Articles

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

E. KEMEL, M. TRAVERS

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

Gordon ADOMDZA, T. ASTEBRO, Kevyn YONG

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

http://rdcu.be/pi47


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

N. VULKAN, T. ASTEBRO, M. FERNANDEZ SIERRA

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

http://dx.doi.org/10.2139/ssrn.2700236


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

J. TAG, T. ASTEBRO, P. THOMPSON

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

http://www.sciencedirect.com/science/article/pii/S0014292116301179


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

B. HILL

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

http://dx.doi.org/10.2139/ssrn.2460508


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

T. ASTEBRO, K. YONG

Entrepreneurship: Theory and Practice

mars 2016, vol. 40, n°2, pp.381-400

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

http://ssrn.com/abstract=2744148


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

P. CARDALIAGUET, C. RAINER, D. ROSENBERG, N. VIEILLE

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

http://dx.doi.org/10.2139/ssrn.2344780


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

M. ABDELLAOUI, H. BLEICHRODT, O. L'HARIDON, D. VAN DOLDER

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

http://dx.doi.org/10.2139/ssrn.2318352


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

Memorable Consumption

I. GILBOA, A. POSTLEWAITE, L. SAMUELSON

Journal of Economic Theory

septembre 2016, vol. 165, pp.414–455

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

Mots clés : Memorable goods, Consumption volatility, Consumption smoothing

http://dx.doi.org/10.2139/ssrn.2731299


People often consume non-durable goods in a way that seems inconsistent with preferences for smoothing consumption over time. We suggest that such patterns of consumption can be better explained if one takes into account the future utility flows generated by memorable consumption goods—goods, such as a honeymoon or a vacation, whose utility flow outlives their physical consumption. We consider a model in which a consumer enjoys current consumption as well as utility generated by earlier memorable consumption. Lasting utility flows are generated only by some goods, and only when their consumption exceeds customary levels by a sufficient margin. We offer axiomatic foundations for the structure of the utility function and study optimal consumption in a dynamic model. We show that rational consumers, taking into account future utility flows, would make optimal choices that rationalize lumpy patterns of consumption

Public policy to promote entrepreneurship: a call to arms

T. ACS, T. ASTEBRO, D. AUDRETSCH, D. ROBINSON

Small Business Economics

juin 2016, vol. 47, n°1, pp.35-51

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

Mots clés : Entrepreneurship, Public policy, Social welfare

http://dx.doi.org/10.2139/ssrn.2728664


We debate the motivation for and effectiveness of public policies to encourage individuals to become entrepreneurs. Reviewing established evidence we find that most Western world policies do not greatly reduce or solve any market failures but instead waste taxpayers’ money, encourage those already intent on becoming entrepreneurs, and mostly generate one-employee businesses with low-growth intentions and a lack of interest in innovating. Most policy initiatives that would have the effect of promoting valuable entrepreneurship would not be recognizable as such, because they would primarily address other market failures: A central-payer health care would remove healthcare-related distortions affecting employment choices; greater STEM education would produce more engineers of which some start valuable new firms; and labor market reform to encourage hiring immigrants in jobs they have been educated for would reduce inefficient allocation of talent to entrepreneurship


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