This paper analyzes the survival of organizations in which decision agents do not bear a major share of the wealth effects of their decisions. This is what the literature on large corporations calls separation of “ownership ” and “control.” Such separation of decision and risk bearing functions is also common to organizations like large professional partnerships, financial mutuals and nonprofits. We contend that separation of decision and risk bearing functions survives in these organizations in part because of the benefits of specialization of management and risk bearing but also because of an effective common approach to controlling the implied agency problems. In particular, the contract structures of all these organizations separate the ratification and monitoring of decisions from the initiation and implementation of the decisions.

A number of proposals have been advanced in recent years for the development of “general systems theory ” that, abstracting from properties peculiar to physical, biological, or social systems, would be applicable to all of them. 1 We might well feel that, while the goal is laudable, systems of such diverse kinds could hardly be expected to have any nontrivial properties in common. Metaphor and analogy can be helpful, or they can be misleading. All depends on whether the similarities the metaphor captures are significant or superficial. It may not be entirely vain, however, to search for common properties among diverse kinds of complex systems. The ideas that go by the name of cybernetics constitute, if not a theory, at least a point of view that has been proving fruitful over a wide range of applications. 2 It has been useful to look at the behavior of adaptive systems in terms of the concepts of feedback and homeostasis, and to analyze adaptiveness in terms of the theory of selective information. 3 The ideas of feedback and information provide a frame of reference for viewing a wide range of situations, just as do the ideas of evolution, of relativism, of axiomatic method, and of

In a duopoly model of informed speculation, we show that overconfidence may strictly dominate rationality since an overconfident trader may not only generate higher expected profit and utility than his rational opponent, but also higher than if he were also rational. This occurs because overconfidence acts like a commitment device in a standard Cournot duopoly. As a result, for some parameter values the Nash equilibrium of a two-fund game is a Prisoner's Dilemma in which both funds hire overconfident managers. Thus, overconfidence can persist and survive in the long run. 2 The rational expectations hypothesis implies that economic agents make decisions as though they know a correct probability distribution of the underlying uncertainty. According to the traditional view (Alchian (1950) and Friedman (1953)), the rational expectations hypothesis is empirically plausible because rational beliefs are better able to survive the market test than irrational beliefs. Yet, the empirical liter...

The rational choice framework assumes that individuals know what is in their self interest and make choices accordingly. Do they? When they go to the supermarket (in a developed country with a market economy) arguably they do act accordingly. In such settings, the individual knows, almost certainly, whether the choice would be beneficial, ex post. Indeed financial markets in the developed market economies (usually) possess the essential characteristics consistent with substantive rationality. However, it is simply not possible to make sense out of the diverse performance of economies and polities both historically and contemporaneously if individuals really knew their self interest and acted accordingly. Instead people act in part upon the basis of myths, dogmas, ideologies and "half-baked " theories. We argue here both that ideas matter, and that the way that ideas are communicated among people is crucial to building useful theories that will enable us to deal with strong uncertainty problems at the individual level.2 For most of the interesting issues in political and economic markets uncertainty, not risk, characterizes choice-making. Under conditions of uncertainty, individuals ' interpretation of their environment will reflect the

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Information systems researchers have a long tradition of drawing on theories from disciplines such as economics, computer science, psychology, and general management and using them in their own research. Because of this, the information systems field has become a rich tapestry of theore-1 Jane Webster was the accepting senior editor for this paper. MISQ REVIEW tical and conceptual foundations. As new theories are brought into the field, particularly theories that have become dominant in other areas, there may be a benefit in pausing to assess their use and contribution in an IS context. The purpose of this paper is to explore and critically evaluate use of the resource-based view of the firm (RBV) by IS researchers. The paper provides a brief review of resourcebased theory and then suggests extensions to make the RBV more useful for empirical IS research. First, a typology of key IS resources is presented, and these are then described using six traditional resource attributes. Second, we emphasize the particular importance of looking at both resource complementarity and moderating factors when studying IS resource effects on firm performance. Finally, we discuss three considerations that IS researchers need to address when using the RBV empirically. Eight sets of propositions are advanced to help guide future research. Keywords: Resource-based view, organizational impacts of IS, information systems resources, competitive advantage, IS strategic planning, information resource management

This paper surveys research on computational agent-based models used in finance. It will concentrate on models where the use of computational tools is critical in the process of crafting models which give insights into the importance and dynamics of investor heterogeneity in many financial settings.

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We study certain classes of supermodular and submodular games which are symmetric with respect to material payoffs but in which not all players seek to maximize their material payoffs. Specifically, a subset of players have negatively interdependent preferences and care not only about their own material payoffs but also about their payoffs relative to others. We identify sufficient conditions under which members of the latter group have a strategic advantage in the following sense: at all intragroup symmetric equilibria of the game, they earn strictly higher material payoffs than do players who seek to maximize their material payoffs. We show that these conditions are satisfied by a number of games of economic importance, and discuss the implications of these …ndings for the evolutionary theory of preference formation and the theory of Cournot competition.

this paper.