A fuzzy risk attitude classification based on prospect theory

Traditional methods do not actually measure peoples’ risk attitude naturally and precisely. Therefore, a fuzzy risk attitude classification method is developed. Since the prospect theory is usually considered as an effective model of decision making, the personalized parameters in prospect theory are firstly fuzzified to distinguish people with different risk attitudes, and then a fuzzy classification database schema is applied to calculate the exact value of risk value attitude and risk be- havior attitude. Finally, by applying a two-hierarchical clas- sification model, the precise value of synthetical risk attitude can be acquired.

Applying prospect theory to predict new venture creation

Although prior research on new venture creation has identified several antecedents that differentiate entrepreneurs from non-entrepreneurs, scholars still have an incomplete understanding of the factors and decision processes that lead an individual to become an entrepreneur. By applying prospect theory, we introduce the reference point as an important antecedent of new venture creation. Testing our research model and hypotheses with entrepreneurs and employees, results show that entrepreneurs set more aspiring reference points and therefore find themselves more often in a perceived loss situation. Results are also robust when testing for entrepreneurial intention of business graduate students. According to prospect theory, the perceived loss triggers more risk-seeking behavior. Summing up, the reference point has a positive effect on new venture creation and differentiates entrepreneurs from nonentrepreneurs. We discuss theoretical and managerial implications of the findings and develop avenues for future research.

Staatliche Gründungsfinanzierung: Stand der Forschung und offene Fragen

Der Beitrag gibt einen Überblick über den Stand der Forschung zur staatlichen Gründungsfinanzierung, speziell in Deutschland. Dabei steht die Frage im Vordergrund, ob eine öffentliche Gründungsfinanzierung aus wirtschaftspolitischer Sicht zu rechtfertigen ist. Konkret werden vier Forschungsfragen untersucht. Die erste Frage lautet, ob Unternehmensgründungen für eine Wirtschaft überhaupt Nutzen stiften. Die zweite Frage lautet, ob auf dem Markt der Finanzierung von Gründungsunternehmen Unvollkommenheiten bzw. Marktversagen feststellbar sind. Die dritte Frage lautet, ob staatliche Maßnahmen der Gründungsfinanzierung einzelwirtschaftlich effektiv sind, dass sich also geförderte Unternehmen als erfolgreicher erweisen als nicht geförderte. Die vierte Frage lautet, ob eine staatliche Gründungsfinanzierung die angestrebten wirtschaftspolitischen Ziele zu den niedrigstmöglichen Kosten erreicht, also effizient ist. Die Antworten sind durchweg negativ und zeigen, dass die bisherige Forschung keine ausreichende Rechtfertigung für eine staatliche Gründungsfinanzierung bieten kann.

How expectations affect reference point formation: an experimental investigation

This paper addresses two major topics concerning the role of expectations in the formation of reference points. First, we show that when expectations are present, they have a significant impact on reference point formation. Second, we find that decision-makers employ expected values when forming reference points (integrated mechanism) as opposed to single possible outcomes (segregated mechanism). Despite the importance of reference points in prospect theory, to date, there is no standard method of examining these. We develop a new experimental design that employs an indirect approach and extends an existing direct approach. Our findings are consistent across the two approaches.

The Impact of Relationship Conflict on subjective Family Firm Valuation

The present paper empirically investigates the impact of family relationship conflict on subjective firm valuation by family firm owner managers. Drawing on the emerging socioemotional wealth perspective of corporate ownership, we find a U-shaped relationship between relationship conflict inside the family firm and subjective family firm valuation. This finding suggests that negatively valenced emotions induced by the conflict, at low levels of conflict, lead to emotion congruent withdrawal behavior and hence lower valuation. With conflicts gaining in fervor and severity, owner-managers start endowing and pricing sunk costs related to the conflict. This finding suggests that emotions do indeed have spill-over effects on monetary value perceptions and that negatively valenced emotions induced by relationship conflict are not linearly appraised. Rather, to understand the impact of negative emotions on corporate ownership appraisal and attachment it is required to reconcile the emotion congruency with the prospect theory perspective.

Efficient team actions: Outline of a theory of teams in sport

So far, social psychology in sport has preliminary focused on team cohesion, and many studies and meta analyses tried to demonstrate a relation between cohesiveness of a team and it's performance. How a team really co-operates and how the individual actions are integrated towards a team action is a question that has received relatively little attention in research. This may, at least in part, be due to a lack of a theoretical framework for collective actions, a dearth that has only recently begun to challenge sport psychologists. In this presentation a framework for a comprehensive theory of teams in sport is outlined and its potential to integrate the following presentations is put up for discussion. Based on a model developed by von Cranach, Ochsenbein and Valach (1986), teams are information processing organisms, and team actions need to be investigated on two levels: the individual team member and the group as an entity. Elements to be considered are the task, the social structure, the information processing structure and the execution structure. Obviously, different task require different social structures, communication and co-ordination. From a cognitivist point of view, internal representations (or mental models) guide the behaviour mainly in situations requiring quick reactions and adaptations, were deliberate or contingency planning are difficult. In sport teams, the collective representation contains the elements of the team situation, that is team task and team members, and of the team processes, that is communication and co-operation. Different meta-perspectives may be distinguished and bear a potential to explain the actions of efficient teams. Cranach, M. von, Ochsenbein, G., & Valach, L. (1986).The group as a self-active system: Outline of a theory of group action. European Journal of Social Psychology, 16, 193-229.

Outline of a theory of efficient teams in Sport.

Introduction So far, social psychology in sport has preliminary focused on team cohesion, and many studies and meta-analyses tried to demonstrate a relation between cohesiveness of a team and its performance. How a team really co-operates and how the individual actions are integrated towards a team action is a question that has received relatively little attention in research. This may, at least in part, be due to a lack of a theoretical framework for collective actions, a dearth that has only recently begun to challenge sport psychologists. Objectives In this presentation a framework for a comprehensive theory of teams in sport is outlined and its potential to integrate research in the domain of team performance and, more specifically, the following presentations, is put up for discussion. Method Based on a model developed by von Cranach, Ochsenbein and Valach (1986), teams are considered to be information processing organisms, and team actions need to be investigated on two levels: the individual team member and the group as an entity. Elements to be considered are the task, the social structure, the information processing structure and the execution structure. Obviously, different task require different social structures, communication processes and co-ordination of individual movements. Especially in rapid interactive sports planning and execution of movements based on feedback loops are not possible. Deliberate planning may be a solution mainly for offensive actions, whereas defensive actions have to adjust to the opponent team's actions. Consequently, mental representations must be developed to allow a feed-forward regulation of team member's actions. Results and Conclusions Some preliminary findings based on this conceptual framework as well as further consequences for empirical investigations will be presented. References Cranach, M.v., Ochsenbein, G. & Valach, L. (1986). The group as a self-active system: Outline of a theory of group action. European Journal of Social Psychology, 16, 193-229.

Applied Graph Theory in Computer Vision and Pattern Recognition

This book will serve as a foundation for a variety of useful applications of graph theory to computer vision, pattern recognition, and related areas. It covers a representative set of novel graph-theoretic methods for complex computer vision and pattern recognition tasks. The first part of the book presents the application of graph theory to low-level processing of digital images such as a new method for partitioning a given image into a hierarchy of homogeneous areas using graph pyramids, or a study of the relationship between graph theory and digital topology. Part II presents graph-theoretic learning algorithms for high-level computer vision and pattern recognition applications, including a survey of graph based methodologies for pattern recognition and computer vision, a presentation of a series of computationally efficient algorithms for testing graph isomorphism and related graph matching tasks in pattern recognition and a new graph distance measure to be used for solving graph matching problems. Finally, Part III provides detailed descriptions of several applications of graph-based methods to real-world pattern recognition tasks. It includes a critical review of the main graph-based and structural methods for fingerprint classification, a new method to visualize time series of graphs, and potential applications in computer network monitoring and abnormal event detection.

Light-cone Wilson loop in classical lattice gauge theory

The transverse broadening of an energetic jet passing through a non-Abelian plasma is believed to be described by the thermal expectation value of a light-cone Wilson loop. In this exploratory study, we measure the light-cone Wilson loop with classical lattice gauge theory simulations. We observe, as suggested by previous studies, that there are strong interactions already at short transverse distances, which may lead to more efficient jet quenching than in leading-order perturbation theory. We also verify that the asymptotics of the Wilson loop do not change qualitatively when crossing the light cone, which supports arguments in the literature that infrared contributions to jet quenching can be studied with dimensionally reduced simulations in the space-like domain. Finally we speculate on possibilities for full four-dimensional lattice studies of the same observable, perhaps by employing shifted boundary conditions in order to simulate ensembles boosted by an imaginary velocity.

Essays on behavioral aspects of the design and disclosure of compensation contracts

This thesis consists of four essays on the design and disclosure of compensation contracts. Essays 1, 2 and 3 focus on behavioral aspects of mandatory compensation disclosure rules and of contract negotiations in agency relationships. The three experimental studies develop psychology- based theory and present results that deviate from standard economic predictions. Furthermore, the results of Essay 1 and 2 also have implications for firms’ discretion in how to communicate their top management’s incentives to the capital market. Essay 4 analyzes the role of fairness perceptions for the evaluation of executive compensation. For this purpose, two surveys targeting representative eligible voters as well as investment professionals were conducted. Essay 1 investigates the role of the detailed ‘Compensation Discussion and Analysis’, which is part of the Security and Exchange Commission’s 2006 regulation, on investors’ evaluations of executive performance. Compensation disclosure complying with this regulation clarifies the relationship between realized reported compensation and the underlying performance measures and their target achievement levels. The experimental findings suggest that the salient presentation of executives’ incentives inherent in the ‘Compensation Discussion and Analysis’ makes investors’ performance evaluations less outcome dependent. Therefore, investors’ judgment and investment decisions might be less affected by noisy environmental factors that drive financial performance. The results also suggest that fairness perceptions of compensation contracts are essential for investors’ performance evaluations in that more transparent disclosure increases the perceived fairness of compensation and the performance evaluation of managers who are not responsible for a bad financial performance. These results have important practical implications as firms might choose to communicate their top management’s incentive compensation more transparently in order to benefit from less volatile expectations about their future performance. Similar to the first experiment, the experiment described in Essay 2 addresses the question of more transparent compensation disclosure. However, other than the first experiment, the second experiment does not analyze the effect of a more salient presentation of contract information but the informational effect of contract information itself. For this purpose, the experiment tests two conditions in which the assessment of the compensation contracts’ incentive compatibility, which determines executive effort, is either possible or not. On the one hand, the results suggest that the quality of investors’ expectations about executive effort is improved, but on the other hand investors might over-adjust their prior expectations about executive effort if being confronted with an unexpected financial performance and under-adjust if the financial performance confirms their prior expectations. Therefore, in the experiment, more transparent compensation disclosure does not lead to more correct overall judgments of executive effort and to even lower processing quality of outcome information. These results add to the literature on disclosure which predominantly advocates more transparency. The findings of the experiment however, identify decreased information processing quality as a relevant disclosure cost category. Firms might therefore carefully evaluate the additional costs and benefits of more transparent compensation disclosure. Together with the results from the experiment in Essay 1, the two experiments on compensation disclosure imply that firms should rather focus on their discretion how to present their compensation disclosure to benefit from investors’ improved fairness perceptions and their spill-over on performance evaluation. Essay 3 studies the behavioral effects of contextual factors in recruitment processes that do not affect the employer’s or the applicant’s bargaining power from a standard economic perspective. In particular, the experiment studies two common characteristics of recruitment processes: Pre-contractual competition among job applicants and job applicants’ non-binding effort announcements as they might be made during job interviews. Despite the standard economic irrelevance of these factors, the experiment develops theory regarding the behavioral effects on employees’ subsequent effort provision and the employers’ contract design choices. The experimental findings largely support the predictions. More specifically, the results suggest that firms can benefit from increased effort and, therefore, may generate higher profits. Further, firms may seize a larger share of the employment relationship’s profit by highlighting the competitive aspects of the recruitment process and by requiring applicants to make announcements about their future effort. Finally, Essay 4 studies the role of fairness perceptions for the public evaluation of executive compensation. Although economic criteria for the design of incentive compensation generally do not make restrictive recommendations with regard to the amount of compensation, fairness perceptions might be relevant from the perspective of firms and standard setters. This is because behavioral theory has identified fairness as an important determinant of individuals’ judgment and decisions. However, although fairness concerns about executive compensation are often stated in the popular media and even in the literature, evidence on the meaning of fairness in the context of executive compensation is scarce and ambiguous. In order to inform practitioners and standard setters whether fairness concerns are exclusive to non-professionals or relevant for investment professionals as well, the two surveys presented in Essay 4 aim to find commonalities in the opinions of representative eligible voters and investments professionals. The results suggest that fairness is an important criterion for both groups. Especially, exposure to risk in the form of the variable compensation share is an important criterion shared by both groups. The higher the assumed variable share, the higher is the compensation amount to be perceived as fair. However, to a large extent, opinions on executive compensation depend on personality characteristics, and to some extent, investment professionals’ perceptions deviate systematically from those of non-professionals. The findings imply that firms might benefit from emphasizing the riskiness of their managers’ variable pay components and, therefore, the findings are also in line with those of Essay 1.

Coordinating Platform-Based Multi-Sourcing: Introducing the Theory of Convention

Spurred by the consumer market, companies increasingly deploy smartphones or tablet computers in their operations. However, unlike private users, companies typically struggle to cover their needs with existing applications, and therefore expand mobile software platforms through customized applications from multiple software vendors. Companies thereby combine the concepts of multi-sourcing and software platform ecosystems in a novel platform-based multi-sourcing setting. This implies, however, the clash of two different approaches towards the coordination of the underlying one-to-many inter-organizational relationships. So far, however, little is known about impacts of merging coordination approaches. Relying on convention theory, we addresses this gap by analyzing a platform-based multi-sourcing project between a client and six software vendors, that develop twenty-three custom-made applications on a common platform (Android). In doing so, we aim to understand how unequal coordination approaches merge, and whether and for what reason particular coordination mechanisms, design decisions, or practices disappear, while new ones emerge.

Bargaining for power and information : an experimental and theoretical analysis of the interaction between institutions, externalities and adverse selection

Bargaining is the building block of many economic interactions, ranging from bilateral to multilateral encounters and from situations in which the actors are individuals to negotiations between firms or countries. In all these settings, economists have been intrigued for a long time by the fact that some projects, trades or agreements are not realized even though they are mutually beneficial. On the one hand, this has been explained by incomplete information. A firm may not be willing to offer a wage that is acceptable to a qualified worker, because it knows that there are also unqualified workers and cannot distinguish between the two types. This phenomenon is known as adverse selection. On the other hand, it has been argued that even with complete information, the presence of externalities may impede efficient outcomes. To see this, consider the example of climate change. If a subset of countries agrees to curb emissions, non-participant regions benefit from the signatories’ efforts without incurring costs. These free riding opportunities give rise to incentives to strategically improve ones bargaining power that work against the formation of a global agreement. This thesis is concerned with extending our understanding of both factors, adverse selection and externalities. The findings are based on empirical evidence from original laboratory experiments as well as game theoretic modeling. On a very general note, it is demonstrated that the institutions through which agents interact matter to a large extent. Insights are provided about which institutions we should expect to perform better than others, at least in terms of aggregate welfare. Chapters 1 and 2 focus on the problem of adverse selection. Effective operation of markets and other institutions often depends on good information transmission properties. In terms of the example introduced above, a firm is only willing to offer high wages if it receives enough positive signals about the worker’s quality during the application and wage bargaining process. In Chapter 1, it will be shown that repeated interaction coupled with time costs facilitates information transmission. By making the wage bargaining process costly for the worker, the firm is able to obtain more accurate information about the worker’s type. The cost could be pure time cost from delaying agreement or cost of effort arising from a multi-step interviewing process. In Chapter 2, I abstract from time cost and show that communication can play a similar role. The simple fact that a worker states to be of high quality may be informative. In Chapter 3, the focus is on a different source of inefficiency. Agents strive for bargaining power and thus may be motivated by incentives that are at odds with the socially efficient outcome. I have already mentioned the example of climate change. Other examples are coalitions within committees that are formed to secure voting power to block outcomes or groups that commit to different technological standards although a single standard would be optimal (e.g. the format war between HD and BlueRay). It will be shown that such inefficiencies are directly linked to the presence of externalities and a certain degree of irreversibility in actions. I now discuss the three articles in more detail. In Chapter 1, Olivier Bochet and I study a simple bilateral bargaining institution that eliminates trade failures arising from incomplete information. In this setting, a buyer makes offers to a seller in order to acquire a good. Whenever an offer is rejected by the seller, the buyer may submit a further offer. Bargaining is costly, because both parties suffer a (small) time cost after any rejection. The difficulties arise, because the good can be of low or high quality and the quality of the good is only known to the seller. Indeed, without the possibility to make repeated offers, it is too risky for the buyer to offer prices that allow for trade of high quality goods. When allowing for repeated offers, however, at equilibrium both types of goods trade with probability one. We provide an experimental test of these predictions. Buyers gather information about sellers using specific price offers and rates of trade are high, much as the model’s qualitative predictions. We also observe a persistent over-delay before trade occurs, and this mitigates efficiency substantially. Possible channels for over-delay are identified in the form of two behavioral assumptions missing from the standard model, loss aversion (buyers) and haggling (sellers), which reconcile the data with the theoretical predictions. Chapter 2 also studies adverse selection, but interaction between buyers and sellers now takes place within a market rather than isolated pairs. Remarkably, in a market it suffices to let agents communicate in a very simple manner to mitigate trade failures. The key insight is that better informed agents (sellers) are willing to truthfully reveal their private information, because by doing so they are able to reduce search frictions and attract more buyers. Behavior observed in the experimental sessions closely follows the theoretical predictions. As a consequence, costless and non-binding communication (cheap talk) significantly raises rates of trade and welfare. Previous experiments have documented that cheap talk alleviates inefficiencies due to asymmetric information. These findings are explained by pro-social preferences and lie aversion. I use appropriate control treatments to show that such consideration play only a minor role in our market. Instead, the experiment highlights the ability to organize markets as a new channel through which communication can facilitate trade in the presence of private information. In Chapter 3, I theoretically explore coalition formation via multilateral bargaining under complete information. The environment studied is extremely rich in the sense that the model allows for all kinds of externalities. This is achieved by using so-called partition functions, which pin down a coalitional worth for each possible coalition in each possible coalition structure. It is found that although binding agreements can be written, efficiency is not guaranteed, because the negotiation process is inherently non-cooperative. The prospects of cooperation are shown to crucially depend on i) the degree to which players can renegotiate and gradually build up agreements and ii) the absence of a certain type of externalities that can loosely be described as incentives to free ride. Moreover, the willingness to concede bargaining power is identified as a novel reason for gradualism. Another key contribution of the study is that it identifies a strong connection between the Core, one of the most important concepts in cooperative game theory, and the set of environments for which efficiency is attained even without renegotiation.

Theory after Dialogue: Christian-Muslim Engagement Today and Tomorrow

The phenomenon of Christian–Muslim dialogue has had a very chequered history. At varying times, three broad modes of engagement can be said to have operated: antipathy, affinity and inquiry, and these three modes can be found still in today's world. In some places, hostility and antipathy abound. In others, voices and actions express cordial friendship, détente and affinity. In this latter climate, the prospect of engagement in mutual inquiry and cooperative ventures is not only theoretically possible, but actively pursued, and in the first decade of the twenty-first century, a number of notable initiatives in the arena of mutual inquiry have taken place. This article addresses aspects of the context and development of Christian–Muslim dialogue as a modern phenomenon, and then turns to a review of three twenty-first century developments – the Building Bridges seminar series; the Stuttgart-based Christian–Muslim Theological Forum and the “Common Word” letter. It also reflects on the models and theology of dialogue, including not only theology for dialogue, but also theology in and – importantly – after dialogue.