contours of development abstract new ventures seem to suffer more difficulties and business failures than do established firms also there is a pattern to the mortality with most newly founded businesses lasting only a few years explanations of high failure rates in new ventures have often centered on poor management or have postulated that firms chose inappropriate strategies for their markets and economic environments the present article conceives of new venture mortality as similar in nature to patterns of development that we observe for instance in human embryos or in the formation of new species that is development is an inherently hazardous process some of the specific hazards of development are 1 1 generic entry barriers it is generally not possible for a new firm or product to successfully enter an already crowded stable market where competitors are strong it is more feasible instead to enter a new or growing market or to enter with a substitute product that is clearly superior to those existing or to exploit an unnoticed market opening or to develop competitive strengths secretly without overtly challenging others in the industry 2 2 density of developmental hurdles any new entity must clear a sequence of important hurdles on its way to maturity such as establishing a well ordered office a functional sales channel etc failure at any one hurdle is potentially fatal and a mathematical analysis shows that the likelihood of passing even 10 hurdles in a row is about one in three the earliest hurdles tend to be the most difficult and to crowd more densely than later hurdles particularly troublesome are phase changes where a company first starts business or becomes one thing rather than another within a short period of time 3 3 amplification of maturational error any complex system that grows rapidly and is unable to predict the future perfectly is going to accumulate structural errors that become very difficult to remedy this is a natural and inevitable developmental process as the system grows in complexity and the flaw itself becomes a pillar of the system if an imitator or competitor arrives soon afterward and spots the error he or she will easily be able to retool and redesign a better system whereas the first firm is stuck with old habits tools dies and production methods 4 4 sequence and control in development every embryonic organism has a design template outlined in its dna that is carefully followed both the developing fetus itself and the mother have monitoring and control mechanisms that trigger an abortion if the development process goes awry new ventures lack such mechanisms they are more susceptible to developmental deviance likely to differ from the model successful corporation of their type 5 5 smallness and the asymmetry of luck small things are more subject to the whims of fate than big things amount of resources is the key because new ventures typically start off with scarce resources a bad bounce can sink the company and the probability of at least one such bad bounce is high 6 6 costs of organizing like all of the larger brained mammals a new company such as a medical supply firm must learn through experience much of what it means to be mature costs associated with learning arrive just when the firm is most vulnerable and distracted by other challenges in one sense the message of this article is good news in that managers of failed enterprises need not assume all the blame after all if most new businesses do poorly then failure is the average or typical case and it makes little sense to say that the average manager is poor the bad news is that if our perspective is correct managers of new ventures have less scope to influence the success of their enterprises than is commonly believed the managerial recommendations that emerge are that new ventures are more likely to succeed to the extent that they have sponsorship or capital have managers with a range of experience in previous ventures are given extra assistance of shelter or can ensure a high probability of passing all of the hurdles faced by a new venture

behavioural development economics lessons from field labs in the developing world abstract explanations of poverty growth and development depend on the assumptions made about individual preferences and the willingness to engage in strategic behaviour economic experiments especially those conducted in the field have begun to paint a picture of economic agents in developing communities that is at variance with the traditional portrait we review this growing literature with an eye towards preference related experiments conducted in the field we also offer lessons on what development economists might learn from experiments we conclude by sharing our thoughts on how to conduct experiments in the field and then offer a few ideas for future research

entrepreneurs perceived chances for success abstract entrepreneurs involved in planning or starting firms must engage in a continuing process of appraising prospects for success these assessments presumably bear upon the preparations they make as well as at some later point whether they decide to make major changes or even to discontinue the business in this study data from 2994 entrepreneurs who had recently become business owners were analyzed to determine their perceived changes of success although previous evidence on business survival led to the hypothesis that the entrepreneurs would only be cautiously optimistic this was not the case they perceived their prospects as very favorable with 81 seeing odds of 7 out of 10 or better and a remarkable 33 seeing odds of success of 10 out of 10 in considering the prospects for other businesses like their own they perceived odds which were significantly lower but still moderately favorable based upon previous research on factors associated with new business success it was hypothesized that those who were more likely to succeed based upon their personal backgrounds and the nature of their new firms would be more optimistic however this was not the case those who were poorly prepared were just as optimistic as those who were well prepared at this point shortly after having become business owners the assessment by entrepreneurs of their own likelihood of success was dramatically detached from past macro statistics from perceived prospects for peer businesses and from characteristics typically associated with higher performing new firms the psychological literature on post decisional bolstering suggests that decision makers in many settings tend to bolster or exaggerate the attractiveness of an option after it has been chosen this coupled with the tendency of entrepreneurs to believe that they can control their own destinies implies that the extreme optimism observed here is probably a typical occurrence for entrepreneurs the findings suggest that it is probably natural to experience feelings of entrepreneurial euphoria when first becoming a business owner with the available evidence it is difficult to judge whether this leads to inadequate preparations or an inability to diagnose problems and make adjustments after the business is started this extreme optimism probably does contribute to the heavy personal commitments observed here in which the median entrepreneur devoted more than 60 hours per week to the business the entrepreneur would seem well advised to form relationships with outsiders such as board members and professional advisors who can be objective and detached in diagnosing problems and assessing objectively the prospects for the business in its current form

entrepreneurial success and failure confidence and fallible judgment excess entry or the high failure rate of market entry decisions is often attributed to overconfidence exhibited by entrepreneurs assuming that these decisions depend on assessments of business opportunities we model boundedly rational entrepreneurs and show analytically that whereas excess entry is an inevitable consequence of imperfect judgment it does not necessarily imply overconfidence indeed judgmental fallibility can lead to excess entry even when all potential entrepreneurs are underconfident we further demonstrate that as a group individuals who decide to start a new business exhibit more confidence than those who do not and that successful entrants are less confident than failures our results therefore question general claims that overconfidence leads to excess entry we conclude by emphasizing the need to understand the role of judgmental fallibility in producing economic outcomes and implications for both venture capitalists and the training of entrepreneurs

exact consumer s surplus and deadweight loss consumer s surplus is a widely used tool in applied welfare economics both economic theorists and cost benefit analysis often use consumer s surplus despite its somewhat dubious reputation the basic idea is to evaluate the value to a consumer or his willingness to pay for a change in price of a good from say pricep to pricep because price changes affect consumer welfare an evaluation of this effect is often a key input to public policy decisions yet consumer s surplus is probably the most controversial of widely used economic concepts both paul samuelson and ian little conclude that the economics profession would be better off without it it is my feeling of the situation that substantial agreement exists on the correct quantities to be measured the amount the consumer would pay or would need to be paid to be just as well off after the price change as he was before the price change the quantities correspond to john hicks compensating variation measures an alternative measure which takes ex post price change utility as the basis of comparison is hicks equivalent variation the controversy arises in the measurement of these quantities the usual measurement procedure is to use the area to the left of the marshallian market demand curve between two price levels jules dupuit originated this measure of welfare change and alfred marshall and hicks derived appropriate conditions for its use the primary condition for the area to the left of the demand curve to correspond to the compensating variation is to have constant marginal utility of income marshall gave this condition and if it holds the same quantity will be derived as the area to the left of the compensated hicksian demand curve this area to the left of the compensated demand curve is exactly what the compensating variation and equivalent variation measure thus the constant marginal utility of income is a sufficient condition for marshallian consumer s surplus to be equal to hicks consumer s surplus in this case arnold harberger s plea to use the welfare triangle as one half times the product of the price change times the quantity change to measure deadweight loss corresponds to the correct theoretical amount of welfare change in a recent paper robert willig derives bounds for the percentage difference between the correct measure of either the compensating or equivalent variation and the marshallian measure derived form the market demand curve his bounds which depend on the income elasticity of demand for the single good in the region of price change being considered as well as the proportion of the consumer s income spent on the good demonstrate that the marshallian consumer s surplus is often a good approximation to hicks consumer s surplus the fact that the proportion of the consumer s income spent matters as well as the income elasticity was first pointed out by harold hotelling willig contends that the approximation error will be less than the errors involved in estimating the demand curve thus he hopes to remove the need for apology that applied economists often need to give to theorists who remark on the inappropriateness of using marshallian consumer s surplus to measure welfare change however in this paper i show that for the case primarily considered by willig of a single price change which is also the situation in which consumer s surplus is often used in applied work no approximation is necessary professor of economics massachusetts institute of technology and research associate national bureau of economic research i would like to thank peter diamond erwin diewert daniel mcfadden robert merton robert solow hal varian joel yellin and the referees for help and comments research support from the national science foundation is acknowledged the reason that we still have two rather than one of samuelson s six measures of consumer s surplus arises from an index number problem of the correct basis for the welfare comparison i will give both measures but plan to concentrate on the compensating variation

the impact of education on subjective discount rate in ugandan villages abstract heterogeneity in time discounting may reinforce the existing barriers to save and invest faced by rural populations in developing countries we elicit a subjective discount rate for a varied sample of ugandan villagers in accordance with other studies we have found the discount rate to decrease with education we examine this correlation further by testing the causal effect of education and exploit two different sources of its variation school frequency across villages and the number of the respondents school going years that overlap with the era of the dictator idi amin s rule for men we find that education has a significant impact on their discount rate similar in magnitude for both types of instruments and robust to observable characteristics this finding highlights the importance of education in development

returns to spending on agricultural extension the case of the national agricultural advisory services naads program of uganda the aim of this paper is to assess the direct and indirect impacts of the agricultural extension system of uganda the national agricultural advisory services naads program on household agricultural income data from two rounds of surveys of ugandan rural farm households conducted in 2004 and 2007 as well as different program evaluation methods and model specifications are used to estimate impacts and compute a rate of return the direct and indirect impact of the program is estimated at 37 95 and 27 55 increase in per capita agricultural gross revenue between 2004 and 2007 for households participating directly and indirectly in the program respectively compared to nonparticipants the rate of return on the program s expenditures is estimated at 8 49 the program has been relatively more effective among male headed larger and asset poor households as well as those taking up noncrop high value enterprises and living further away from financial services all weather roads and markets or located in the eastern and northern regions policy implications of the results are drawn

bootstrapping in small firms an empirical analysis of change over time abstract while bootstrapping is widely utilized as a strategic practice of small firms and has been regarded in the entrepreneurship literature as an important topic of study little has been done to link bootstrapping to organizational theory this paper presents hypotheses and an empirical study regarding bootstrapping and organizational development for small firms the results of the study indicate that different types of bootstrapping are utilized at different periods in the life of a small firm and that the methods utilized coincide to some extent with organizational theory predictions

how do investment ideas spread through social interaction evidence from a ponzi scheme a unique data set from a large ponzi scheme allows me to study word of mouth diffusion of investment information investors could join the scheme only by invitation from an existing member which allows me to observe how the idea spreads from one person to the next based on inviter invitee relationships i find that the observed social network has a scale free connectivity structure which significantly facilitates the diffusion of the investment idea and contributes to the growth and survival of the socially spreading ponzi scheme i further find that investors invest more if their inviter has comparatively higher age education and income

consumer preferences for electricity tariffs does proximity matter abstract the introduction of renewable energy sources fosters the transformation to an energy system with distributed generation this alters the relation between consumers and power generation sites as generation and consumption spatially converge it allows for new configurations within the energy sector and provides opportunities for marketing regional energy we empirically investigate consumer preferences for electricity generation in proximity to end users focusing on the proximity of generation and providers and present representative data for germany in a discrete choice experiment a sample of 780 consumer households and 173 adopters of a renewable energy system prosumers chose from a range of different electricity tariffs we estimate the willingness to pay for the following attributes shares of regional generation power providers and electricity mixes we find evidence in favor of regional production but in spite of positive attitudes towards local generation from renewable sources willingness to pay is not responsive to higher shares of regional generation in addition a preference for regional providers exists the results show that renewable energy mixes are preferred particularly a solar and hydro mix adopters state slightly more distinct preferences as compared to consumer households thus we find there is potential for business models offering regionally generated electricity

entrepreneurship and the initial size of firms abstract it is clear that entrepreneurs and their firms can vary widely nevertheless most of the research to date on entrepreneurship has examined central tendencies with relatively little attention devoted to entrepreneurial diversity this study examines one of the most distinguishing characteristics of young firms initial size the focus is whether smaller start ups differ from larger ones in the backgrounds of the entrepreneurs their processes of starting or the subsequent patterns of development in this longitudinal study an initial sample of 1903 young firms was examined to determine differences in characteristics of the entrepreneurs and in their processes of starting one year later data were obtained from 742 of these firms permitting analysis of how initial firm size was related to subsequent difficulties encountered and changes made as well as to performance as expected along almost every dimension these starting larger firms had the backgrounds that would seem to be necessary for the assembly of substantial resources they tended to have more education more management experience and goals that were more managerial in nature they also were more likely to have partners women were associated more often with smaller ventures but for this sample there were no differences in the representation of minorities between the smaller and larger start ups those starting larger ventures tended to rely more upon external investors and to start ventures more closely linked to their previous jobs both groups of entrepreneurs sought information from a number of sources but those founding larger ventures utilized professional advisors more whereas those starting smaller ventures utilized informal sources in the year after the first questionnaire differences between the two groups were less marked than expected both groups of surviving firms reported low levels of serious problems with the smaller ventures somewhat surprisingly reporting serious problems less often there were not many differences in changes made except that smaller ventures were more likely to lose partners and larger ventures were more likely to add branches or locations both groups reported high rates of mean growth in sales the smaller ventures with their small initial bases showed larger percentage increases smaller ventures also showed higher percentage increases in employment and surprisingly a greater increase in the absolute number of employees somewhat more of the smaller ventures had discontinued both groups included many firms that grew substantially and others that scaled back demonstrating the fluidity and experimentation characteristic of young firms for entrepreneurs and their advisors for public policy makers and for researchers any progress in understanding entrepreneurial processes should in the long run enhance venture performance the patterns observed here indicate that firms of different initial size tend to be associated with particular entrepreneurial characteristics processes of formation and subsequent patterns of development this diversity should be recognized in the development of assistance programs and university courses as well as in the interpretation of previous research for public policy makers the growth of these firms both small and large indicates the potential of economic contributions from entrepreneur ship further the growth of the smaller start ups suggests that even those ventures that appear to have few resources and modest potential can in the aggregate contribute substantially to the economy

intra household resource allocation an inferential approach if household income is pooled and then allocated to maximize welfare then income under the control of mothers and fathers should have the same impact on demand with survey data on family health and nutrition in brazil the equality of parental income effects is rejected unearned income in the hands of a mother has a bigger effect on her family s health than income under the control of a father for child survival probabilities the effect is almost twenty times bigger the common preference or neoclassical model of the household is rejected if unearned income is measured with error and income is pooled then the ratio of maternal to paternal income effects should be the same equality of the ratios cannot be rejected there is also evidence for gender preference mothers prefer to devote resources to improving the nutritional status of their daughters fathers to sons

multistage selection and the financing of new ventures using a random sample of 221 new swedish ventures initiated in 1998 we examine why some new ventures are more likely than others to successfully be awarded capital from external sources we examine venture financing as a staged selection process in which two sequential selection events systematically winnow the population of ventures and influence which ventures receive financing for a venture to receive external financing its founders must first select it as a candidate for external funding and then a financier must fund it we find evidence that founders select ventures as candidates for external finance based on their perceptions of market competition market growth and employment growth while financiers base funding decisions on objective verifiable indicators of venture development such as the completion of organizing activities marketing activities and the level of sales of the venture our findings have implications for venture financing and evolutionary theories of social processes

estimating individual discount rates in denmark a field experiment we estimate individual discount rates with respect to time streams of money using controlled laboratory experiments these discount rates are elicited by means of field experiments involving real monetary rewards the experiments were carried out across denmark using a representative sample of 268 people between 19 and 75 years of age individual discount rates are estimated for various households differentiated by socio demographic characteristics such as income and age our conclusions are that discount rates are constant over the 12 month to 3 year horizons used in these experiments and that discount rates vary substantially with respect to several socio demographic variables hence we conclude that it would be reasonable to assume constant discount rates for specific household types but not the same rates across all households

resolving differences in willingness to pay and willingness to accept reply gwendolyn c morrison 1997 raises a logical point regarding our experimental test of the divergence between willingness to pay wtp and willingness to accept wta measures of economic value shogren et al 1994 she argues that our design does not provide a true test of the existence of a fundamental endowment effect since we did not control for the potential of a pivoting indifference map daniel kahneman et al 1990 she concludes that even though our ev idence shows that the mean wtp and wta bids for market goods with close substitutes e g candy bars and coffee mugs converge after market experience the endowment effect might still be alive and well albeit at statisti cally insignificant levels

discount rates and credit markets theory and evidence from rural india three models of credit markets 1 the permanent income model 2 upward sloping credit supply to individual borrowers and 3 constrained credit due to imperfect enforcement are tested using credit market data and an experimental study of individuals discount rates in south india the permanent income model is rejected by both the discount rate and the credit market data the discount rate data are consistent with either of the other two models while the credit market data are consistent with a combination of these two models other explanations are found to be insufficient to explain the results of this study

overconfidence and moral hazard abstract in this paper i study the effects of overconfidence on incentive contracts in a moral hazard framework agent overconfidence can have conflicting effects on the equilibrium contract on the one hand an optimistic or overconfident agent disproportionately values success contingent payments and thus prefers higher powered incentives on the other hand if the agent overestimates the extent to which his actions affect outcomes lower powered incentives are sufficient to induce any given effort level if the agent is moderately overconfident the latter effect dominates because the agent bears less risk in this case there are efficiency gains stemming from his overconfidence if the agent is significantly overconfident the former effect dominates the agent is then exposed to an excessive amount of risk and any gains arise only from risk sharing under disagreement an increase in optimism or overconfidence increases the effort level implemented in equilibrium

consumers willingness to pay for the color of salmon a choice experiment with real economic incentives in most retail markets sellers post the price and consumers choose which products to buy we designed an experimental market with posted prices to investigate consumers willingness to pay for the color of salmon salmon fillets varying in color and price were displayed in twenty choice scenarios in each scenario the participants chose which of two salmon fillets they wanted to buy to induce real economic incentives each participant drew one binding scenario the participants then had to buy the salmon fillet they had chosen in their binding scenario the choice data were analyzed with a mixed logit model

does schooling cause growth a number of economists find that growth and schooling are highly correlated across countries a model is examined in which the ability to build on the human capital of one s elders plays an important role in linking growth to schooling the model is calibrated to quantify the strength of the effect of schooling on growth by using evidence from the labor literature on mincerian returns to education the upshot is that the impact of schooling on growth explains less than one third of the empirical cross country relationship the ability of reverse causality to explain this empirical relationship is also investigated

willingness to pay versus expected consumption value in vickrey auctions for new experience goods over the past two decades vickrey auctions have been widely used to elicit willingness to pay for new food products this article shows that in a multiperiod context it can be optimal for consumers to bid higher than the expected consumption value for a new experience good to obtain information about how the new good fits into their preference set the degree of uncertainty about the consumption value the purchasing frequency and expected future market prices affect both the expected value of the quality information and the subgame perfect bidding strategy in vickrey auctions for new experience goods

modernization and time preferences in tanzania evidence from a large scale elicitation exercise abstract assumptions about individual time preferences are important for explanations of poverty and development data from a large scale elicitation exercise in tanzania show significantly higher levels of impatience in urban areas than in rural areas this result remains robust to adding controls for socio economic differences between rural and urban areas which possibly correlate with time preferences we attribute this to differences in modernisation between urban and rural areas with modernisation leading to increased impatience this is corroborated by the observed positive correlation between impatience and education the latter being an important vehicle of modernisation for traditional societies in tanzania

swinging a double edged sword the effect of slack on entrepreneurial management and growth resource slack represents a double edged sword simultaneously fueling and hindering growth drawing on penrose s growth theory and stevenson s entrepreneurial management theory we have developed and tested a conceptual model that provides a more nuanced account of the resource slack growth relationship using a large dataset spanning six years we have found that slack has a positive direct effect on growth but a negative effect on entrepreneurial management and that entrepreneurial management has a positive effect on growth our empirical and conceptual findings are important to the development of firm growth theory and explicate causal mechanisms transforming slack into firm level outcomes

endogenous overconfidence in managerial forecasts abstract we examine whether attribution bias leads managers who have experienced short term forecasting success to become overconfident in their ability to forecast future earnings importantly this form of overconfidence is endogenous and dynamic we also examine the effect of this cognitive bias on the managerial credibility consistent with the existence of dynamic overconfidence managers who have predicted earnings accurately in the previous four quarters are less accurate in their subsequent earnings predictions these managers also display greater divergence from the analyst consensus and are more precise lastly investors and analysts react less strongly to forecasts issued by overconfident managers

entrepreneurial optimism and the market for new issues this article analyzes the impact of entrepreneurial optimism on the market for new issues we find that the existence of optimists generates a new reason for entrepreneurs to own equity in their firms we show that optimism is a natural explanation for why some new issues are underpriced and others overpriced we also show that the impact of optimism on entrepreneurs equity holdings depends on the number of optimists absolute risk aversion and cash flow variance optimism makes entrepreneurs worse off in contrast optimism can make outside investors better off when entrepreneurs signal firm value by retaining shares and underpricing

smart money the effect of education on financial outcomes household financial decisions are important for household welfare economic growth and financial stability yet our understanding of the determinants of financial decision making is limited exploiting exogenous variation in state compulsory schooling laws in both standard and two sample instrumental variable strategies we show that education increases financial market participation measured by investment income and equities ownership while dramatically reducing the probability that an individual declares bankruptcy experiences a foreclosure or is delinquent on a loan further results and a simple calibration suggest that the result is driven by changes in savings or investment behavior rather than simply increased labor earnings

theories of choice under risk insights from financial markets abstract to date the plausibility of theories of choice under risk hinges are mainly on experimental evidence this paper devises and implements an approach amenable of assessing the performance of three families of models expected utility rank dependent expected utility and the cumulative prospect theory using information from financial asset markets our findings unequivocally support reference point dependence diminishing marginal sensitivity loss aversion and nonlinear weighting of gain and loss physical probabilities the empirical observations are found to be robust to inter alia the parameterization of the utility and probability weighting functions day of the week effects the choice of a reference point and the introduction of possible low probability market crashes peso component

overconfidence compensation contracts and capital budgeting a risk averse manager s overconfidence makes him less conservative as a result it is cheaper for firms to motivate him to pursue valuable risky projects when compensation endogenously adjusts to reflect outside opportunities moderate levels of overconfidence lead firms to offer the manager flatter compensation contracts that make him better off overconfident managers are also more attractive to firms than their rational counterparts because overconfidence commits them to exert effort to learn about projects still too much overconfidence is detrimental to the manager since it leads him to accept highly convex compensation contracts that expose him to excessive risk

aspiring to succeed a model of entrepreneurship and fear of failure fear of failure can dominate the choices of individuals we model its role in the decision to become an entrepreneur and subsequent investments made in pursuit of success using the framework of loss aversion we show that when an individual s threshold for success is sufficiently high fear of failure motivates additional investment when the threshold for success is equal to the foregone outside option on the other hand fear of failure is always de motivating finally regardless of the success threshold fear of failure is negatively associated with entry into entrepreneurship our findings highlight the importance of the interaction between the degree of fear of failure and the aspirations of the would be entrepreneur

being in someone else s shoes the role of gender in nascent entrepreneurship several studies have shown the existence of significant differences in the rate of new business creation between men and women specifically it has been shown that women are much less likely to be involved in entrepreneurship than men worldwide it is not yet understood however if such differences are the result of personal characteristics of the individual and of her economic environment or are instead the result of universal and perhaps evolutionary phenomena our empirical analysis is conducted using representative samples of population for 37 countries and a special form of bootstrapping that allows us to equalize individuals conditions and as a result analyze the choices of men and women put in identical economic environments and socio economic circumstances

preference heterogeneity in the structural estimation of efficient pigovian incentives for insecticide spraying to reduce malaria this paper bridges the theoretical and empirical literatures on the role of preference heterogeneity in characterizing externalities related to disease transmission we use a theoretical structure similar to locational sorting models which characterize equilibria in terms of marginal individuals who are indifferent between locations in our case the locations are binary consisting of whether or not to take a discrete preventative action individual heterogeneity arises in this structure due to variation in the costs and disutility associated with prevention we demonstrate application of this approach in the context of participation in insecticide based indoor residual spraying programs for malaria control in northern uganda we identify the parameters of our theoretical model using a stated preference choice experiment combined with estimates from published epidemiological studies the model implies that pigovian subsidies for participation in this context should decrease household malaria risk by 19 25 our approach can be applied to other bioeconomic externalities with spillovers from discrete preventative actions including agricultural pest management and the control of pest infestations and invasive species

the heterogeneity of animal spirits a first taxonomy of entrepreneurs with regard to investment expectations investment expectations are highly subjective and subjectivity is inherently diverse we propose an analytical taxonomy of entrepreneurs with regard to investment expectations of how diverse animal spirits are we draw on past research so as to outline the relevant independent classification variables motivations skills management styles and affective traits comprise our four groups of classification variables based on a field study using a sample of 289 entrepreneurs and performing two different cluster analyses we find 11 stable groups of entrepreneurs we portray them as ideal types a la weber there may be major and minor memberships our 11 groups are the neoclassical manager the builder the administrator the paternalistic manager the hero the mogul the prophet the craftsman the inventor the gambler and the explorer

using an economic experiment to estimate willingness to pay for a new maternal nutrient supplement in ghana scaling up access to supplements designed to prevent undernutrition such as new small quantity lipid based nutrient supplements sq lns may require distribution via both public channels and retail markets the viability of sq lns retail markets will hinge on household level demand we use an economic experiment to characterize initial willingness to pay wtp for a maternal sq lns product in ghana wtp is positive for most participants though below the estimated cost of production for many wtp varies depending on income assets and parity status these findings have implications for the design of public health policy and hybrid public private delivery mechanisms

who invests in renewable electricity production empirical evidence and suggestions for further research transforming energy systems to fulfill the needs of a low carbon economy requires large investments in renewable electricity production res e recent literature underlines the need to take a closer look at the composition of the res e investor group in order to understand the motives and investment processes of different types of investors however existing energy policies generally consider res e investments made on a regional or national level and target investors who evaluate their res e investments according to least cost high profit criteria we present empirical evidence to show that res e investments are made by a heterogeneous group of investors that a variety of investors exist and that their formation varies among the different types of renewable sources this has direct implications for our understanding of the investment process in res e and for the study of motives and driving forces of res e investors we introduce a multi dimensional framework for analyzing differences between categories of investors which not only considers to the standard economic dimension which is predominant in the contemporary energy literature but also considers the entrepreneurship innovation adoption and institutional dimensions the framework emphasizes the influence of four main investor related factors on the investment process which should be studied in future research motives background resources and personal characteristics

focusing and framing of risky alternatives abstract this paper develops a theory of focusing and framing in an intertemporal context with risky choices we provide a selection criterion between existing theories of focusing by allowing a decision maker to choose her frame such that her attention is either drawn to salient events associated with an option or to the expected utilities an option yields in different time periods our key assumption is that a decision maker can choose her frame in a self serving manner we predict that the selected frame induces overoptimistic actions in the sense that subjects underrate downside risk but overrate upside risk and accordingly reveal overoptimistic choices hence our theory can explain phenomena such as excessive harmful consumption smoking unhealthy diet and risky investments entrepreneurship lotteries gambling in one coherent framework notably overoptimistic actions are not universal but have plausible limits we characterize under which situations overoptimistic actions are most likely to occur and under which circumstances choices should be rational or even pessimistic

consumer attitudes toward low stake risk in food markets consistency of quality is viewed as important for producers of consumer goods however there is no literature testing the importance of quality consistency on consumers willingness to pay for consumer goods we use an experimental auction market to investigate how inconsistency in tenderness affects consumers willingness to pay for beef we find that most consumers are risk averse with respect to sensory quality both the average tenderness and the variance of tenderness affected the consumers willingness to pay for beef reducing the uncertainty of the sensory quality by categorizing the beef into three tenderness classes increased the total value of the beef by 8

the economics of roscas and intrahousehold resource allocation this paper investigates individual motives to participate in rotating savings and credit associations roscas detailed evidence from roscas in a kenyan slum nairobi suggests that most roscas are predominantly composed of women particularly those living in a couple and earning an independent income to explain this phenomenon we propose an argument based on conflictual interactions within the household participation in a rosca is a strategy a wife employs to protect her savings against claims by her husband for immediate consumption the empirical implications of the model are then tested using the data collected in kenya

are entrepreneurs decisions more biased an experimental investigation of the susceptibility to status quo bias abstract entrepreneurship research has demonstrated that entrepreneurs are more susceptible to certain cognitive biases than are selected other individuals we investigate whether this finding holds for the status quo bias not yet investigated in the entrepreneurship literature the status quo bias is defined as the tendency to select a previously chosen alternative disproportionately often we compare entrepreneurs decisions with those of students and bankers in an experimental study we find that entrepreneurs are as affected by the status quo as students but less affected than bankers accounting for differences in experience and types of decision scenarios we have indirect evidence for a consistency of entrepreneurs decisions with what would be expected from a stereotypical schumpeterian entrepreneur being more open to new options than other individuals are however since entrepreneurs are frequently influenced by the status quo we discuss the pros and cons of such behavior

effects and value of verifiable information in a controversial market evidence from lab auctions of genetically modified food food products containing genetically modified gm ingredients have entered the market over the past decade the biotech industry and environmental groups have disseminated conflicting private information about gm foods this paper develops a unique methodology for valuing independent third party information in such a setting and applies this method to consumers willingness to pay for food products that might be gm data are collected from real consumers in an auction market setting with randomized information and labeling treatments the average value of third party information per lab participant is small but the public good value across u s consumers is shown to be quite large jel c91 d12 d82

employment change in independent owner managed high technology firms in great britain there is a growing volume of literature that points to the potential for small technology based firms to achieve substantial employment growth as a direct consequence of such work this sector of any economy has attracted increasing attention from national and local governments concerned with finding ways of revitalising economically deprived localities and creating employment opportunities this paper provides up to date empirical evidence surrounding the ability of small high technology firms to create additional jobs in great britain in addition key founder and business characteristics are isolated which are significantly associated with employment change in growing high technology firms over the 1986 to 1992 period with respect to factors influencing these high levels of employment growth a high firm size in 1986 was found to act positively on employment growth as was a graduate level education for the key founder on the finance side firms which had access to and used a multiplicity of sources of start up finance tended to grow faster futher on the basis of our results we would suggest and recommend a government policy which at the firm level actively encourages high technology firm start ups who record higher rates of survival than firms in more conventional sectors as well as providing support for existing high technology firms who have already demonstrated the inclination and ability to grow in employment size

posted prices and bid affiliation evidence from experimental auctions in most experimental auctions researchers ask participants to bid on the same item in multiple po tentially binding rounds posting the price submitted by the top bidder or bidders after each of those rounds if bids submitted in later rounds are affiliated with posted prices from earlier rounds this practice could result in biased value estimates in this article we discuss the results of an experiment designed explicitly to test whether posted prices affect bidding behavior we find that for familiar items high posted prices lead to increased bids in subsequent rounds our results have implications for researchers conducting experimental auctions article advances the literature in several im portant ways first we report the design and results of the only study designed specifically to control for the effects of posted prices on bids in subsequent rounds we do this with the aid of confederate bidders who were instructed to bid within a certain narrow range thus we have multiple treatments that vary only by the presence or absence of confederate bidders al lowing for what we believe to be the cleanest possible test of the effect of posted prices on bidding behavior in later rounds while list and shogren 1999 model bids in round t as a function of the posted price in round t 1 through our use of confederate bidders to con trol posted prices we are able to test whether exposure to high posted prices has an effect that accumulates over the course of multiple rounds leading to a gradual increase in mean bids second our methods of analysis are more complete than previous work examining bid af filiation we not only compare summary statis tics from early and late rounds but we also use panel data analysis to understand how in dividual participants bids are affected by the presence of confederate bidders focusing on individuals rather than summary statistics al lows us to understand how individual specific characteristics influence affiliation and it also allows us to better understand the role of out liers

are risk aversion and impatience related to cognitive ability is the way that people make risky choices or tradeoffs over time related to cognitive ability this paper investigates whether there is a link between cognitive ability risk aversion and impatience using a representative sample of the population and incentive compatible measures we conduct choice experiments measuring risk aversion and impatience over an annual time horizon for a randomly drawn sample of roughly 1 000 german adults subjects also take part in two different tests of cognitive ability which correspond to sub modules of one of the most widely used iq tests interviews are conducted in subjects own homes we find that lower cognitive ability is associated with greater risk aversion and more pronounced impatience these relationships are significant and robust to controlling for personal characteristics educational attainment income and measures of credit constraints we perform a series of additional robustness checks which help rule out other possible confounds

networking and growth of young technology intensive ventures in china abstract more often than not new ventures lack established products known technologies longstanding customer relations experienced managerial teams sufficient capital and strong reputations almost by definition small new firms lack the resources of many larger established firms the task of an infant firm and a measure of its success is to make a transition from being resource weak to being resource strong how can resources that are critical for profitable growth be acquired for the resource weak new venture researchers have found that entrepreneurs can gain access to valuable resources and they can seek to achieve competitive advantage through networking activities forming and utilizing available relationships with external organizations can allow entrepreneurs to build credibility gain advice financing and customer access build a positive image and obtain resources at below market prices and obtain channel access information and innovations business relationships with other organizations allow an entrepreneur to achieve desired business results through asset parsimony a favorable view toward networking for new ventures leaves a number of unanswered questions however relevant research questions might include who should the entrepreneur seek as a business partner are all inter organizational relationships equal or are some types more valuable to new ventures than other relationships do firms relying on high levels of networking activities actually outperform firms that less actively seek resources through external organizational relationships the present study provides a specific understanding of the concept of networking for entrepreneurs we propose that networking can be understood in terms of range the number of external relationships to obtain resources and of intensity the frequency of contact of and amount of resource obtained from these relationships this research project evaluates the range and intensity of networking among high growth and low growth entrepreneurial ventures extensive interviewing with managers of six young technology oriented firms in the people s republic of china prc affirmed the importance of entrepreneurial networking managers in the three high growth firms reported greater range and intensity of business networking than did managers of three low growth firms matched by industry and age moreover the relationship between networking activities and growth transcended the stage of firm development where networking range and intensity are deemed important in the growth process new venture success may call for entrepreneurs to reach out deliberately to external organizations to capture needed resources to a certain extent such networking activities run counter to important entrepreneurial motivations of independence and autonomy the concept of networking and the results of this study imply that entrepreneurs need to combine the spirit of independence with the reality of resource dependence and they need to balance personal autonomy with strategic business relationships this study also contributes to the understanding of entrepreneurship in our increasingly global economy particularly in the prc business relationships between the united states and the prc have been expanding rapidly in the last decade many foreign businesses seek license agreements joint venture partners equity participation or channel relationships with young ventures in that country do the same rules of networking apply in the prc as the literature suggests apply in the united states new ventures in this study were found to engage in processes of networking activities consistent with those in the west although networking activities may have different cultural roots firm success appeared influenced by the same principles of networking

desperate housewives communication difficulties and the dynamics of marital un happiness this paper develops a model of marital dissolution based on communication difficulties the quality of a marriage depends on the proximity of an action to a target the target is unknown and must be learned over time each individual receives private signals about the target and can communicate them only imperfectly to his or her spouse because of imperfect communication spouses may hold different beliefs about the optimal action the action actually chosen is a compromise of the spouses distinct beliefs if a couple s beliefs diverge too widely one or both of them may prefer to dissolve the marriage the paper explores how poor communication contributes to marital unhappiness as well as its implications for the dynamics of divorce risk the welfare properties of divorce decisions and the role of counseling when the distribution of decision making power in the household favors men wives but not husbands can find themselves trapped for prolonged periods in a marriage that leaves them as unhappy as it is possible to be without seeking relief through divorce

welfare gains from quality certification of infant foods results from a market experiment in mali in low income countries malnutrition is often most severe among infants of six to twenty four months they need higher density foods than the family diet but density is a credence attribute we hypothesize that the premium now paid for heavily advertised brands reflects demand for quality assurance which could be provided at lower cost to competing firms through third party certification we use a new market experiment to find that mothers average willingness to pay for certification is about 1 75 kg or four times its cost so that total economic surplus gains from introducing certification to mali would be on the order of 1 million annually

a quantitative content analysis of the characteristics of rapid growth firms and their founders a group of firms that is attracting attention are rapid growth firms these firms are of particular interest because rapid growth is an indication of market acceptance and firm success by studying rapidgrowth firms researchers can help all firms better understand the attributes associated with firm growth despite these positive outcomes however rapid firm growth is difficult to achieve and maintain this study adds to the literature through a quantitative content analysis of the narrative descriptions of 50 rapid growth firms and a comparison group of 50 slow growth companies the purpose of the study was to draw from the narratives a list of empirically grounded growth related attributes that are associated with rapid growth firms the findings of the study resulted in the advancement of a conceptual model of the attributes of rapid growth firms in four areas founder characteristics firm attributes business practices and human resource management hrm practices

experimental auction procedure impact on valuation of quality differentiated goods despite increased use of experimental auctions a myriad of different procedures are being employed without formal consideration of how the procedures might affect results this study investigates the effect of several procedural issues on valuation estimates from experimental auctions results indicate the second price auction generates higher valuations than english becker degroot marschak bdm and random nth price auctions especially in latter bidding rounds and that random nth price auction yields lower valuations than english and bdm auctions we find that endowing subjects with a good prior to eliciting bids can have an impact on valuations but the effect varies across auction mechanism

rational entry into risky markets with negative expected returns the role of biased misestimation of profit potential abstract we extend the theory of negative long run profits in risky industries by incorporating a negatively skewed profit distribution rational behavior with incomplete information is introduced by allowing economic agents to know the median rather than the mean rate of return we compare this to the case involving postdecision bolstering where entrants choose to discount available information on the industry profit distribution monte carlo experiments are tailored to the experience of the u s home building industry

behavioral foundations of microcredit experimental and survey evidence from rural india microcredit is an innovative financial tool designed to reduce poverty and fix credit market imperfections we use experimental measures of time discounting and risk aversion for villagers in south india to highlight behavioral features of microcredit conditional on borrowing from any source women with present biased preferences are more likely than others to borrow through microcredit institutions microcredit contracts require loan repayments in regular fixed installments and they harness peer pressure to encourage discipline these innovations mirror mechanisms highlighted in behavioral approaches to saving suggesting that microcredit s popularity stems partly from modes of encouragement and self discipline absent in typical lending mechanisms

effects of cheap talk on consumer willingness to pay for golden rice a large body of literature suggests willingness to pay is overstated in hypothetical valuation questions as compared to when actual payment is required recently cheap talk has been proposed to eliminate the potential bias in hypothetical valuation questions cheap talk refers to process of explaining hypothetical bias to individuals prior to asking a valuation question this study explores the effect of cheap talk in a mass mail survey using a conventional value elicitation technique results indicate that cheap talk was effective at reducing willingness to pay for most survey participants however consistent with previous research cheap talk did not reduce willingness to pay for knowledgeable consumers

does money matter abstract the desire to attain personal wealth has long been regarded as the foremost motive for entrepreneurship other goals and values however may also contribute to entrepreneurial motivation thus the extent to which money matters relative to other motives is an empirical question in this study we examine the role of wealth as the motive for the decision to found new ventures three focal questions guide our research 1 does money matter more relative to other decision dimensions in deciding to start a new high technology venture 2 does money matter more to entrepreneurs compared to non entrepreneurs and 3 does money matter in absolute terms that is does a decision model that focuses solely on the motive of wealth attainment parsimoniously predict entrepreneurs start up decisions we conducted in depth interviews with 51 entrepreneurs and a control group of 28 senior managers who decided not to start ventures non entrepreneurs in the high technology industry in british columbia to address our research questions the motives we examined are wealth attainment and an aggregate of other dimensions identified by entrepreneurs and managers we considered three components of values participants ratings of the importance of various decision dimensions their rating of the salience of these dimensions and their satisfaction with prior levels of attainment on those decision dimensions we assessed beliefs as participants perceived probability of attaining their desired level of a particular decision dimension in each of three alternatives the position held at the time the venture decision was made the venture itself and the next best career alternative at that time the data were analyzed to compare entrepreneurs values and beliefs regarding wealth with an aggregate of other decision dimensions our relative hypotheses and with those of non entrepreneurs our comparative hypotheses our findings do not support the common perception that money is the only or even the most important motive for entrepreneurs decisions to start new ventures wealth attainment was significantly less important to entrepreneurs relative to an aggregate of 10 other decision dimensions and entrepreneurs did not rate wealth as any more important than did non entrepreneurs non entrepreneurs rated wealth as no more important than other motives wealth attainment was also significantly less salient to entrepreneurs decisions to venture than were other motives non entrepreneurs reported that wealth was significantly more salient to their decision against founding a venture than other dimensions in fact non entrepreneurs rated wealth attainment as significantly more salient to their decision against founding than entrepreneurs rated it for their decision to proceed with starting a high technology business a significant number of entrepreneurs started businesses even when they believed that doing so offered them a lower probability of obtaining their most desired level of wealth than did one of their other alternatives satisfaction ratings and stated beliefs also dispute classical predictions just prior to making the decision to venture the entrepreneurs in our study were as satisfied with wealth as they were with other decision dimensions the non entrepreneurs were actually more satisfied with wealth attainment than with other dimensions a comparison of the groups revealed no difference in satisfaction with wealth attainment levels entrepreneurs did believe that their chances of attaining their desired level of wealth were much greater through founding a new high technology venture than through their other alternatives this difference in beliefs however was not significantly greater than their optimistic beliefs about chances of attaining desired levels of other dimensions it was significantly higher compared to the non entrepreneurs belief difference measures for wealth in fact the entrepreneurs stated beliefs regarding the chances of attaining their desired levels of all dimensions were higher than those of the non entrepreneurs suggesting that entrepreneurs were simply more optimistic at the time of their decision than non entrepreneurs salience findings suggest that these optimistic beliefs about wealth did not motivate the founding decision alone we can distinguish those people who successfully started ventures by their regard for wealth as a less salient factor and their beliefs in higher chances of a venture producing monetary and other returns other motives such as innovation vision independence and challenge were more important and much more salient to this sample of entrepreneurs our findings have implications for practice teaching and research venture capitalists who partially base their assessment of entrepreneurs on the extent to which they are motivated to make a great deal of money may benefit from reconsideration of this criterion we have evidence of one group of high technology entrepreneurs who achieved success without placing much decision weight on attainment of personal wealth nascent entrepreneurs and those who teach entrepreneurship can use this empirical finding to argue two main points 1 not all entrepreneurs found a business for personal wealth reasons and 2 one need not be motivated by personal wealth attainment to be a successful entrepreneur similarly theoretical models that assume money is the primary motive for entrepreneurial activity require re examination future research in entrepreneurship should focus less on wealth attainment and more on other motives for the venturing decision a multiple attribute decision model may be able to more fully explain venturing decisions

nudging farmers to use fertilizer theory and experimental evidence from kenya we model farmers as facing small fixed costs of purchasing fertil izer and assume some are stochastically present biased and not fully sophisticated about this bias such farmers may procrastinate post poning fertilizer purchases until later periods when they may be too impatient to purchase fertilizer consistent with the model many farmers in western kenya fail to take advantage of apparently profit able fertilizer investments but they do invest in response to small time limited discounts on the cost of acquiring fertilizer free deliv ery just after harvest calibration suggests that this policy can yield higher welfare than either laissez faire policies or heavy subsidies

the value of business planning before start up a decision theoretical perspective in this paper we analyze business planning from the perspective of the nascent entrepreneur we measure its value for the entrepreneur at the point where he must decide whether or not to plan and we contrast our results with empirical studies that compare firms performance after market entry within a formal decision theoretical framework we show that the value of planning is driven by the possibility of evaluating alternative actions and being able to improve strategies before market entry the main purpose of evaluation is to pursue good and terminate bad business ideas we show how the value of planning is determined by the venture under consideration and how it depends on the quality of planning our theoretical model yields several behavioral and statistical implications that we compare with empirical observations found in the literature in particular we show how our model of rational decision making can be used to explain important hypotheses and contradictory observations that have fueled the debate on business planning

reinvestment decisions by entrepreneurs rational decision making or escalation of commitment abstract among the most important decisions made by entrepreneurs are those relating to whether to expand maintain or contract their businesses we would expect these major commitments to be based upon expectations about future performance these expectations in turn would be heavily influenced by performance to date thus we might presume that businesses that have been receiving favorable feedback from the marketplace would be more likely to expand and those receiving negative feedback would be more likely to contract ongoing research in decision making suggests that psychological processes may play a role in influencing these decisions under certain conditions entrepreneurs may be influenced by a phenomenon termed escalation of commitment this may lead entrepreneurs to decide to expand the asset bases of their firms regardless of feedback from the marketplace the literature on escalation of commitment suggests that under certain conditions decision makers who make an initial decision become overly committed to the original choice and then subsequently make decisions biased by psychological commitment previous research most of which has been conducted in laboratory settings suggests that escalation bias is more likely to occur 1 if entrepreneurs have started their firms rather than purchased them 2 if entrepreneurs have partners 3 if entrepreneurs expect to use their skills in the new business and 4 if entrepreneurs are overconfident that is expected to do substantially better than others in the same kinds of business it is also expected that these escalation predictors will have a relatively greater influence when feedback is negative than when it is positive the negative feedback seems to invoke a self justification process it is also hypothesized that the influence of these predictors will be less in the third year of a business than in the second year finally it is expected that these psychological influences will help to provide systematic explanation of reinvestment decisions over and beyond what one could predict based upon financial feedback the hypotheses were tested using data from a longitudinal study involving 1112 firms it was found that entrepreneurs who had started their firms and those who had expressed substantial over confidence were significantly more likely to make the decision to expand the hypotheses that those who had partners and those who expected to apply their skills would be more likely to expand were not supported furthermore and consistent with previous research these psychological escalation predictors seemed to exert a greater influence when feedback from the marketplace was negative as expected there was a declining influence in the third year as compared with the second consistent with the prior literature and the hypotheses these psychological predictors did show a small but systematic influence upon reinvestment decisions decisions to expand or contract a business are not necessarily good or bad however it is important that entrepreneurs be aware of the factors influencing their decisions entrepreneurs should recognize that the escalation bias tendency is likely to occur seeking independent opinions from advisors who do not feel as much personal responsibility for the original decision to start may lead to more objective evaluation of alternatives advisors should also realize that the inclination to escalate exists and is natural they may thereby be able to guard against the tendency to be swept along by the entrepreneur s enthusiasm and propensity to escalate entrepreneurs and their advisors as well as researchers should recognize that important entrepreneurial decisions are often influenced by psychological as well as economic factors this awareness should enable entrepreneurs to make more rational decisions

distinguishing the effect of overconfidence from rational best response on information aggregation this article studies the causal effect of individuals overconfidence and bounded rationality on information aggregation by using a new multiperiod game in which agents are rewarded for submitting accurate estimates of an unknown asset s value based on i their private information and ii others past estimates by carrying out laboratory sessions of this game in which subjects overconfidence is a treatment variable i find that overconfidence affects the information aggregation process by increasing the dispersion of estimates and decreasing the rate of estimates convergence however even when subjects are not overconfident qualitatively similar deviations from the fully rational model predictions are observed i show that this can be explained by subjects strategic response to errors the author 2008 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please email journals permissions oxfordjournals org oxford university press

arrogance can be a virtue overconfidence information acquisition and market efficiency abstract in behavioral finance overconfidence has been established as a prevalent psychological bias which can make markets less efficient by creating mispricing in the form of excess volatility and return predictability in this paper we develop a model in which overconfidence causes investors to overinvest in information acquisition when this information could improve market efficiency by driving prices closer to true values we study the impact of overconfidence on mispricing and information acquisition comparing their net effect on prices we derive several novel implications first overconfidence generally improves market pricing provided the level of overconfidence is not too high pricing can also improve even when overconfidence is arbitrarily high depending on the amount of private information acquired relative to publicly available information

information and auction performance a laboratory study of conservation auctions for spatially contiguous land management conservation auctions are used by public agencies to procure environmental friendly land uses from private landowners we present the structure of an iterative conservation auction that ranks bids according to a scoring rule intended to procure spatially adjacent conservation land use projects laboratory experiments are conducted to compare the performance of this auction under two information conditions under one condition subjects have knowledge about the spatial goal implemented by the scoring rule and in the other case they don t the results indicate that rent seeking is intensified with more information and increased bidder familiarity with the auction revealing the spatial information on the other hand has no impact on auction efficiency

moving forward balancing the financial and emotional costs of business failure why do owner managers delay business failure when it is financially costly to do so in this paper we acknowledge that delaying business failure can be financially costly to the owner manager and the more costly the delay the more difficult the recovery but we complement this financial perspective by introducing the notion of anticipatory grief as a mechanism for reducing the level of grief triggered by the failure event which reduces the emotional costs of business failure we propose that under some circumstances delaying business failure can help balance the financial and emotional costs of business failure to enhance an owner manager s overall recovery some persistence may be beneficial to recovery and promote subsequent entrepreneurial action

experimentation and the returns to entrepreneurship previous studies have argued that entrepreneurs earn less and bear more risk than salaried workers with otherwise similar characteristics in a simple model of entrepreneurship i show that estimates of mean and variance of returns to entrepreneurship used by these previous studies are biased as they fail to account for the option value of experimenting with new ideas using longitudinal data i find patterns that are consistent with entrepreneurship as experimentation and returns to entrepreneurship that are more attractive than established by previous research

a market based approach to child nutrition mothers demand for quality certification of infant foods in bamako mali this paper analyses the potential impact of introducing quality certification to the market for infant foods in a very low income country where malnutrition is widespread using an experimental economics approach we find that a program to sample test and certify the nutrient density of products could promote a more competitive market for low cost fortified foods and be implemented on a self financing basis yielding net economic benefits on the order of us 1 million per year in the city of bamako we find that mothers demand for quality information rises with their education and income level but is higher than the estimated cost of certification even among the very poor and uneducated

the effects of prior beliefs and learning on consumers acceptance of genetically modified foods abstract new food products using genetically modified crops appeared in u s supermarkets starting in 1996 and consumers perceived some risks this paper examines the role of consumers prior beliefs about genetic modification and of diverse new information on their willingness to pay for foods that might be genetically modified we use data from economics experiments and show that participants who had informed prior beliefs discounted gm labeled food products more highly than those who had uninformed prior beliefs uninformed participants were especially susceptible to information from interested and third parties in contrast informed participants were generally not affected significantly by new information

holding on for too long an experimental study on inertia in entrepreneurs and non entrepreneurs disinvestment choices abstract disinvestment in the sense of project termination and liquidation of assets including the cession of a venture is an important realm of entrepreneurial decision making this study presents the results of an experimental investigation modeling the choice to disinvest as a dynamic problem of optimal stopping in which the patterns of decisions are analyzed with entrepreneurs and non entrepreneurs our experimental results reject the standard net present value approach as an account of observed behavior instead most individuals seem to understand the value of waiting their choices are weakly related to the disinvestment triggers derived from a formal optimal stopping benchmark consistent with real options reasoning we also observe a pronounced psychological inertia i e most individuals hold on to a losing project for even longer than real options reasoning would predict the study provides evidence for entrepreneurs and non entrepreneurs being quite similar in their behavior

interval bidding in a distribution elicitation format interval bidding allows people to report a range of values for a non market good herein we allow people to choose their distribution over this range endogenously we consider a multiplicative error model explaining the willingness to pay wtp which is estimated using a feasible generalized least squares estimator we apply our framework to a representative sample of the french population who were asked about the valuation of a bear conservation programme we find that most participants prefer stating their wtp as a range rather than a point but the shape of the distribution greatly varies across people our results support the use of the interval bidding with endogenous distribution approach in valuation studies

price information and bidding behavior in repeated second price auctions examining panel data on bidding behavior in over forty second price auction markets with repeated trials we observe that i posted prices influence the behavior of the median naive bidder ii posted prices do not affect the behavior of the median experienced bidder or the bidder for familiar goods and iii anticipated strategic behavior wanes after two trials the results suggest that while affiliation might exist in auctions for new goods the repeated trial design with nonprice information removes the correlation of values and provides the experience that bidders need to understand the market mechanism

is the experimental auction a dynamic market experimental auctions are generally thought of as static markets this paper presents the results of an experimental auction designed to test whether participants perceptions regarding the relative difficulty of delaying or reversing a transaction outside the experimental market systematically affect their willingness to pay bids the results show that auction participants perceptions significantly impact their bids in a manner that is consistent with real option theory these results suggest that economists must be careful to consider the existence of outside markets when designing experimental auctions

is there an optimistic bias on betting markets bettors are subject to an optimistic bias when betting on the team they support this paper shows that this individual bias does not affect betting odds on british teams in association football soccer as it is often argued

aspirations market offerings and the pursuit of entrepreneurial opportunities abstract in this paper we focus on two core questions 1 why do some people seek entrepreneurial opportunities 2 under what conditions is the pursuit of entrepreneurial opportunity most likely we attempt to answer these questions by creating a theoretical framework that considers the interaction between an individual s level of aspiration and their appraised value in the labor market we propose that when there is disequilibrium between the aspiration vector av of an individual and the perceived valuation of the market offering vector p mov an individual tends to pursue entrepreneurial opportunities in addition when hiring officers hr directors or other relevant parties involved in the hiring decision are biased or when existing organizations have limitations in reflecting an individual s av prospective entrepreneurs begin searching for new opportunities in society finally and in our view most crucially we consider the interaction between an individual s subjective consideration and his perceived assessment by the labor market a novel approach which we hope takes into account the complexity and richness of entrepreneurship we offer seven specific propositions that derive from the disequilibrium predicted by our framework

the changing form of overconfidence and its effect on growth expectations at the early stages of startups in this article we attempt to explain the failure of many studies to show a link between entrepreneurs beliefs in their entrepreneurial skills and the actual or expected growth of their venture by using frese and gielnik s action characteristics model of entrepreneurship as an analytical framework and analyzing global entrepreneurship monitor adult population survey data we show that entrepreneurs perceived entrepreneurial skills are consistently inflated over the different phases of the startup albeit in different ways depending on the typical form of overconfidence the link between skill beliefs and growth expectations may be mediated by expectations about competitive advantages moreover the huge drop in growth expectations is not associated with a drop in perceived skills instead other entrepreneurial expectations also become more realistic and their effect strengthens with experience

the courage of misguided convictions the field of modern financial economics assumes that people behave with extreme rationality but they do not furthermore people s deviations from rationality are often systematic behavioral finance relaxes the traditional assumptions of financial economics by incorporating these observable systematic and very human departures from rationality into standard models of financial markets we highlight two common mistakes investors make excessive trading and the tendency to disproportionately hold on to losing investments while selling winners we argue that these systematic biases have their origins in human psychology the tendency for human beings to be overconfident causes the first bias in investors and the human desire to avoid regret prompts the second

wildlife corridor market design an experimental analysis of the impact of project selection criteria and bidding flexibility in this work we used controlled laboratory experiments to investigate the impact of project selection criteria and bidding flexibility on the economic performance of wildlife corridor auctions bidders coordinated their bids to form valid corridors and compete with other valid corridors to be successful we tested the impact of bidding flexibility in terms of a bidders differentiating their offers for different eligible corridors and b bidders submitting a single offer that would automatically be considered for all eligible corridors within the bidding options we compared the performance of the auctions under a net benefit and a benefit cost ratio selection criteria we found that participants conditioned their offers in terms of corridor benefit information as a consequence allowing multiple offers significantly increased payment and rent extraction on the other hand a single offer restriction facilitated a higher proportion of valid agreements and reduced rent extraction and as a result the agency s payment we could not find any significant difference between project selection criteria in terms of payment and rent extraction these results provide important insights for policy makers engaged in conservation market design throughout the world

determinants of satisfaction for entrepreneurs this study considers the extent to which entrepreneurs are satisfied with their businesses in their third year of business ownership entrepreneurial satisfaction might be viewed as a basic measure of performance it may bear upon decisions by individual entrepreneurs about whether to invest more time and money whether to cut back or whether to close down it may also influence whether entrepreneurs work effectively with their customers and employees for researchers the investigation of why in particular settings some entrepreneurs may be more satisfied than others may aid in the interpretation of past research which has used this as a performance measure this research draws upon a theoretical framework used in investigations of employee satisfaction called discrepancy theory it suggests that individual satisfaction is determined in part by whether there is a gap between actual rewards or performance and the individual s goals or expectations in this research it was hypothesized that entrepreneurs emphasizing primarily noneconomic goals such as doing the work they wanted to do would have higher satisfaction when the business was experiencing lower levels of performance for higher levels of performance there would be no difference in essence the satisfaction of those emphasizing economic goals would vary more with economic performance a related hypothesis was that for this sample of start up firms many of which would be experiencing low levels of performance those emphasizing noneconomic goals would have higher average levels of satisfaction this was based upon the expectation that many start up firms would be experiencing marginal performance so that the gap between goals and performance would be greater for economically oriented entrepreneurs the research also focused upon expectations because one aspect of discrepancy theory suggests that satisfaction decreases if there is a gap between expectations and performance accordingly it was hypothesized that controlling for performance entrepreneurs with higher initial expectations would subsequently have lower levels of satisfaction previous research suggests that membership in particular demographic groups may influence expectations this led to hypotheses that older entrepreneurs female entrepreneurs and minority entrepreneurs would have lower levels of initial expectations this in turn may influence later satisfaction thus it was hypothesized that controlling for performance entrepreneurs in each of these groups would have higher satisfaction because their initial expectations would be lower the study utilized a sample of 287 entrepreneurs who were followed over a 3 year period the data on predictors of satisfaction were gathered in year 1 when the average owner had been in business for 11 months the satisfaction measures were gathered 2 years later by that time there should have been some stabilization in the routines of the business and the entrepreneur could reflect upon historic performance and experiences in judging the extent to which business ownership had been satisfying the data were analyzed primarily using path analysis in which it was hypothesized that certain variables would have both direct and indirect effects upon satisfaction it was found that the satisfaction of entrepreneurs emphasizing economic goals was not more sensitive to economic performance at least within the range of performance considered in this sample for this group of firms many of which appeared to be experiencing marginal performance those emphasizing noneconomic goals did express higher levels of satisfaction it had been expected that those with higher initial expectations would later be less satisfied because they would have a greater expectation performance gap however the opposite was found those who were more optimistic initially were more satisfied later even when controlling for performance demographic influences on initial expectations were examined contrary to expectations none of the demographic traits was significantly related to initial assessment of likelihood of success older entrepreneurs women entrepreneurs and minority entrepreneurs were just as optimistic as those in other groups the relationship between membership in these demographic groups and later satisfaction was also examined no significant relationships were found for older entrepreneurs and minority entrepreneurs however there was some evidence p 07 that women entrepreneurs were more satisfied with business ownership two of the most interesting findings were those related to initial expectations and to women entrepreneurs contrary to discrepancy theory those who had higher initial expectations were later more satisfied not less this may suggest as staw and ross 1985 found in a longitudinal study of employee satisfaction that attitudes are in part a function of stable individual traits those who had a positive view of their initial prospects later viewed the experience of business ownership more favorably regardless of subsequent performance for women entrepreneurs the higher levels of satisfaction may reflect a view that they have fewer attractive alternatives it may also be that they discover greater relative satisfaction from the day to day aspects of business ownership for entrepreneurs and their advisors the findings suggest that particular goals attitudes and backgrounds are likely to be associated with greater satisfaction this may influence whether entrepreneurs stay with marginal businesses for researchers the study provides insight into discrepancy theory by considering its application to entrepreneurs rather than the hired employees normally studied in addition subjective measures of performance such as satisfaction have often been used in previous research on entrepreneurial performance this study casts light on why in particular settings some entrepreneurs may be more satisfied than others

comparing open ended choice experiments and experimental auctions an application to golden rice we use two experimental valuation methods to estimate consumer demand for genetically modified golden rice the first is an open ended choice experiment oece where participants name the quantities of golden rice and conventional rice demanded at each of several price combinations one of which will be randomly chosen as binding this allows us to estimate market demand by aggregating demand across participants this estimate of market demand also allows us to estimate own price elasticity and consumer surplus for golden rice comparing willingness to pay wtp estimates from the oece with those from a uniform price auction we find that oece wtp estimates exhibit less affiliation across rounds and the effects of positive and negative information under the oece are more consistent with prior expectations and existing studies we also find that while auction wtp estimates more than double across five rounds oece wtp estimates are stable across rounds and are always roughly equal to those from the final auction round

modern theories of entrepreneurial behavior a comparison and appraisal this paper compares and appraises three principal contemporary theories of entrepreneurial decision making neoclassical austrian and behavioral we employ theory appraisal criteria made available in fritz machlup s 1967 celebrated article on alternative theories of the firm the paper considers theories that treat sequences of behavior by which individual entrepreneurs reach decisions on two levels the discovery of profit opportunities and their exploitation we also consider how each theory characterizes the entrepreneur s decision making process by contrast with the posited behavior of other economic agents austrian theory is suited to explaining novel adventurous behavior at the discovery stage the algorithm for opportunity exploitation in both the neoclassical and austrian approaches is a single repertoire optimization rule neoclassical theory is situated in frictionless atomistic walrasian markets and emphasizes mathematical tractability austrian and behavioral theories conceive entrepreneurial acts taking place in market processes understood as complex institutional phenomena there are strong theoretical complementarities between austrian and behavioral approaches both approaches value descriptive accuracy though the behavioralists place more weight on operational tractability austrians and behavioralists share an interest in heuristics they emphasize the role of prior micro level knowledge at the discovery stage therefore more collaborative research in future between austrians and behavioralists should prove fruitful

endogenous time preferences of forest goods and community based forest management abstract in the economic analysis of cbfm people s discount rates are assumed exogenous and same for all goods we examined the validity of this assumption by eliciting the discount rates of households for grass timber fuelwood and money and analyzed the impacts of various personal and economic factors on households discount rates we found that time preferences are endogenous and good specific a good proportion of households have infinite discount rates for forest goods the mean values of monthly discount rates for households that indicated finite discount rates are 0 67 for timber 6 83 for fuelwood 55 49 for grass and 3 47 for money the availability of alternative sources and current consumption of the forest goods are two main determinants of a household s discount rates the study provides many useful insights for the design and implementation of cbfm programs the concept of mental accounting should be used for economic analyses of cbfm programs different management strategies should be adopted for different forest goods and alternative sources should be provided to meet the current needs of the households

intuitive optimizing experimental findings on time allocation decisions with newly formed ventures abstract this paper offers a theoretical and an experimental analysis of decision making in an entrepreneurial context we investigate how individuals distribute their time between leisure and working activities and how they divide their working time between their newly formed venture and a wage job two questionnaire experiments with business and economics students are utilized to test benchmark predictions from an economic model which we complement with predictions based on behavioral decision theory differences between economic predictions and behaviors are found to be dependent on whether the venture dominates the wage job the wage job dominates the venture or none dominates the other implications for entrepreneurial behavior are derived for these three scenarios

overoptimism and the performance of entrepreneurial firms recent theoretical and empirical research on cognitive bias in decision making suggests that overoptimism critically influences entrepreneurs decisions to establish and sustain new ventures we investigate whether such cognitive bias influences entrepreneurial venture performance using data on commercialization efforts for university inventions in contrast to prior studies our results suggest that entrepreneurial overoptimism does not appear to be the determining factor in the decision to found a firm we do find that entrepreneurs continue unsuccessful development efforts for longer periods of time than do established firms which is consistent with entrepreneurial overoptimism in the development of technologies with uncertain market prospects this latter finding is also consistent with rationality based models of decision making behavior however we find that the economic returns associated with many of the technologies in our sample are realized after the start up has been acquired by an established firm suggesting that start ups may serve as a transitional organizational form in the market for technology commercialization

consumer s surplus without apology the purpose of this paper is to settle the controversy surrounding consumer s surplus and by so doing to validate its use as a tool of welfare economics i will show that observed consumer s surplus can be rigorously utilized to estimate the unobservable compensating and equivalent variations the correct theoretical measures of the welfare impact of changes in prices and income on an individual i derive precise upper and lower bounds on the percentage errors of approximating the compensating and equivalent variations with consumer s surplus these bounds can be explicitly calculated from observable demand data and it is clear that in most applications the error of approximation will be very small in fact the error will often be overshadowed by the errors involved in estimating the demand curve the results in no way depend upon arguments about the constancy of the marginal utility of income consequently this paper supplies specific empirical criteria which can replace the apologetic caveats frequently employed by those who presently apply consumer s surplus moreover the results imply that consumer s surplus is usually a very good approximation to the appropriate welfare measures to preview below i establish the validity of these rules of thumb for a

the impact of idea generation and potential appropriation on entrepreneurship an experimental study using a novel experimental paradigm we explore how the experience of generating an idea and the possibility that another investor might adopt a rejected investment opportunity bias the investment decisions of innovator and imitator entrepreneurs we find that individuals who generate a business idea form biased evaluations of the economic potential of ideas be it their own idea or somebody else s idea on the one hand they are overconfident about the value of and overly likely to invest in their own idea on the other hand when investing in another person s idea even if it is not competing with their own idea they are underconfident about the value of and insufficiently likely to invest in the idea surprisingly we find that entrepreneurial experience exacerbates this pattern of over and underconfidence in addition we find that the threat that another investor can appropriate a declined investment opportunity increases willingness to invest we propose a theoretical account to explain the o

preference learning in consecutive experimental auctions this paper explores the origins of the strikingly high price premia paid for new food products in lab valuation exercises our experimental design distinguishes between two explanations of this phenomenon novelty of the experimental experience versus the novelty of the good i e preference learning bids reflect a person s desire to learn how an unfamiliar good fits into their preference set subjects bid in four consecutive experimental auctions for three goods that vary in familiarity candy bars mangos and irradiated meat our results suggest that preference learning is the main source of the high premia and that novelty of the experimental experience does not in itself artificially inflate valuations copyright 2000 oxford university press

schooling and labor market consequences of school construction in indonesia evidence from an unusual policy experiment between 1973 and 1978 the indonesian government engaged in one of the largest school construction programs on record combining differences across regions in the number of schools constructed with differences across cohorts induced by the timing of the program suggests that each primary school constructed per 1 000 children led to an average increase of 0 12 to 0 19 years of education as well as a 1 5 to 2 7 percent increase in wages this implies estimates of economic returns to education ranging from 6 8 to 10 6 percent

entrepreneurs optimism and new venture performance a social cognitive perspective previous research indicates that entrepreneurs are generally high in dispositional optimism the tendency to expect positive outcomes even when such expectations are not rationally justified findings of the current study demonstrate a negative relationship between entrepreneurs optimism and the performance revenue and employment growth of their new ventures past experience creating ventures and industry dynamism moderated these effects strengthening the negative relationship between entrepreneurs optimism and venture performance these findings illustrate the benefits of applying a social cognitive perspective toward efforts to understand key aspects of the new venture creation and development process