristics of modern machine learning methods and their relevance to scientific applications. We conclude with some speculations on near-term progress and promising directions.

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ACM WWW10 Conference. May, 2001

Item-based Collaborative Filtering Recommendation Algorithms

Badrul Sarwar, George Karypis, Joseph Konstan, John Riedl, Badrul Sarwar, George Karypis, Joseph Konstan, John Riedl

No Information

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Experimental Math,10, no. 2, pp. 103-107. 2001

A singular example for the averaged mean curvature flow

An example of an embedded curve is presented which under numerical simulation of the averaged mean curvature flow develops first a loss of embeddedness, and then a singularity where the curvature becomes infinite, all in finite time.

This leads to the conjecture that not all smooth embedded curves persist for all times under the averaged mean curvature flow.

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The Seventeenth Conference on Uncertainty in Artificial Intelligence (UAI01), August 3-5, 2001, University of Washington, Seattle, Washington, USA

Decision-Theoretic Planning with Concurrent Temporally Extended Actions

Khashayar Rohanimanesh, Sridhar Mahadevan

We investigate a model for planning under uncertainty with temporally extended actions, where multiple actions can be taken concurrently at each decision epoch. Our model is based on the options framework, and combines it with factored state space models, where the set of options can be partitioned into classes that affect disjoint state variables.

We show that the set of decision epochs for concurrent options defines a semi-Markov decision process, if the underlying temporally extended actions being parallelized are restricted to Markov options.

This property allows us to use SMDPalgorithms for computing the value function over concurrent options. The concurrent options model allows overlapping execution of options in order to achieve higher performance or in order to perform a complex task.

We describe a simple experiment using a navigation task which illustrates how concurrent options results in a faster plan when compared to the case when only one option is taken at a time.

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