control and performance of international joint ventures control is a critical concept for successful management and performance of international joint ventures ijvs this paper reviews and synthesizes prior studies addressing the conceptualization and operationalization of control within ijvs as well as the ijv control performance relationship the paper also presents a new conceptualization of ijv control as well as a conceptual frame work for studying control of ijvs

loss aversion and learning to bid bidding challenges learning theories even with the same bid experiences vary stochastically the same choice can result in either a gain or a loss in such an environment the question arises of how the nearly universally documented phenomenon of loss aversion affects the adaptive dynamics we analyse the impact of loss aversion in a simple auction using the experienced weighted attraction model of learning our experimental results suggest that individual learning dynamics are highly heterogeneous and affected by loss aversion to different degrees apart from that the experiment shows that loss aversion is not specific to rare decision making

the realization effect risk taking after realized versus paper losses abstract understanding how prior outcomes affect risk attitudes is critical for the study of choice under uncertainty a large literature documents the significant influence of prior losses on risk attitudes the findings appear contradictory some studies find greater risk taking after a loss whereas others show the opposite that people take on less risk i reconcile these seemingly inconsistent findings by distinguishing between realized versus paper losses using new and existing data i replicate prior findings and demonstrate that following a realized loss individuals avoid risk if the same loss is not realized a paper loss individuals take on greater risk jel d11 d14 d81 g11

risk rationality and time diversification the validity of the concept of time diversification is the subject of long running debate supporters of the concept argue that risk decreases as investment horizon increases detractors suggest that the concept is false on the face of it we argue that time diversification is consistent both theoretically and empirically with current conceptions of risk and rationality and we also note the implications of changes in investment horizon for stock market behavior

corruption investments and contributions to public goods experimental evidence from rural liberia we analyze how corruption affects incentives to invest or contribute to public goods we obtain a proxy for corruption among liberian community leaders by keeping track of a flow of inputs associated with a development intervention measuring these inputs before and after giving them in custody to the chief we then use the gap between these measurements missing inputs to explain variation in investment behavior of villagers investment behavior is gauged with two simple artefactual field experiments our main results are that corruption i undermines incentives for voluntary contributions to local public goods and ii may reduce private investments of individuals subject to rent seeking by the chief in real life we also provide weaker evidence that the impact of corruption on investments and contributions to public goods is heterogeneous this impact may be gender specific and appears to vary with accessibility of communities

risk aversion in a dynamic asset allocation experiment we conduct a controlled laboratory experiment in the spirit of merton 1971 in which subjects dynamically choose their portfolio allocation between a risk free and risky asset using the optimal allocation of an investor with hyperbolic absolute risk aversion hara utility we fit the experimental choices to characterize the risk profile of our participants despite substantial heterogeneity decreasing absolute risk aversion and increasing relative risk aversion are the predominant types we also find some evidence of increased risk taking after a gain finally the session level risk attitudes show a different profile than the individual descriptions of risk attitudes

causes consequences and cures of myopic loss aversion an experimental investigation we examine in an experiment the causes consequences and possible cures of myopic loss aversion mla for investment behaviour under risk we find that both investment horizons and feedback frequency contribute almost equally to the effects of mla longer investment horizons and less frequent feedback lead to higher investments however when given the choice subjects prefer on average shorter investment horizons and more frequent feedback exploiting the status quo bias by setting a long investment horizon or low feedback frequency as a default turns out to be a successful behavioural intervention that increases investment levels

political risk and the benefits of international portfolio diversification this paper examines the benefits of portfolio investment in the stock markets of politically risky countries by evaluating the effects of political risk constraints on the performance of a portfolio of international stocks we use monthly data on political risk ratings and stock returns for a sample of thirty six countries from april 1982 to december 1991 ex post and ex ante portfolio selection strategies are developed to assess the gains from international diversification efficient sets are derived using a quadratic programming technique we use four ex ante portfolio strategies whose optimal portfolio weights are those of the equally weighted portfolio the minimum variance portfolio the certainty equivalence tangency portfolio and the bayes stein portfolio the empirical findings based on the performance tests of jobson and korkie 1981 suggest that diversification among politically risky countries improves the risk return characteristics of optimal portfolios however the most striking benefit of the inclusion of politically risk countries in an international portfolio is the reduction in overall portfolio risk

do professional traders exhibit myopic loss aversion an experimental analysis two behavioral concepts loss aversion and mental accounting have been combined to provide a theoretical explanation of the equity premium puzzle recent experimental evidence supports the theory as students behavior has been found to be consistent with myopic loss aversion mla yet much like certain anomalies in the realm of riskless decision making these behavioral tendencies may be attenuated among professionals using traders recruited from the cbot we do indeed find behavioral differences between professionals and students but rather than discovering that the anomaly is muted we find that traders exhibit behavior consistent with mla to a greater extent than students

asset stock accumulation and sustainability of competitive advantage given incomplete factor markets appropriate time paths of flow variables must be chosen to build required stocks of assets that is critical resources are accumulated rather than acquired in strategic factor markets barney barney j 1986 strategic factor markets expectations luck and business strategy management sci october 1231 1241 sustainability of a firm s asset position hinges on how easily assets can be substituted or imitated imitability is linked to the characteristics of the asset accumulation process time compression diseconomies asset mass efficiencies inter connectedness asset erosion and causal ambiguity

stock market valuation of joint venture sell offs this article examines the stock market performance implications of joint venture jv partner sell offs using a resource based view and an event study methodology more specifically it proposes hypotheses putting into evidence the stock market valuation of different reasons for jv sell offs refocusing of a business debt reduction and jv failure abnormal returns ars from jv sell offs are estimated for a sample of 151 european selling partners first the results show that stock market reactions observed around the date of announcement are significant and positive this finding is consistent with that of finance research literature on stock market reactions to ordinary asset sales this leads us to discount the idea that stock markets place a specific valuation on jv sell offs second the results indicate that the reasons for jv sell offs are a determinant of ars of selling partners

corporate combinations and common stock returns the case of joint ventures the gain to stockholders from mergers is well documented however there is little evidence as to whether the source of the gain is due to synergy or management displacement merger is just one of an almost limitless variety of ways in which firms combine resources to accomplish some objective a joint venture is another in addition to being of interest as an independent phenomenon because the original managements of the parent firms remain intact under a joint venture investigation of wealth gains from joint ventures provides an opportunity to isolate the management displacement hypothesis from the synergy hypothesis as the source of gains in corporate combinations our results are 1 there are significant wealth gains from joint ventures 2 the smaller partner earns a larger excess rate of return while the dollar gains are more equally divided and 3 the gains scaled by resources committed yield premiums similar to those in mergers we are inclined to interpret our results as supportive of the synergy hypothesis as the source of gain from corporate combinations this paper is an empirical investigation of the common stock returns of u s companies that enter into joint ventures with other u s companies we consider joint ventures in the context of what is by now a burgeoning literature examining the security returns of companies involved in intercorporate mergers and tender offers 1 in this context our objective is to provide evidence as to the source of the well documented gains to stockholders of firms involved in mergers and tender offers in addition joint ventures are an interesting economic phenomenon in their own right they are undertaken by many of the largest u s companies involve billions of dollars in capital expenditures annually and are subject to considerable scrutiny in the popular press in this regard our analysis provides data on what is as yet a relatively unexplored area of economic activity 2 a corporate merger represents the joining together of all the resources of two companies under a single management to accomplish some set of objectives empirical studies have found that mergers generally result in significant increases in the total market values of the merging firms with the stockholders of the

social identity and governance the behavioral response to female leaders this paper uses data from artefactual field experiments and surveys conducted in 61 villages in india to examine whether men and women respond differently to women as leaders we investigate the extent to which behavior towards female leaders is influenced by experience with women in leadership positions we find evidence of significant male backlash against female leaders which can be attributed to the transgression of social norms and in particular a violation of male identity when women are assigned to positions of leadership through gender based quotas increased exposure to female leaders reduces the extent of bias

the effects of income mobility and tax persistence on income redistribution and inequality we explore the effect of income mobility and the persistence of redistributive tax policy on the level of redistribution in democratic societies an infinite horizon theoretical model is developed and the properties of the equilibrium tax rate and the degree of after tax inequality are characterized mobility and stickiness of tax policy are both negatively related to the equilibrium tax rate however neither is sufficient by itself social mobility has no effect on equilibrium taxes if tax policy is voted on in every period and tax persistence has no effect in the absence of social mobility the two forces are complementary tax persistence leads to higher levels of post tax inequality for any amount of mobility the effect of mobility on inequality is less clear cut and depends on the degree of tax persistence a laboratory experiment is conducted to test the main comparative static predictions of the theory and the results are generally supportive

disappointment in decision making under uncertainty decision analysis requires that two equally desirable consequences should have the same utility and vice versa most analyses of financial decision making presume that two consequences with the same dollar outcome will be equally preferred however winning the top prize of 10 000 in a lottery may leave one much happier than receiving 10 000 as the lowest prize in a lottery this paper explores the implications of disappointment a psychological reaction caused by comparing the actual outcome of a lottery to one s prior expectations for decision making under uncertainty explicit recognition that decision makers may be paying a premium to avoid potential disappointment provides an interpretation for some known behavioral paradoxes and suggests that decision makers may be sensitive to the manner in which a lottery is resolved the concept of disappointment is integrated into utility theory in a prescriptive model

decision support for retirement portfolio management overcoming myopic loss aversion via technology design as firms continue to abandon pensions in favor of employee managed retirement plans tremendous demands are being placed on the decision making proficiency of future retirees as reflected in the equity premium puzzle individual investors tend to hold overly conservative portfolios that provide meager payoffs over time consequently there is growing concern that the vast majority of retirement accounts might be insufficiently funded when employees reach retirement given that most retirement plans can now be managed online a potential solution lies in designing a web based decision support system dss that helps future retirees make more profitable portfolio management decisions this paper reports the results of a study in which 159 retirement plan participants were asked to use an experimental website to manage a portfolio of retirement investments over a simulated 30 year period using a psychological approach toward designing the dss myopic loss aversion is put forth as a theoretical explanation for the psychological mechanisms that encourage investors to hold overly conservative portfolios armed with this knowledge three design features information horizon system restrictiveness and decisional guidance are implemented as part of an overarching design strategy targeted at increasing investors willingness to take calculated risks the results indicate that investor conservatism diminishes when the dss presents prospective probabilities and payoffs over long time horizons in contrast short term information horizons constitute a major stumbling block for investors however when confronted with short term information horizons risk aversion can be successfully counteracted by configuring a dss to either restrict the frequency of decisions or to suggest a relatively aggressive portfolio allocation these findings carry important implications for theory and practice

a theory of disappointment aversion an axiomatic model of preferences over lotteries is developed it is shown that this model is consistent with the allais paradox includes expected utility theory as a special case and is only one parameter beta richer than the expected utility model allais paradox type behavior is identified with positive values of beta preferences with positive beta are said to be disappointment averse it is shown that risk aversion implies disappointment aversion and that the arrow pratt measures of risk aversion can be generalized in a straight forward manner to the current framework copyright 1991 by the econometric society

costly search and mutual fund flows this paper studies the flows of funds into and out of equity mutual funds consumers base their fund purchase decisions on prior performance information but do so asymmetrically investing disproportionately more in funds that performed very well the prior period search costs seem to be an important determinant of fund flows high performance appears to be most salient for funds that exert higher marketing effort as measured by higher fees flows are directly related to the size of the fund s complex as well as the current media attention received by the fund which lower consumers search costs

the effect of myopia and loss aversion on risk taking an experimental test myopic loss aversion is the combination of a greater sensitivity to losses than to gains and a tendency to evaluate outcomes frequently two implications of myopic loss aversion are tested experimentally 1 investors who display myopic loss aversion will be more willing to accept risks if they evaluate their investments less often 2 if all payoffs are increased enough to eliminate losses investors will accept more risk in a task in which investors learn from experience both predictions are supported the investors who got the most frequent feedback and thus the most information took the least risk and earned the least money language en

regulatory performance of audit tournaments and compliance observability this paper examines the effectiveness of traditional regulatory schemes and newly emerging social information schemes for achieving compliance our experiment focuses on two stochastic audit schemes for enforcing regulatory compliance in the random audit mechanism firms are randomly chosen for inspection in the tournament audit mechanism the probability of inspection increases with the degree of estimated underreporting to study the effects of social information the experiment varies the observability of identity output and compliance decisions optimal output is theoretically independent of the auditing scheme but equilibrium reporting is higher under the tournament mechanism than random auditing experimental findings are broadly consistent with the theoretical predictions for reporting but deviate modestly for output in particular we find that average output is lower and reporting is higher in the tournament treatment compared to the random audit treatment at the individual level a majority of participants misreported in most periods social observability does not affect output or reporting significantly in either of the audit treatments

insider trading and the valuation of international strategic alliances in emerging stock markets because stock markets in emerging economies are relatively new under regulated and often segmented investors responses to public announcements by firms in these economies may differ from responses in developed economies stock markets we draw on the institutional and corporate governance literatures to explain investor reactions to announcements of international strategic alliances isas between foreign and emerging market firms we argue that emerging economies stock markets positively value isas however information leakages due to weak regulatory environments siphon off the good news before the isa announcement date the level of state ownership of publicly traded firms and the nationality of foreign partners both affect the size and timing of market reactions

myopic loss aversion and stock investments an empirical study of private investors abstract myopic loss aversion was suggested by benartzi and thaler 1995 as an explanation for the equity premium puzzle its main prediction is that loss averse investors who evaluate their investment performance too frequently and therefore often observe small losses on their stock portfolios would invest too little in equity we investigate the link between myopic loss aversion and actual investment decisions of individual investors using survey data our results are consistent with the predictions of benartzi and thaler higher myopic loss aversion is associated with lower stock investment as a share of total assets investors tend to evaluate their stock portfolio performance too often which contributes to the prevalence of myopic loss aversion the effect of myopia is most apparent when investors both evaluate their portfolios frequently and trade stocks regularly

paying is believing the effect of costly information on bayesian updating the supposed irrelevance of historical costs for rational decision making has been the subject of much interest in the economic literature in this paper we explore whether individual decision making under risk is affected by the cost of information to do so one must distinguish the effect of cost from self selection by individuals who value information the most outside of the laboratory it is difficult to disentangle these two effects we thus create an experimental environment where subjects are o ered additional useful and identical information on the state of the world across treatments we find a systematic effect of sunk costs on the manner in which subjects update their beliefs subjects over weigh costly information relatively to free information which results in a push of beliefs towards the extremes this shift does not necessarily lead to behavior more attuned with bayesian updating we find that an intensification of representativeness bias due to cost is the most likely explanation of our results

selection tournaments and dishonesty we conduct a real effort experiment in which performance is not monitored and participants are paid according to their reported performance participants are paid according to a piece rate and a winner take all tournament and then select between the two schemes before performing the task one more time competition increases dishonesty and lowers output when the payment scheme is exogenously determined participants with a higher propensity to be dishonest are more likely to select into competition however after selection we find no output difference between piece rate and tournament this is attributable to a handful of honest individuals who select competition

host country policies and mne management control in ijvs evidence from china in international joint ventures ijvs partner firms exert three types of management control output process and social since management control critically influences ijv success it is essential to understand what factors drive the development of the control system prior studies have focused mainly on ijvs internal conditions and have largely neglected external institutional influences on ijv control in this study we explore how host country policies affect mne partners control over their ijvs using a sample of ijvs in china we find that mne partners tend to exercise less output and process control when minority equity restriction is present greater process control when they receive government incentives and less social control when they are required to partner with state owned enterprises in contrast the results of a post hoc analysis show that local partners control activities are not significantly influenced by these policies our findings provide new insights into ijv management by demonstrating the impacts of regulatory institutions on partners control activities

risk taking by agents the role of ex ante and ex post accountability we study the role of accountability in situations where an agent makes risky decisions for a principal we observe that in the absence of accountability agents choose less risk averse investments for the principal than investors who invest for their own account accountability mitigates the observed decrease in risk aversion differences are observed between situations where agents are accountable for their decision ex ante and where they are accountable for the outcome ex post

an experiment on risk taking and evaluation periods does the period over which individuals evaluate outcomes influence their investment in risky assets results from this study show that the more frequently returns are evaluated the more risk averse investors will be the results are in line with the behavioral hypothesis of myopic loss aversion which assumes that people are myopic in evaluating outcomes over time and are more sensitive to losses than to gains the results have relevance for the equity premium puzzle and also for the marketing strategies of fund managers

team production benefits from a permanent fear of exclusion one acclaimed role of managers is to monitor workers in team production processes and discipline them through the threat of terminating them from the team alchian and demsetz 1972 we extend a standard weakest link experiment with a manager that can decide to replace some of her team members at a cost the amount of contractual commitment termination possibilities and the precision of the manager s monitoring information serve as treatment variables our results show that the fear of exclusion has a profound effect on team performance even if workers are imperfectly monitored the most flexible contract induces the highest output while the one with no firing possibilities leads to the lowest production however once the fear is eliminated for some workers because permanent workers cannot be fired after a probation phase effort levels steadily decrease

informal risk sharing in an infinite horizon experiment author s charness gary b genicot garance abstract this paper presents the first laboratory study of risk sharing without commitment our experiment captures the main features of a simple model of voluntary insurance between two agents in the model two individuals interact over a potential infinite horizon and suffer random income shocks risk averse individuals have incentives to smooth consumption by making transfers to each other these transfers being voluntary only self enforcing risk sharing arrangements are possible transfers can never be so large as to tempt individuals to renege on them this constraint when binding has strong implications for the shape of the constrained optimal risk sharing arrangement in our experiment participants are matched in pairs each period one of them randomly drawn receives a given amount in addition to its regular income after observing both incomes each person in a pair chooses a non negative transfer to make to the other person two features of the experimental design are crucial first it is common information that all pairs will be dissolved at the end of each period with a given probability participants are informed when this occurs and randomly re matched this replicates the effect of infinite horizon and discounting in the model second at the end of the experiment a single period is randomly drawn to count for cash payment this feature is essential for individuals to care about the utility outcome of each period we find evidence generally consistent with risk sharing with most transfers coming from individuals who received h in the period moreover in support of the theory transfers are much higher with a higher continuation probability and they also are highly correlated with the individual s degree of risk aversion however while the model predicts an increase in transfers with ex ante inequality we observe the opposite effect this may reflect considerations of identity or group membership

do international acquisitions by emerging economy firms create shareholder value the case of indian firms while overseas acquisitions by emerging economy firms are gaining increased attention from the business press our understanding of whether and why this inorganic mode of international expansion creates value to acquirer firms is limited we argue that international acquisitions facilitate internalization of tangible and intangible resources that are both difficult to trade through market transactions and take time to develop internally thus constituting an important strategic lever of value creation for emerging economy firms furthermore the magnitude of value created will be higher when the target firms are located in advanced economic and institutional environments country markets that carry the promise of higher quality of resources and therefore stronger complementarity to the existing capabilities of emerging economy firms an event study of 425 cross border acquisitions by indian firms during 2000 2007 supports our predictions

limited farsightedness in network formation pairwise stability jackson and wolinsky 1996 is the standard stability concept in network formation it assumes myopic behavior of the agents in the sense that they do not forecast how others might react to their actions assuming that agents are perfectly farsighted related stability concepts have been proposed we design a simple network formation experiment to test these extreme theories but find evidence against both of them the subjects are consistent with an intermediate rule of behavior which we interpret as a form of limited farsightedness on aggregate the selection among multiple pairwise stable networks and the performance of farsighted stability crucially depends on the level of farsightedness needed to sustain them and not on efficiency or cooperative considerations individual behavior analysis corroborates this interpretation and suggests in general a low level of farsightedness around two steps on the part of the agents

determinants of state aid to firms the case of the european automotive industry using an original database for the 1992 2008 period we investigate the determinants of state aid to the automotive industry in the european union eu we find evidence that eu policies have been effective in reducing state aid and re orienting it toward horizontal objectives however national politics still have considerable relevance during election years governments are more generous and this is particularly true in eu countries with proportional representation finally a strategic game between countries seems to take place whereby a country s decision to grant aid seems to be responsive to aid previously granted by other member states

disappointment and dynamic consistency in choice under uncertainty the central proposition of disappointment theory is that an individual forms expectations about uncertain prospects and that if the actual consequence turns out to be worse than or better than that expectation the individual experiences a sensation of disappointment or elation generating a decrement or increment of utility which modifies the basic utility derived from the consequence by incorporating a simple disappointment elation function into a model of individual choice many observed violations of conventional expected utility axioms including violations of savage s sure thing principle and the isolation effect can be predicted and defended as rational and dynamically consistent behaviour

are teams prone to myopic loss aversion an experimental study on individual versus team investment behavior abstract myopic loss aversion mla has been found to have a persistent influence on individual decision making under risk in this paper i show that team decision making attenuates mla but that teams are also prone to mla

the effect of national culture on the choice of entry mode characteristics of national cultures have frequently been claimed to influence the selection of entry modes this article investigates this claim by developing a theoretical argument for why culture should influence the choice of entry two hypotheses are derived which relate culture to entry mode choice one focusing on the cultural distance between countries the other on attitudes towards uncertainty avoidance using a multinomial logit model and controlling for other effects the hypotheses are tested by analysing data on 228 entries into the united states market by acquisition wholly owned greenfield and joint venture empirical support for the effect of national culture on entry choice is found

does commitment or feedback influence myopic loss aversion an experimental analysis empirical research has shown that a lower feedback frequency combined with a longer bind ing period decreases myopia and thereby increases the willingness to invest into a risky asset in an experimental study we disentangle the intertwined manipulation of feedback frequency and binding period to analyze how both variables alone contribute to the change in myopia and how they interact we find a strong effect for the length of commitment a much less pro nounced effect for the feedback frequency and a strong interaction between both variables the results have important implications for real world intertemporal decision making

stereotypes and false consensus how financial professionals predict risk preferences abstract we analyze the prediction of risk preferences of others using an artefactual field experiment with financial professionals and students for their prediction the subjects receive information on multiple demographic characteristics and a self assessment of risk taking of the target when analyzing the predictions we find three significant effects subjects use the demographic information for stereotyping as well as the target s self assessment on risk taking and we find a considerable false consensus effect the false consensus effect is the strongest for experienced professionals regarding the prediction s accuracy we find that the forecasts of the professionals are more accurate than the forecasts of the students

differential gains between partners in joint ventures role of resource appropriation and private benefits i examine why there are differences in wealth gains between firms when they announce a joint venture jv building on transaction cost economics and the resource based view i argue that because jvs often involve incomplete contracts differences in wealth gains arise due to resource appropriation and private benefits as a result two factors become important in understanding whether a firm earns higher lower wealth gains than its partner 1 its potential for earning private benefits and 2 its ability to extract private benefits as a test of the impact of the first factor i propose that when a jv is formed the partner that possesses more valuable resources is likely to earn lower wealth gains whereas the partner that possesses less valuable resources is likely to earn higher wealth gains because its potential for earning private benefits over the course of the venture is also higher i then argue that the partner with less valuable resources is likely to extract higher private benefits and gain more when it has greater bargaining power and absorptive capacity conversely the partner with more valuable resources is likely to protect itself better from appropriation when it has jv capabilities i find support for these arguments in a sample of 344 ventures the implications are that private benefits significantly influence value creation in jvs and that a broad array of contingencies and factors affect these benefits which need to be considered when entering into a cooperation

arms race or detente how interfirm alliance announcements change the stock market valuation of rivals most prior event studies find that the announcement of a new alliance is accompanied by a positive stock market response for the partners this result has usually been interpreted as evidence for the prevailing view that alliances are effective vehicles for partners to acquire or access new skills and thus become stronger competitors however partners should also earn positive abnormal returns if alliances are used to shape competitive interactions attenuating competitive intensity industry wide in this study we disentangle these different mechanisms by examining how alliance announcements affect the stock market s evaluation of allying firms rivals if an alliance is expected to make partner firms more competitive this should lead to negative abnormal returns for partners rivals if an alliance is expected to facilitate a reduction in competitive intensity this should lead to positive abnormal returns for rivals results from an event study analysis of research and development alliances in the telecommunications and electronics industries during 1996 2004 provide evidence consistent with competition attenuation in some alliances our research thus challenges the increasingly narrow focus on learning and resource accumulation through alliances and calls for broader consideration of the roles and effects of collaboration both for individual firms and for industry structure

risk taking for oneself and others a structural model approach economic theory makes no predictions about social factors affecting decisions under risk we examine situations in which a decision maker decides for herself and another person under conditions of payoff equality and compare them to individual decisions by estimating a structural model we find that responsibility leaves utility curvature unaffected but accentuates the subjective distortion of very small and very large probabilities for both gains and losses we also find that responsibility reduces loss aversion but that these results only obtain under some specific definitions of the latter these results serve to generalize and reconcile some of the still largely contradictory findings in the literature they also have implications for financial agency which we discuss

is roger federer more loss averse than serena williams using data from the high stakes 2013 dubai professional tennis tournament we find that compared with a tied score i male players have a higher serve speed and thus exhibit more effort when behind in score and their serve speeds get less sensitive to losses or gains when score difference gets too large and ii female players do not change their serve speed when behind while serving slower when ahead thus male players comply more with prospect theory exhibiting more loss aversion and reflection effect our results are robust to controlling for player fixed effects and characteristics with player random effects

alliance experience it enabled knowledge integration and ex ante value gains an important theme in the alliance research has been the study of how prior alliance experience translates into value gains from alliances despite the strong theoretical argument regarding the value enhancing role of alliance experience past research has reported mixed results in an attempt to resolve the inconclusive findings we provide a more fine grained view of alliance experience by examining characteristics such as relatedness and diversity which are defined based on the functional focus and the industry of the partner furthermore we argue that since leveraging alliance experience is a learning process a firm s knowledge integration capabilities enabled by information technology it should influence the extent to which the firm benefits from alliance experience using data from 1 030 alliances made by 89 firms across 11 industries we test the effects of relatedness and diversity on abnormal returns following alliance announcements we find that functionally related experience is positively related to abnormal returns whereas partner industry based related experience affects the expected value negatively we also find that a firm s it enabled knowledge integration positively moderates the effects of both related and diverse experience on abnormal returns our findings highlight that although knowledge gained through prior experience is important complementary capabilities that enable firms to leverage and utilize such knowledge are also necessary for ex ante value creation in alliances we interpret these findings and discuss their implications for research in both strategic management and information systems

the limitations of european union control of state aid the european union eu is one of the few jurisdictions in the world that has introduced specific legal provisions for controlling state aid the treaty provisions are structured in such a way that the commission is in principle obliged to authorize every single grant of aid this has proved to be practically impossible the more so with 27 members of the eu as a result the commission has issued a number of exemption and de minimis rules for which notification is not required that suggest that the bulk of state aid is beneficial in order for state aid policy to become more rigorous the 2005 state aid action plan rightly enhanced the role of economic analysis this means rethinking the exemption regulations and the way individual decisions are taken one important step forward would be to make sure that distortions of competition are noticeable before a state measure is declared incompatible as a result at least with respect to individual decisions eu policy would stop addressing cases where the distortions of competition are minimal furthermore the commission would stop imposing irrelevant constraints on subsidized forms this is particularly the case for restructuring aid where the restoration of the healthiness of the firm is the final objective of the aid however even in recent decisions taken as a result of the financial crisis the commission uses competition type considerations only to overcome moral hazard by attaching a number of intrusive conditions to its authorization decisions prohibition of reducing prices before a competitor does introduction of capacity or sales caps merger prohibitions caps on managers salaries etc very often these conditions reduce not increase the probability that these companies restructure successfully moral hazard can only be eliminated by not allowing the aid by limiting the aid to what is strictly necessary or by making sure that it is a once and for all option and not by constraining the company from competing copyright 2012 oxford university press

the effect of short term information on long term investment an experimental study abstract we present a multi trial experiment that extends the classic experiment of thaler et al 1997 by adding short term information to long term investment the allocation to the risky asset is reduced in the long term when we add short term information

relative pay and labor supply we examine the impact of relative wages on labor supply in a laboratory experiment we test the hypothesis that ceteris paribus making a given wage high low relative to other wage levels will lead to an increase decrease in labor supply we find that labor supply does respond significantly to relative pay and in the expected direction however when a strong enough reason for the relative low pay is given this difference disappears

how do international joint ventures create shareholder value this study attempts to identify conditions under which announcements of international joint venture jv formation lead to increases in shareholder value of participating u s firms it does so by combining the singular theoretical foci of previous work on the topic and specifying previously unconsidered but conceptually important influences on firms expected jv performance the study s findings indicate support for the hypothesized effect of variables in partners task related competitive and structural context s but not those in these firms partner related and institutional context s specifically partner venture business relatedness the pursuit of r d oriented activity greater equity ownership and large firm size all are found to have a positive impact on firms jv based value creation although this study finds support for the performance impact of firm level competition the direction of this impact is contrary to that hypothesized no support is found for hypothesized effect of partner partner business relatedness previous jv experience partners relative firm size national cultural relatedness and jv host country political risk copyright 2000 john wiley sons ltd

investment flexibility and the acceptance of risk abstract the hypothesis examined in this paper is that the greater the investor s flexibility the easier it is for him to change his portfolio depending on his results the more willing he will be to accept risks when the investor has no control on the size of the risky investment but can choose between one risky and one riskless asset this conjecture is shown to be correct however if there is more than one risky asset each period counterexamples demonstrate that flexibility rarely ensures greater risk taking for the standard portfolio problem in which investors are free to determine the size of their investment in a risky asset flexibility always raises the demand for the risky asset if constant relative risk aversion is less than unity but counterexamples can always be found when the constant relative risk aversion is larger than unity journal of economic literatureclassification numbers g11 d81 d84

an index of loss aversion to a considerable extent risk aversion as it is commonly observed is caused by loss aversion several indexes of loss aversion have been proposed in the literature the one proposed in this paper leads to a clear decomposition of risk attitude into three distinct components basic utility probability weighting and loss aversion the index is independent of the unit of payment the main theorem shows how the indexes of different decision makers can be compared through observed choices

how price path characteristics shape investment behavior abstract price paths are often the only graphical representation of financial products investors receive before making an investment decision we argue that price paths serve as graphical frames that influence the perceived attractiveness of an asset by highlighting specific asset characteristics in a controlled lab experiment we find that price paths have an impact on investment decisions in a regression we test a simple model relating the perception of price path shapes to several heuristics these heuristics are focusing on more recent outcomes deriving implicit reference prices from focal prices focusing on losses and estimating risk from the amplitude of the path we conclude that investment decisions are systematically biased due to the shape of an asset s price path

myopic loss aversion information feedback vs investment flexibility we experimentally disentangle the effect of information feedback from the effect of investment flexibility on the investment behavior of a myopically loss averse investor our findings show that varying the information condition alone suffices to induce behavior that is in line with the hypothesis of myopic loss aversion

evaluation periods and asset prices in a market experiment we test whether the frequency of feedback information about the performance of an investment portfolio and the flexibility with which the investor can change it influence her risk attitude in markets in line with the prediction of myopic loss aversion benartzi and thaler 1995 we find that more information and more flexibility result in less risk taking market prices of risky assets are significantly higher if feedback frequency and decision flexibility are reduced this result supports the findings from individual decision making and shows that markets do not eliminate such behavior

myopic loss aversion disappointment aversion and the equity premium puzzle abstract this paper takes a close look at the behavioural finance explanations of the equity premium puzzle namely myopic loss aversion benartzi s thaler r h 1995 myopic loss aversion and the equity premium puzzle quarterly journal of economics 110 73 92 and disappointment aversion ang a bekaert g liu j 2005 why stocks may disappoint journal of financial economics 76 471 508 the paper proposes a simple specification of loss and disappointment aversion and brings these theories to the data the main conclusion is that a highly short sighted investment horizon is required for the historical equity premium to be explained by loss aversion while reasonable values for disappointment aversion are found also for long investment horizons stocks may not only lose in the short term but also disappoint in the long term

international investment location decisions abstract in international location tournaments governments compete for foreign investment with tax and other short run incentives such tournaments can be won if agglomeration economies are sufficiently powerful to overcome investors desire to spread investments as a hedge against risk we focus on manufacturing investments by u s multinationals in the 1980s our econometric results suggest that agglomeration economies are indeed the dominant influence on investor calculations paradoxically short run incentives have limited apparent impact on location choice we conclude that high cost tournament play is unnecessary for countries with good infrastructure development specialized input suppliers and an expanding domestic market

reference dependent consumption plans we develop a rational dynamic model in which people are loss averse over changes in beliefs about present and future consumption because changes in wealth are news about future consumption preferences over money are reference dependent if news resonates more when about imminent consump tion than when about future consumption a decision maker might to generate pleasant surprises overconsume early relative to the optimal committed plan increase immediate consumption following surprise wealth increases and delay decreasing consumption following surprise losses since higher wealth mitigates the effect of bad news people exhibit an unambiguous first order precautionary savings motive

can losing lead to winning individuals groups and teams who are behind their opponents in competition tend to be more likely to lose in contrast we show that through increasing motivation being slightly behind can actually increase success analysis of more than 18 000 professional basketball games illustrates that being slightly behind at halftime leads to a discontinuous increase in winning percentage teams behind by a point at halftime for example actually win more often than teams ahead by one or approximately six percentage points more often than expected this psychological effect is roughly half the size of the proverbial home team advantage analysis of more than 45 000 collegiate basketball games finds consistent though smaller results experiments corroborate the field data and generalize their findings providing direct causal evidence that being slightly behind increases effort and casting doubt on alternative explanations for the results taken together these findings illustrate that losing can sometimes lead to winning this paper was accepted by peter wakker decision analysis

crisis era protectionism and the multilateral governance of trade an assessment this paper examines the multilateral governance of trade along with the prospects for its meaningful reform in the light of recent crisis era discrimination against the many types of cross border commerce prior episodes of protectionism provide a useful benchmark the findings are not optimistic the current set of multilateral rules is incomplete has weak incentives for compliance and can be readily circumvented only a far reaching revision of these rules could induce more restraint

market valuation of joint ventures joint venture characteristics and wealth gains abstract along with rd that is the nature of relationship between partners the relatedness and the strategic implication of joint ventures to partners the extent of partners control over joint ventures and the corporate governance in parent firms the data set consists of two party equity joint ventures in the electronics industry that were launched between 1979 and 1988 the unit of analysis is the 174 u s firms out of 158 joint ventures of which 113 were cross border agreements and 45 were between u s firms the study applies the event study method to assess stockholders risk adjusted wealth gains and a cross sectional analysis based on a generalized least squares model to test the hypotheses contrary to popular belief our results show an overall favorable reaction to joint venturing in the stock market even though there is substantial variation according to contextual influences the findings show that stock market valuations reflect the economic potential of joint ventures and are affected by the degree and type of control shareholders and partners can exercise the first key finding in the study is that the valuation effect of joint ventures is multifaceted the market valuation of joint ventures depends on the relationship between partners the nature of partners contributions the extent of partners control over joint ventures and the corporate governance in parent firms our findings also show that partner size which has not been studied in prior studies is a critical variable affecting wealth gains from joint ventures our results certainly shed light on understanding the effect of size on corporate wealth gains from joint ventures the results provide conflicting support for most hypotheses depending on firm size implying that joint ventures have different strategic and managerial implications for the partners depending on size shareholders tend to perceive joint ventures as a risky entrepreneurial operation particularly for the smaller partners it is indeed difficult to protect the smaller partners firm specific know how from being appropriated by the other partners accordingly smaller firms role and degree of control in a joint venture substantially affect wealth gains from their joint venturing with larger corporations shareholders value majority equity sharing by smaller partners as an important governance mechanism to control resource flows and avoid opportunistic behaviors by the larger partners whereas this study extends the previous findings on positive wealth gains of joint ventures by examining contextual influences it also attempts to fill the void in the field of corporate entrepreneurship despite the growing interest in corporate entrepreneurship there has been little attempt to empirically examine its potential association with corporate financial performance in particular with market based performance measures or wealth gains financial theory posits that accounting based performance measures do not properly measure the value of managers entrepreneurial decisions rappaport 1986 argued that the true measure of the long run value of an investment decision is economic value for shareholders as measured by abnormal stock returns i e wealth gains our study is an extension of this fast emerging field of study on the relationship between corporate entrepreneurship and financial performance by focusing on corporate wealth gains from joint venturing with other firms in pursuit of entrepreneurial goals

car mechanics in the lab investigating the behavior of real experts on experimental markets for credence goods credence goods such as car repairs or medical services are characterized by severe informational asymmetries between sellers and consumers leading to fraud in the form of provision of insufficient service undertreatment provision of unnecessary service overtreatment and charging too much for a given service overcharging recent experimental research involving a standard student subject pool has examined the influence of informational and market conditions on the type and level of fraud we investigate whether professional car mechanics as real sellers of credence goods react in the same way to changes in informational and institutional constraints while we find qualitatively similar effects in the fraud dimensions of undertreatment and overcharging for both subject pools car mechanics are significantly more prone to supplying unnecessary services in all conditions which could be a result of decision heuristics they learned in their professional training