Leonid, Eric, Roger and me

Posted by Marc Hodak on October 15, 2007 under Self-promotion | Comments are off for this article

For the longest time, my most downloaded paper on SSRN has been my contribution to mechanism design. My paper on the Enron Scandal submitted last June, however, has been downloaded at a rapid clip (it was #5 among “new papers” in the Management Research Network)–a trajectory that would make it my #1 paper sometime next month. Maybe with the publicity of the Hurwicz, Maskin, and Myerson Nobel, my ingenious mechanism may see a surge!

My mechanism, a corporate cost allocation method, was praised at the time of publication (ten years ago) as extraordinarily clever. It was adopted by some very large, complex organizations, and succeeded in getting their managers to reveal reservation prices (a key objective of mechanism design) on major investments, with the effect of significantly improving their corporate returns.

Unfortunately, over the last decade, corporate cost allocations have come to be driven almost entirely by tax considerations rather than internal economics. The impact on organizational efficiency of this sorry trend is incalculable. Imagine E-bay auctions organized by the IRS.