IntroductionResearch In General.Uncertainty, Information, and IncentivesR. Vijay Krishna11UNC, Chapel HillMarch 28, 20111 / 10IntroductionWhat Economists doHow are Resources allocated?How do Rational Actors respond to Incentives?Role of Institutions?2 / 10IntroductionWhat Economists doHow are Resources allocated?How do Rational Actors respond to Incentives?Role of Institutions?2 / 10IntroductionWhat Economists doHow are Resources allocated?How do Rational Actors respond to Incentives?Role of Institutions?2 / 10IntroductionStarting PointRational AgentsRegularity in BehaviourDee Dah, Dee Dah, Dee DahApplies to Animals, microbes etc3 / 10IntroductionUncertaintyWhy don't we have Asteroid Insurance?Structure of UncertaintyStructure of Consumers' PreferencesStructure of Insurance MarketsUsefulness/Role of Prices4 / 10IntroductionUncertaintyWhy don't we have Asteroid Insurance?Structure of UncertaintyStructure of Consumers' PreferencesStructure of Insurance MarketsUsefulness/Role of Prices4 / 10IntroductionInformationPeople Often Have Private InformationPrivate Information is ValuableIncentives to Reveal InformationGrocery Stores oer specialsUsefulness/Role of Price/Quantity discounts5 / 10IntroductionInformationPeople Often Have Private InformationPrivate Information is ValuableIncentives to Reveal InformationGrocery Stores oer specialsUsefulness/Role of Price/Quantity discounts5 / 10IntroductionIncentivesLeonard Mlodinow [The Drunkard's Walk] on Hollywood EconomicsSherry Lansing ran Paramount  commissioned Forrest Gump,Braveheart, TitanicMarket shares 11.4, 10.6, 11.3, 7.4, 7.1, 6.7  subsequently redand parting market share 10Mark Canton at Columbia Pictures  commissioned Flop, Flop,Flop, then red as he commissioned Men in Black ($589m), AirForce One ($315m), The Fifth Element ($264), Jerry Maguire($274m)Mlodinow: actions due to industry's misunderstanding ofrandomnessEconomist: timing of shocks matters6 / 10IntroductionIncentivesLeonard Mlodinow [The Drunkard's Walk] on Hollywood EconomicsSherry Lansing ran Paramount  commissioned Forrest Gump,Braveheart, TitanicMarket shares 11.4, 10.6, 11.3, 7.4, 7.1, 6.7  subsequently redand parting market share 10Mark Canton at Columbia Pictures  commissioned Flop, Flop,Flop, then red as he commissioned Men in Black ($589m), AirForce One ($315m), The Fifth Element ($264), Jerry Maguire($274m)Mlodinow: actions due to industry's misunderstanding ofrandomnessEconomist: timing of shocks matters6 / 10IntroductionIncentivesLeonard Mlodinow [The Drunkard's Walk] on Hollywood EconomicsSherry Lansing ran Paramount  commissioned Forrest Gump,Braveheart, TitanicMarket shares 11.4, 10.6, 11.3, 7.4, 7.1, 6.7  subsequently redand parting market share 10Mark Canton at Columbia Pictures  commissioned Flop, Flop,Flop, then red as he commissioned Men in Black ($589m), AirForce One ($315m), The Fifth Element ($264), Jerry Maguire($274m)Mlodinow: actions due to industry's misunderstanding ofrandomnessEconomist: timing of shocks matters6 / 10IntroductionIncentivesLeonard Mlodinow [The Drunkard's Walk] on Hollywood EconomicsSherry Lansing ran Paramount  commissioned Forrest Gump,Braveheart, TitanicMarket shares 11.4, 10.6, 11.3, 7.4, 7.1, 6.7  subsequently redand parting market share 10Mark Canton at Columbia Pictures  commissioned Flop, Flop,Flop, then red as he commissioned Men in Black ($589m), AirForce One ($315m), The Fifth Element ($264), Jerry Maguire($274m)Mlodinow: actions due to industry's misunderstanding ofrandomnessEconomist: timing of shocks matters6 / 10IntroductionIncentivesLeonard Mlodinow [The Drunkard's Walk] on Hollywood EconomicsSherry Lansing ran Paramount  commissioned Forrest Gump,Braveheart, TitanicMarket shares 11.4, 10.6, 11.3, 7.4, 7.1, 6.7  subsequently redand parting market share 10Mark Canton at Columbia Pictures  commissioned Flop, Flop,Flop, then red as he commissioned Men in Black ($589m), AirForce One ($315m), The Fifth Element ($264), Jerry Maguire($274m)Mlodinow: actions due to industry's misunderstanding ofrandomnessEconomist: timing of shocks matters6 / 10IntroductionIncentives and Serial UncertaintyShakespeare [Julius Caesar]Men at some time are masters of their fates:The fault, dear Brutus, is not in our stars,But in ourselves, (for we are Underlings)7 / 10IntroductionWork•to•Own Franchising ProgramsExecutive John Fitchett commenting on Quiznos' sweat equity programThe Operating Partner Program was developed in response to asuccessful pool of qualied, interested entrepreneurs with restaurantexperience who would make great franchise owners, but lack access tothe necessary nancing . . .Operating partners earn a salary and benets as they work toward fullownership of the restaurant, with 80% of prots paying downQuiznos' contribution on a monthly basis.8 / 10IntroductionWork•to•Own Franchising Programs (continued)Executive John Fitchett commenting on Quiznos' sweat equity programwe believe an operating partner that successfully operates therestaurant can reach the point of being able to acquire full ownershipin two to ve years. . . .For the rst year, Quiznos will cover any losses, and the amount will beadded to the loan value.After 12 months, if the restaurant has not reached protability,. . . [Wewill then] evaluate whether to put a new operator in the restaurant.9 / 10Research In GeneralResearch in GeneralThe Scientic MethodRole of Applied MathematicsThe Joy of it allThank You and Good Luck10 / 10Research In GeneralResearch in GeneralThe Scientic MethodRole of Applied MathematicsThe Joy of it allThank You and Good Luck10 / 10Research In GeneralResearch in GeneralThe Scientic MethodRole of Applied MathematicsThe Joy of it allThank You and Good Luck10 / 10Research In GeneralResearch in GeneralThe Scientic MethodRole of Applied MathematicsThe Joy of it allThank You and Good Luck10 /