The Impact of Overconfidence and Attitudes towards Ambiguity on Market Entry
For many people who have started their entrepreneurial adventure, the biggest challenge is to believe in yourself. Yet, for those who choose this path, confidence can also make the entrepreneur underestimate actual business risks, leading to fatal decisions. Researchers of HEC Paris Business School and Bocconi University offer a new explanation for why decision-makers often appear too confident, and shed light on the consequences of this characteristic.
Decision-making: do you need a decision theorist… or a shrink?
Human beings are notoriously bad at making rational decisions. Even theoretical models designed to help you find the “right” answer are limited in their applications. A trio of researchers calls for a re-appraisal of decision theory, arguing that basic tools can improve decision-making by challenging underlying assumptions and uncovering psychological biases.
The Hunt for Better Decisions
What do the choice of a specific technology for the NASA shuttle, choosing a marketing policy, selecting an airport location, assisting AIDS patients in Africa and the production of low-cost goods all have in common? The answer is a discipline called Decision Theory in which HEC Paris has a worldwide reputation for groundbreaking research, particularly in the branch of decisions made in the face of uncertainty. Research Professor Mohammed Abdellaoui has been exploring this complex, multidisciplinary, and little-known discipline for 24 years and is at the heart of its development over the past decade.
Making Sense of Economic Models
Economics is not considered the most successful scientific discipline, to say the least. There are various lines of critique of the field, some more justified than others. Two recent research papers attempt to add new angles to this methodological discussion, arguing that economic models can be useful and serve society in ways that differ from the classical view of science.
How should we decide in the face of uncertainty?
How should governments decide in the face of radical uncertainties, such as those concerning climate change, energy policy, genetically modified organisms and nanotechnologies? How should managers and investors plan in the face of the considerable economic, geopolitical and environmental uncertainties that impact the success of their projects?
Do people manage their time like their money?
Time and money are two valuable and scarce resources that individuals try to manage optimally in their everyday decisions. Despite the old saying that “time is money,” important differences distinguish the two attributes. To be more specific, it turns out that people seem not to manage their time like they manage their money!
Analyzing Decisions is part of our Humanity
There is a species of sea urchins that begins its life as an animal but ends it as a plant. It crawls at the bottom of the ocean until it finds a place to cast its root. From that point on it has no more decisions to make, and it becomes a plant. Importantly, after having decided where to plant itself, it consumes its own brain. There is, apparently, no more use for the brain once all decisions have been made.
Stormy weather: overestimating risk in the wake of disaster
In a new study, Adrien Matray and Oliver Dessaint reveal that in the aftermath of hurricanes managers of nearby businesses tend to increase corporate cash holdings. This decision is irrational: the immediacy of the disaster makes the risk of damages from a storm seem greater although the actual probability remains the same. Overestimating risk is costly for business, so the researchers say companies should develop structures to prevent knee-jerk reactions to natural or financial crises.