Explore first, exploite next: the true shape of regret in bandit problems


Mathematics of Operations Research

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Départements : Economie et Sciences de la décision

We revisit lower bounds on the regret in the case of multi-armed bandit problems. We obtain non-asymptotic, distribution-dependent bounds and provide straightforward proofs based only on well-known properties of Kullback-Leibler divergences. These bounds show in particular that in an initial phase the regret grows almost linearly, and that the well-known logarithmic growth of the regret only holds in a final phase. The proof techniques come to the essence of the information-theoretic arguments used and they are deprived of all unnecessary complications

Family Firms in the Ownership Network: Clustering, Bridging, and Embeddedness


Entrepreneurship: Theory and Practice

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Départements : Stratégie et Politique d’Entreprise, GREGHEC (CNRS)

Mots clés : family firms, community, embeddedness, network

In this paper, we investigate family firms’ position in the intercorporate ownership network. Rooting our predictions in the Behavioral Agency Model and a Network analytical framework, we predict and find that family involvement decreases the likelihood of business group affiliation and of cross-group ties leading to a lower embeddedness within the overall network. We predict and find the opposite effect for community involvement. We use the complete longitudinal dataset of publicly listed firms’ corporate ownership ties in India (2001, 2005, and 2009). Theoretical and substantive contributions are to research on family businesses and to research on interorganizational networks

Financing Investment: The Choice between Bonds and Bank Loans


Management Science

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Départements : Finance

Mots clés : Debt structure, Capital structure, Investment, Credit supply, Competition,

We build a model of investment and financing decisions to study the choice between bonds and bank loans in a firm's marginal financing decision and its effects on corporate investment. We show that firms with more growth options, higher bargaining power in default, operating in more competitive product markets, and facing lower credit supply are more likely to issue bonds. We also demonstrate that, by changing the cost of financing, these characteristics affect the timing of investment. We test these predictions using a sample of U.S. firms and present new evidence that supports our theory

Firm Non-Market Capabilities and the Effect of Supranational Institutional Safeguards on the Location Choice of International Investments


Strategic Management Journal

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Départements : Stratégie et Politique d’Entreprise, GREGHEC (CNRS)

Mots clés : international investment location choice; non-market capabilities; political connections; supranational institutions; bilateral investment treaties

We investigate the extent to which firms rely on supranational institutional safeguards versus their non-market capabilities to offset the risks of investing abroad. We argue that firms with non-market capabilities are insensitive to supranational institutional safeguards when choosing the location of their international investments. We show that supranational agreements between an investor’s home and host nation, operationalized as Bilateral Investment Treaties (BITs), increase the likelihood of investment, but there is substantial firm heterogeneity with respect to this relationship. Firms with various forms of non-market capabilities are not sensitive to BITs, whereas other firms are more likely to invest under BITs. We advance the understanding of how firm non-market capabilities can substitute for supranational institutional arrangements in addressing risks associated with host country institutional weaknesses

Herding and Social Media Word-of-Mouth: Evidence from Groupon

X. LI, L. WU

MIS Quarterly

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Départements : Information Systems and Operations Management, GREGHEC (CNRS)

Mots clés : Herding, word-of-mouth, social media, interaction effect, complementarity

Modern online retailing practices provide consumers with new types of real-time information that can potentially increase demand. In particular, showing past product sales information can reduce uncertainty about product quality, inducing consumers to herd. This effect could be particularly salient for experience goods due to their inherent high uncertainty about product quality. Social media word-of-mouth (WOM) can increase product awareness as product information spreads via social media, increasing demand directly and also amplifying existing quality signals such as past sales. This study examines the mechanisms behind the strategy of facilitating herding and the strategy of integrating social media platforms to understand the potential complementarities between the two strategies. We conduct empirical analysis using data from which sells goods in a fast cycle format of “daily deals”. We find that facilitating herding and integrating social media platforms are complements in generating sales, supporting that it is beneficial to combine the two strategies on social media-driven platforms. Furthermore, we find that herding is more salient for experience goods, consistent with our hypothesized mechanisms, while the effect of social media WOM does not differ between experience goods and search goods

How and When do Conglomerates Affect the Creativity of their Subsidiaries?


Strategic Management Journal

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How Do Firm Political Connections Impact Foreign Acquisitions? The Effects of Decision Makers’ Political and Firm Embeddedness


Global Strategy Journal

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Départements : Stratégie et Politique d’Entreprise, GREGHEC (CNRS)

Mots clés : political connections, non-market strategies, foreign acquisitions, French firms, mental models

Research summary: We examine how firm political connections established through the political embeddedness of senior decision makers affect firms’ foreign acquisition strategy. We argue that such political embeddedness affects the mental models of decision makers and, in turn, influences their preferences for particular strategies. We propose that political embeddedness leads to the formation of mental models that favor foreign acquisition strategies. We further argue that the firm embeddedness of politically-embedded decision makers alters their mental models, thereby mitigating their inclination for such strategies. We find evidence consistent with our mental models explanation using a sample of foreign acquisitions made by French publicly-traded firms during the 2009-2014 period. Overall, this study contributes to a better understanding of the mechanisms through which political connections impact global strategy. Managerial summary: We investigate how firm political connections affect firms’ foreign acquisition strategies. We argue that when firms have top decision makers with close connections to the government, they will make more foreign acquisitions. We further argue that this inclination towards foreign acquisitions is primarily driven by non-executive board members, with politically-connected executives appearing to be more reluctant to engage in such strategies. We find evidence consistent with these ideas when examining foreign acquisitions made by French publicly-traded firms managed by graduates of the prestigious ENA government school, which trains many government and senior civil servants in France

How Much Do Means Tested Benefits Reduce the Demand for Annuities?


Journal of Pension Economics and Finance

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Départements : Finance, GREGHEC (CNRS)

Mots clés : Means-Tested Benefits, Occupational Pension, Annuity

We analyze the effect of means-tested benefits on annuitization decisions using an administrative dataset of pension wealth cash-out choices. Availability of means-tested payments creates an incentive to cash out pension wealth for low and middle income earners, instead of taking the annuity. Agents trade off the advantages from annuitization, receiving longevity risk insurance, to the disadvantages, giving up “free” wealth in the form of means-tested supplemental income. Our life-cycle model demonstrates that the availability of means-tested benefits substantially reduces the desire to annuitize especially for low and intermediate levels of pension wealth. In our empirical analysis we show that the model’s predicted fraction of retirees choosing the annuity is able to match the annuitization pattern of occupational pension wealth observed in Switzerland

Impact of Average Rating on Social Media Endorsement: The Moderating Role of Rating Dispersion and Discount Threshold


Information Systems Research

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Départements : Information Systems and Operations Management, GREGHEC (CNRS)

Incentive programs for reducing readmissions when patient care is co-produced


Production and Operations Management

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Départements : Information Systems and Operations Management, GREGHEC (CNRS)

Mots clés : co-productive services, hospital readmissions, pay-for-performance, bundled payment

To reduce preventable readmissions, many healthcare systems are transitioning from Fee-for-Service (FFS) to other reimbursement schemes such as Pay-for-Performance (P4P) or Bundled Payment (BP) so that the funder of a healthcare system can transfer to the hospital some of the financial risks associated with patient re-hospitalizations. To examine the effectiveness of different schemes (FFS, P4P, and BP), we develop a "health co-production" model in which the patient's readmissions can be "jointly controlled" by the efforts exerted by both the hospital and the patient. Our analysis of the equilibrium outcomes reveals that FFS cannot entice the hospital and the patient to exert readmission-reduction efforts. Relative to BP, we find that P4P is more "robust" in the sense that it can induce readmission-reduction efforts under milder conditions. However, BP can induce greater efforts compared to P4P. More importantly, we characterize the conditions under which BP (or P4P) is the dominant scheme from the funder's perspective. Finally, we find that patient cost-sharing can generate two benefits: (a) it provides incentive for patients to exert efforts; and (b) if not excessive, it can reduce the readmission rate