http://repub.eur.nl/res/concept/jel-D80/ Recent publications classified by JEL Code D80 en http://repub.eur.nl/static-eur/img/logo.png http://repub.eur.nl http://repub.eur.nl/res/pub/37301/ 2012-09-25T00:00:00Z We study risk perception and actual decision-making by the corporate elite, where we consider CEOs, CFOs and non-executives. We collect data for many members of the elite for Netherlands-based companies using the vignettes method. We find that CEOs are more risk tolerant but do not act accordingly by demanding higher returns. CFOs and non-executives are found to be more risk-averse; but, interestingly, only the non-executives demand higher returns more than CEOs do. Differences in demanded returns across CEOs and CFOs are found to be negligible. When decision makers mature and get more experienced, they tend to ask higher returns on investment. For all members of the corporate elite it holds that overconfidence is consistently related to higher risk tolerance, whereas those degrees of overconfidence are similar. Groot, E.A. de Renes, S. Segers, R. Franses, Ph.H.B.F. http://repub.eur.nl/res/pub/31627/ 2012-01-01T00:00:00Z Abstract. We examine the impact of CEOs’ familiarity with business segments on their divestiture decisions. We find that CEOs are less likely to divest assets from familiar segments, when compared to non-familiar segments. Our evidence suggests that CEOs favor their familiar segments, because they are more informed about these segments relative to non-familiar segments. It does not support CEO selection and managerial entrenchment as main explanations for the familiarity effect. Even though divestitures from familiar segments are least likely to occur, these divestitures generate the highest abnormal announcement returns. Ang, J. Jong, A. de Poel, A.M. van der http://repub.eur.nl/res/pub/22339/ 2010-11-01T00:00:00Z This paper examines how a firm can strategically choose its capacity to manipulate consumer beliefs about aggregate demand. It looks at a market with social effects where consumers want to do what is popular, to buy what they believe others want to buy. By imposing a capacity constraint and setting a price just low enough for it to bind, the firm can fool certain naive consumers into believing that demand is greater than it actually is. This will in turn increase the willingness to pay of all consumers through social effects. In equilibrium, the firm will impose a capacity constraint whenever demand is lower than expected, even when the number of naive consumers is arbitrarily small. Vikander, N. http://repub.eur.nl/res/pub/34945/ 2010-01-01T00:00:00Z Abstract This article analyzes the last financial crisis focussing on the recurrent dynamics of externalities in banking. It shows that two major determinants of the crisis were the uncertainty of a new form of financial intermediation and the failure of regulation to cope with its externalities. Differently from more standard explanations, which are based on opportunism and/or irrationality of financial institutions, this analysis suggests that regulation has not just been insufficient. Regulation has contributed to financial instability too, supporting fragile conventions to handle uncertainty and encouraging regulatory arbitrage through financial innovation. Three implications are derived from this analysis and contrasted with the ongoing reforms of financial regulation in the US and in the EU. First, regulatory arbitrage is better dealt with by protecting banking from disintermediation than by extending prudential regulation to non-banks. Maturity transformation should be defined functionally and reserved to banks. Second, a major danger with ratings is that they support false conventions of safety. To avoid this outcome, the relevance of ratings for regulatory purposes should be reduced and rating agencies should be deterred from rating without firm knowledge. Third, in order to reduce short-termism, regulation of banks’ corporate governance should rather question than reinforce managerial accountability to shareholders. Pacces, A.M. http://repub.eur.nl/res/pub/17089/ 2009-10-16T00:00:00Z This paper analyses the role of information in the search process. I build a simple model of a good with two random attributes with some joint probability distribution. I consider seemingly unimportant changes in this distribution, i.e. changes which neither affect expected utility nor its variance. These changes have a great impact on the search behaviour: the customer may start to search the characteristics and buy the good even if she did not do so before. The optimal search rule is derived and the model is generalized to multiple objects Parakhonyak, A. http://repub.eur.nl/res/pub/14202/ 2008-11-24T00:00:00Z Market-based instruments are believed to create more efficient incentives for firms to adopt new technologies than command-and-control policies. We compare the effects of a direct technology regulation and of an adoption subsidy under asymmetric information about the costs of technological advances in controlling the socially undesirable activities. We show that the policy maker may want to commit to her policy. The reason is that asymmetric information about adoption costs induces the policy maker to set subsidy levels that increase over time; firms, expecting higher subsidies in the future, postpone investment. Direct regulation offers a commitment possibility that allows to prevent firms from postponing investment. Ossokina, I.V. Swank, O.H. http://repub.eur.nl/res/pub/13562/ 2008-02-01T00:00:00Z Managing through projects has become important for generating new knowledge to cope with technological and market discontinuities. This paper examines how the fit between the creation of technological and market knowledge and important project management characteristics, i.e. project autonomy and completion criteria, influences the success of new business development (NBD) projects. In-depth longitudinal case research on NBD projects commercialised from 1993 to 2003 in the consumer electronics industry highlights that project management characteristics focusing only on the creation of technological knowledge contributed to the failure of those NBD projects that required new market knowledge as well. The findings indicate that senior management support and engaging in an alliance with partners possessing complementary market knowledge can offset this misalignment of the organisation of NBD projects. Burgers, J.H. Bosch, F.A.J. van den Volberda, H.W. http://repub.eur.nl/res/pub/10622/ 2007-10-30T00:00:00Z Managing through projects has become important for generating new knowledge to cope with technological and market discontinuities. This paper examines how the fit between the creation of technological and market knowledge and important project management characteristics, i.e. project autonomy and completion criteria, influences the success of new business development (NBD) projects. In-depth longitudinal case research on NBD-projects commercialised during the period 1993-2003 in the consumer electronics industry highlights that project management characteristics focusing only on the creation of technological knowledge contributed to the failure of those NBD-projects that required new market knowledge as well. The findings indicate that senior management support and engaging in an alliance with partners possessing complementary market knowledge can offset this misalignment of the organisation of NBD-projects. Burgers, J.H. Bosch, F.A.J. van den Volberda, H.W. http://repub.eur.nl/res/pub/6623/ 2004-06-01T00:00:00Z The paper studies information processing imperfections in a fully rational decision-making network. It is shown that imperfect information transmission and imperfect information acquisition in a multi-stage selection game yield information overload. The paper analyses the mechanisms responsible for a seeming bounded rational behavior of the network and shows their similarities and distinctions. Two special cases of filtering selection procedures are investigated, where the overload takes its most limiting forms. The model developed in the paper can be applied both to organizations and to individuals. It can serve as a rational foundation for bounded rationality. Ficco, S.S. Karamychev, V.A. http://repub.eur.nl/res/pub/10996/ 2003-09-01T00:00:00Z Medical decision analyses typically focus on one disease, that is, on one source of risk. In many medical decisions multiple sources of risk co-exist, however. This paper analyzes the effect of such comorbidities on treatment decisions. The effect of comorbidities on treatment decisions depends primarily on the way in which the patient’s attitude to health status risks varies with duration. In the QALY model comorbidities do not affect treatment decisions. This property of the QALY model can be used as a diagnostic test of its descriptive and prescriptive validity. Bleichrodt, H. Crainich, D. Eeckhoudt, L. http://repub.eur.nl/res/pub/6822/ 2003-06-10T00:00:00Z The collection of information necessary for decision-making is often delegated to agents (e.g. bureaucrats, advisors, lawyers). If both the pros and cons of a decision have to be examined, it is better to use competing agents instead of a single agent. The reason is that two conflicting pieces of information cancel each other out. Using two agents, each searching for one cause yields full information collection at minimum costs. This provides a rationale for advocacy in political and judicial systems. In this paper, we provide a rationale for the sequential nature of information collection in advocacy systems. If two agents search simultaneously, the incentive to continue searching is affected by the information found by the other agent. This forces the principal to leave rents to the agents. If agents search sequentially, the reward can be made conditional on the information found in earlier stages. This reduces the cost of information collection. However, sequential advocacy implies either a more sluggish decision-making process or a less-informed decision. Dur, A.J. Swank, O.H. http://repub.eur.nl/res/pub/11741/ 2000-06-01T00:00:00Z The effect of organizational communication structure on performance is studied using a project selection framework in which heterogeneous, rational agents can reject or accept projects. A hierarchy performs better than a polyarchy in tough environments, whereas the reverse holds in friendly environments. Hierarchies can be too strict from a social welfare point of view. Indeed, if the value of profitable but rejected projects is taken into account, a single agent can perform better than a hierarchy. Visser, B.