The objective of science is to advance knowledge, primarily in two interlinked ways: circulating ideas, and defending or criticizing the ideas of others. Peer review acts as the gatekeeper to these mechanisms. Given the increasing concern surrounding the reproducibility of much published research, it is critical to understand whether peer review is intrinsically susceptible to failure, or whether other extrinsic factors are responsible that distort scientists' decisions. Here we show that even when scientists are motivated to promote the truth, their behaviour may be influenced, and even dominated, by information gleaned from their peers' behaviour, rather than by their personal dispositions. This phenomenon, known as herding, subjects the scientific community to an inherent risk of converging on an incorrect answer and raises the possibility that, under certain conditions, science may not be self-correcting. We further demonstrate that exercising some subjectivity in reviewer decisions, which serves to curb the herding process, can be beneficial for the scientific community in processing available information to estimate truth more accurately. By examining the impact of different models of reviewer decisions on the dynamic process of publication, and thereby on eventual aggregation of knowledge, we provide a new perspective on the ongoing discussion of how the peer-review process may be improved.

We estimate the effect of corporate diversification on firm value using a sample of 766 segment-year observations during 2004–2008 for firms listed on the Australian Stock Exchange as of August 2009. In addition to conventionally used measures of diversification, we develop five new measures of diversification that explicitly take into account the degree to which a multi-segment firm’s various segments are in related lines of business. We use three different excess value measures to estimate the valuation effect of diversification. We find that multi-segment firms in our sample enjoyed a significant diversification premium that ranges from 12.4% to 18% depending on the measures of diversification and excess value. We also find some evidence that multi-segment firms benefit more from diversification when their executives are motivated more through long-term incentives such as stock and stock options.

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The maximal generic number of Nash equilibria for two person games in which the two agents each have four pure strategies is shown to be 15. In contrast to Keiding (1995), who arrives at this result by computer enumeration, our argument is based on a collection of lemmas that constrain the set of equilibria. Several of these pertain to any common number d of pure strategies for the two agents. Journal of Economic Literature Classification Number C72.