Dana Clyman

Discrepant Values and Measures of Negotiator Performance

The thesis of the paper is that measuring negotiator performance correctly is difficult because the values that those of us who measure negotiator performance think negotiators are maximizing may differ from the values negotiators are actually maximizing. When such discrepant values exist, using performance measures that do not account for them can lead easily to incorrect conclusions about negotiator performance. Indeed, good performance may be judged poor, and vice-versa. This paper explores several related literatures, including the experimental-bargaining, behavioral-decision-making, and procedural-justice literatures, to demonstrate that discrepant values exist. It then demonstrates that whenever performance measures are used as dependent variables in negotiation experiments, the existence of discrepant values can lead to both Type I and Type II construct-validity errors.

Risky choice, risk sharing and decision analysis: Implications for managers in the resource sector

Abstract This paper provides a brief overview of decision and preference analysis concepts and demonstrates an application of these techniques to the project-valuation problem faced by resource managers. Our major focus is on the use of the exponential utility function, the utility function most frequently used by resource companies. We discuss the important and practical risk-sharing problem faced by managers in the resource sector, that is, how to choose the optimal share of a risky project. We demonstrate that with decision and preference analysis tools it can be quite straightforward for managers to identify their optimal share in risky projects. We then explore these techniques further and demonstrate that they can lead to some seemingly counter-intuitive results. In particular, we explore how the firms optimal share changes with exogeneous changes in project parameters. What we find is that while many of the changes in share are intuitive, some are not. In fact, when the firms estimate of the potential upside payoff upon finding reserves increases, it is sometimes better to decrease the firms share than it is to increase it. This is important, because by recognizing this counter-intuitive result, we can work to improve our intuition by understanding it. We summarize our findings and offers some guidelines resource managers should consider when considering a choice of utility function.

International arbitrage pricing theory: Relating risk premia

Abstract It is elementary that in a world of certain exchange rates, the factor risk premia of different economies must be identical. Using standard arbitrage arguments, this paper demonstrates that when exchange rates become uncertain, the factor risk premia not only must be different, but more importantly, risk premia (of different economies) associated with the same underlying factor must differ by a particular amount. There are three immediate implications of this result: (1) the slopes of the CAPM (capital- asset-pricing-model) lines in different economies must be different, (2) no factor risk, including exchange-rate risk, can have a zero price in more than one economy, and (3) when making cost-of- capital comparisons, simply adjusting for differences in riskfree rates and comparing risk premia is not sufficient; one must also take into account these arbitrage-determined differences between the factor risk premia.