A theorem on aggregating classifications


Mathematical Social Sciences

janvier 2016, vol. 79, pp.6-10

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

Mots clés : Aggregation of classifications, Group identification problem, Task assignment problem, Nonbinary evaluations

Suppose that a group of individuals must classify objects into three or more categories, and does so by aggregating the individual classifications. We show that if the classifications, both individual and collective, are required to put at least one object in each category, then no aggregation rule can satisfy a unanimity and an independence condition without being dictatorial. This impossibility theorem extends a result that Kasher and Rubinstein (1997) proved for two categories and complements another that Dokow and Holzman (2010) obtained for three or more categories under the condition that classifications put at most one object in each category. The paper discusses an interpretation of its result both in terms of Kasher and Rubinstein’s group identification problem and in terms of Dokow and Holzman’s task assignment problem.

Choice-based cardinal utility: a tribute to Patrick Suppes


Journal of Economic Methodology

2016, vol. 23, n°3, pp.268-288

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

Mots clés : ordinal utility, cardinal utility, preference differences, representation theorems, Suppes, ordinalism, cardinalism

We reexamine some of the classic problems connected with the use of cardinal utility functions in decision theory, and discuss Patrick Suppes’ contributions to this field in light of a reinterpretation we propose for these problems. We analytically decompose the doctrine of ordinalism, which only accepts ordinal utility functions, and distinguish between several doctrines of cardinalism, depending on what components of ordinalism they specifically reject. We identify Suppes’ doctrine with the major deviation from ordinalism that conceives of utility functions as representing preference differences, while being nonetheless empirically related to choices. We highlight the originality, promises and limits of this choice-based cardinalism.

Comparing attitudes toward time and toward money in experience-based decisions


Theory and Decision

janvier 2016, vol. 80, n°1, pp.71-100

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

Mots clés : Experience-based decisions, Time, Real incentives, Mixed modeling, Errors, Probability weighting

This paper reports an experimental comparison of attitudes toward time and toward money in experience-based decisions. Preferences were elicited under rank-dependent utility for prospects with two or three consequences expressed either in time or in monetary units. Probabilities were unknown but learned through sampling. More specifically, time and money were compared under two conditions. In a first experiment, both consequences and probabilities of prospects were unknown and learned through sequential sampling. In a second experiment, the possible consequences were revealed after the sampling. A real incentive system was implemented for both time and money. The heterogeneity of preferences was assessed for time and for money through individual and mixed modeling estimations. We observe that the nature of consequences (time or money) modifies probability weighting in terms of elevation and sensitivity. Subjects exhibit more optimism and less sensitivity to probability changes when deciding about time than about money. Revealing the consequences impacts the shape of the utility function and leaves probability weighting unchanged. We also observe that the real incentives have no effect except for the reduction in decision errors. This effect is stronger for money than for time

Decision biases and entrepreneurial finance


Small Business Economics

décembre 2016, vol. 47, n°4, pp.819–834

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

Mots clés : Entrepreneurship, Decision biases, Cognitive biases, Entrepreneurial finance, Informal finance, Fundraising, Social ties, Venture performance

We study the effects of three cognitive biases by the entrepreneur on obtaining funding. We find planning fallacy to increase funding amounts, whereas optimism and overconfidence by the entrepreneur have no effects on funding amounts from others. Further, planning fallacy positively impacts the probability of strong-tie (inside) investments but negatively impacts the probability of weak-tie (outside) investments. Mediation analyses further show that planning fallacy positively impacts venture performance through both self and other investor funding amounts. Our findings are not consistent with the pecking order theory of informal finance and suggest positive effects of at least one cognitive bias on entrepreneurial business success through increased funding

Equity crowdfunding: A new phenomena


Journal of Business Venturing Insights

juin 2016, vol. 5, pp.37–49

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

Mots clés : Equity crowdfunding, UK, Campaign success

Crowdfunding has recently become available for entrepreneurs. Most academic studies analyse data from rewards-based (pre-selling) campaigns. In contrast, in this paper we analyse 636 campaigns, encompassing 17,188 investors and 64,831 investments between 2012 and 2015, from one of the leading European equity crowdfunding platforms. We provide descriptive statistics and carry out cross-campaign regression analysis. The descriptive statistics address its size, growth and geographic distributions in the UK. The regressions analyse which factors are associated with the probability of a successful campaign. We find some similarities and some interesting dissimilarities when comparing the descriptive statistics and regression results to research on rewards-based crowding. The data show that equity crowdfunding will likely pose great challenges to VC and business angel financiers in the near future. We discuss some research challenges and opportunities with these kind of data

Hierarchies and entrepreneurship


European Economic Review

octobre 2016, vol. 89, pp.129–147

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

Mots clés : Entrepreneurship, Employee mobility, Hierarchy, Rank; Small firm effect

We establish a correlation between the hierarchical structure of a firm and the likelihood of business creation among its former employees, using a sample of 16 million observations of Swedish workers and a novel proxy for hierarchies based on occupation data. Conditional on firm size and many other variables, employees in firms with more layers are less likely to enter entrepreneurship, to become self-employed, and to switch to another employer. The effects of layers are much stronger for business creation than for job-switching and they are stronger for entrepreneurship than for self-employment. We discuss two potential explanations for the distinctive hierarchy effect we find. Part of the effect could be to be due to preference sorting by employees, and part due to employees in firms with fewer layers having a broader range of skills. One test showing that the probability of entrepreneurship increases with their prior rank in an organization is consistent with ability sorting and inconsistent with preference sorting

Incomplete preferences and confidence


Journal of Mathematical Economics

aout 2016, vol. 65, pp.83–103

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

Mots clés : Incomplete preferences, Confidence, Multiple priors, Choice under incomplete preferences, Absence of trade

A theory of incomplete preferences under uncertainty is proposed, according to which a decision maker’s preferences are indeterminate if and only if her confidence in the relevant beliefs does not match up to the stakes involved in the decision. We use the representation of confidence in beliefs introduced in Hill (2013), and axiomatise a class of models, differing from each other in the appropriate notion of stakes. The theory naturally suggests two distinct strategies for completing preferences, and hence for choosing in the presence of incompleteness: one that relies only on beliefs in which the decision maker is sufficiently confident, and one that mobilises all beliefs, no matter how little confidence she may have in them. Axiomatic characterisations are given for completion procedures following each of the strategies. Finally, in a market setting, the incorporation of confidence is shown to add an extra friction, beyond the standard implications of non-expected utility models for Pareto optima

Invention Quality and Entrepreneurial Earnings: The Role of Prior Employment Variety


Entrepreneurship: Theory and Practice

mars 2016, vol. 40, n°2, pp.381-400

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

We use creativity theory to analyze the effects of occupational job variety and industry variety on invention quality, and entrepreneurial earnings. We test our ideas with survey data from 770 inventor–entrepreneurs who commercialized their own inventions. Results suggest that occupational and industry variety substitute for each other in positively affecting invention quality whereas a lack of industry variety is associated with greater entrepreneurial earnings. Results are consistent with the idea that high levels of both occupational and industry variety enables the generation and discovery of inventions, but these ideas are usually not technically feasible or financially viable

Markov games with frequent actions and incomplete information -- the limit case


Mathematics of Operations Research

février 2016, vol. 41, n°1, pp.49 - 71

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

Mots clés : Markov games, Incomplete information, Zero-sum games, Hamilton-Jacobi equations, Repeated games

We study the asymptotics of a class of two-player, zero-sum stochastic game with incomplete information on one side when the time span between two consecutive stages vanishes. The informed player observes the realization of a Markov chain on which the payoffs depend, whereas the noninformed player only observes his opponent’s actions. We show the existence of a limit value; this value is characterized through an auxiliary optimization problem and as the solution of a Hamilton-Jacobi equation

Measuring Loss Aversion under Ambiguity: A Method to Make Prospect Theory Completely Observable


Journal of Risk and Uncertainty

février 2016, vol. 52, n°1, pp.1-20

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

Mots clés : Prospect theory, Loss aversion, Utility for gains and losses, Risk, Ambiguity, Elicitation methods

We propose a simple, parameter-free method that, for the first time, makes it possible to completely observe Tversky and Kahneman’s (1992) prospect theory. While methods exist to measure event weighting and the utility for gains and losses separately, there was no method to measure loss aversion under ambiguity. Our method allows this and thereby it can measure prospect theory’s entire utility function. Consequently, we can properly identify properties of utility and perform new tests of prospect theory. We implemented our method in an experiment and obtained support for prospect theory. Utility was concave for gains and convex for losses and there was substantial loss aversion. Both utility and loss aversion were the same for risk and ambiguity, as assumed by prospect theory, and sign-comonotonic trade-off consistency, the central condition of prospect theory, held