Based on measurements with 332 owner-managers, the global shape of the utility function (i.e., S-shaped versus concave or convex over the total range of outcomes) appears to discriminate organizational behavior. Whereas the degree of risk aversion, based on the local shape of the utility function, may be important in explaining owner-manager's trading behavior, the global shape of the utility function appears to drive more structural organizational behavior.

organizational behavior, prospect theory, risk aversion, utility theory
Statistical Decision Theory; Operations Research (jel C44), Firm Objectives, Organization, and Behavior: Other (jel L29), Business Administration and Business Economics; Marketing; Accounting (jel M), Marketing (jel M31)
Erasmus Research Institute of Management
hdl.handle.net/1765/173
ERIM Report Series Research in Management
Copyright 2002, J.M.E. Pennings, A. Smidts, This report in the ERIM Report Series Research in Management is intended as a means to communicate the results of recent research to academic colleagues and other interested parties. All reports are considered as preliminary and subject to possibly major revisions. This applies equally to opinions expressed, theories developed, and data used. Therefore, comments and suggestions are welcome and should be directed to the authors.
Erasmus Research Institute of Management

Pennings, J.M.E, & Smidts, A. (2002). The Shape of Utility Functions and Organizational Behavior (No. ERS-2002-18-MKT). ERIM Report Series Research in Management. Erasmus Research Institute of Management. Retrieved from http://hdl.handle.net/1765/173