First Look

Abstract—We develop a microeconomic model of endogenous growth where clean and dirty technologies compete in production and innovation, in the sense that research can be directed to either clean or dirty technologies. If dirty technologies are more advanced to start with, the potential transition to clean technology can be difficult both because clean research must climb several rungs to catch up with dirty technology and because this gap discourages research effort directed towards clean technologies. Carbon taxes and research subsidies may nonetheless encourage production and innovation in clean technologies, though the transition will typically be slow. We characterize certain general properties of the transition path from dirty to clean technology. We then estimate the model using a combination of regression analysis on the relationship between R&D and patents, and simulated method of moments using microdata on employment, production, R&D, firm growth, entry, and exit from the U.S. energy sector. The model's quantitative implications match a range of moments not targeted in the estimation quite well. We then characterize the optimal policy path implied by the model and our estimates. Optimal policy makes heavy use of research subsidies as well as carbon taxes. We use the model to evaluate the welfare consequences of a range of alternative policies.

Publisher's link: http://www.hbs.edu/faculty/Publication%20Files/15-045_4e9f7d2d-24c3-4d8c-8843-1eb9016bc016.pdf

Abstract—Many negotiators have constituencies that must formally or informally approve an agreement. Traditionally, it is the responsibility of each negotiator to manage the internal conflicts and constituencies on his or her own side. Far less familiar are the many valuable ways that one side can meet its own interests by helping the other side with the other's "internal," "behind-the-table," or "Level II" constituency challenges. Sebenius (2013) offered a moderately theoretical treatment of this challenge. Moving from theory to practice and from simple to complex, the present paper builds on that work. It illustrates several classes of practical measures that negotiators can use to advance their own interests by focusing on the other side's Level II negotiations. Beyond tailoring the terms of the deal for this purpose (e.g., with "compensation provisions"), one side can help the other, and vice versa, via a number of devices, alone or in combination. These include a) shaping the form of the agreement (e.g., tacit v. explicit, process v. substantive); b) tailoring the form of the negotiating process itself (to send a useful signal to constituencies); c) avoiding (or making) statements that inflame (or mollify) the other side's internal opponents; d) helping the other side attractively frame the deal for Level II acceptability; e) providing the ingredients for the other side to make an acceptance or even "victory speech" about why saying "yes" to the deal you want is smart and in the other side's interests; f) constructive actions at the bargaining table informed by knowledge of the other side's internal conflicts (e.g., not escalating when the other side mainly speaks for domestic purposes); g) having the first side work with the other side to tacitly coordinate outside pressure on the other side's Level II constituents to accept the deal that the first side prefers; and h) in extraordinary cases, by directly negotiating with one's counterparts to design measures that thwart its Level II opponents.

Publisher's link: http://www.hbs.edu/faculty/Publication%20Files/14-091_6caacd58-20c1-4257-9be5-204972ad4b4c.pdf

Abstract—Negotiation analysis seeks to develop prescriptive theory and useful advice for negotiators and third parties. It generally emphasizes the parties' underlying interests, alternatives to negotiated agreement, approaches to productively manage the inherent tension between competitive actions to "claim" value individually and cooperative ones to "create" value jointly, as well as efforts to change perceptions of the game itself. Since advice to one side does not necessarily presume the full game-theoretic rationality of the other side(s), negotiation analysts often draw on the findings of behavioral scientists and experimental economists. Further, this approach does not generally assume that all the elements of the "game" are common knowledge. It tends to de-emphasize the application of game-theoretic solution concepts or efforts to find unique equilibrium outcomes. Instead, to evaluate possible strategies and tactics, negotiation analysts generally focus on changes in perceptions of the "zone of possible agreement" and the (subjective) distribution of possible negotiated outcomes conditional on various actions. It has been used to develop prescriptive advice for the simplest bilateral negotiations between monolithic parties, for negotiations through agents or with linked "internal" and "external" aspects, for negotiations in hierarchies and networks, as well as for more complex coalitional interactions.

Abstract—People frequently feel anxious. Although prior research has extensively studied how feeling anxious shapes intrapsychic aspects of cognition, much less is known about how anxiety affects interpersonal aspects of cognition. Here, we examine the influence of incidental experiences of anxiety on perceptual and conceptual forms of perspective taking. Compared with participants experiencing other negative, high-arousal emotions (i.e., anger or disgust) or neutral feelings, anxious participants displayed greater egocentrism in their mental-state reasoning: they were more likely to describe an object using their own spatial perspective, had more difficulty resisting egocentric interference when identifying an object from others' spatial perspectives, and relied more heavily on privileged knowledge when inferring others' beliefs. Using both experimental-causal-chain and measurement-of-mediation approaches, we found that these effects were explained, in part, by uncertainty appraisal tendencies. Further supporting the role of uncertainty, a positive emotion associated with uncertainty (i.e., surprise) produced increases in egocentrism that were similar to anxiety. Collectively, the results suggest that incidentally experiencing emotions associated with uncertainty increases reliance on one's own egocentric perspective when reasoning about the mental states of others.

Publisher's link: http://www.hbs.edu/faculty/Publication%20Files/Todd%20et%20al%202014_162adbe2-6427-4cd1-8675-46aab9eda0e7.pdf