nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2017‒08‒13
four papers chosen by
Arvi Kuura
Tartu Ülikool

  1. Does Voluntary Risk Taking Affect Solidarity? Experimental Evidence from Kenya By Strobl, Renate; Wunsch, Conny
  2. Scheduling Markovian PERT networks to maximize the net present value: new results By Ben Hermans; Roel Leus
  3. Cost-effectiveness of buying land for conservation versus paying land-users for conservation measures – the case of preserving an oligotrophic lake in a Natura 2000 area in North Germany By Schöttker, Oliver; Wätzold, Frank
  4. Government Financing of R&D: A Mechanism Design Approach By Lach, Saul; Neeman, Zvika; Schankerman, Mark

  1. By: Strobl, Renate (University of Basel); Wunsch, Conny (University of Basel)
    Abstract: In this study we experimentally investigate whether solidarity, which is a crucial base for informal insurance arrangements in developing countries, is sensitive to the extent to which individuals can influence their risk exposure. With slum dwellers of Nairobi our design measures subjects' willingness to share income with a worse-off partner both in a setting where participants could either deliberately choose or were randomly assigned to a safe or a risky project. We find that when risk exposure is a choice, willingness to give is roughly 9 percentage points lower compared to when it is exogenously assigned to subjects. The reduction of solidarity is driven by a change in giving behaviour of persons with the risky project. Compared to their counterparts in the random treatment, voluntary risk takers are seemingly less motivated to share their high payoff with their partner, especially if this person failed after choosing the risky project. This suggests that the willingness to show solidarity is influenced by both the desire for own compensation and attributions of responsibility. Our findings have important implications for policies that interact with existing informal insurance arrangements.
    Keywords: solidarity, risk taking, Kenya
    JEL: D81 C91 O12 D63
    Date: 2017–07
  2. By: Ben Hermans; Roel Leus
    Abstract: We study the problem of scheduling a project so as to maximize its expected net present value when task durations are exponentially distributed. Based on the structural properties of an optimal solution we show that, even if preemption is allowed, it is not necessary to do so. Next to its managerial importance, this result also allows for a new algorithm which improves on the current state of the art with several orders of magnitude, both in CPU time and in memory usage.
    Keywords: Project scheduling, Net present value, Exponentially distributed activity durations, Markov decision process, Monotone optimal policy
    Date: 2017–07
  3. By: Schöttker, Oliver; Wätzold, Frank
    Abstract: Cost-effective implementation of measures to conserve biodiversity is often a major target of conservation organisations, and choosing the correct mode of governance can be important in this context. Nature conservation organisations can, in principle, choose between two distinct modes of governance to implement conservation activities: they can (1) buy desired areas of interest and implement conservation measures themselves (buy option), or (2) offer payments to landowners to incentivize them to voluntarily preserve or create habitat on their land (compensation option). In this paper we analyse the cost-effectiveness of these two modes of governance in a case study on a conservation project in a Natura 2000 area in Schleswig-Holstein, Germany. The actual costs of the buying option are compared with the potential costs of implementing the compensation option. We developed a costing framework to compare the costs of both options over time, given they generate the same ecological results on an identical project area. We find that the cost-effective solution depends, among other things, on the conservation timeframe considered and on cost components such as transaction costs, leasehold rent and land prices.
    Keywords: agri-environment scheme; biodiversity; conservation payments; grassland; make-or-buy decision; mode of governance; payments for ecosystem services; conservation costs
    JEL: Q15 Q24 Q57 Q58 R14
    Date: 2017–08–06
  4. By: Lach, Saul; Neeman, Zvika; Schankerman, Mark
    Abstract: We study the design of a government loan program for risky R&D projects that generate positive externalities, undertaken by entrepreneurs in a competitive capital market environment. With adverse selection, the optimal contract requires a high interest rate but nearly zero co-financing by the entrepreneur. This contrasts sharply with observed policies, typified by a low interest rate and high co-finanacing requirement. When we add moral hazard (endogenous success), the optimal policy consists of a menu of at most two contracts, one with high interest/zero self-finanacing and a second with a lower interest but also a co-finanacing requirement. Calibrated simulations compare the optimal policy and observed program designs in terms of innovation and welfare.
    Keywords: additionality; entrepreneurship; government nance; innovation; mechanism design; R&D; start-ups
    JEL: D61 D82 O32 O38
    Date: 2017–08

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