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Anxiety, overconfidence, and excessive risk taking
Eisenbach, Thomas M.; Schmalz, Martin C. - 2015
We provide a preference-based rationale for endogenous overconfidence. Horizon-dependent risk aversion, combined with a … possibility to forget, can generate overconfidence and excessive risk taking in equilibrium. An "anxiety prone" agent, who is more … results to the literature on empirically observed overconfidence and excessive risk taking in several domains of financial and …
Persistent link: https://www.econbiz.de/10010482950
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Overconfidence in the market for lemons
Herweg, Fabian; Müller, Daniel - 2011
We extend Akerlof's (1970) "Market for Lemons" by assuming that some buyers are overconfident. Buyers in our model receive a noisy signal about the quality of the good that is at display for sale. Overconfident buyers do not update according to Bayes' rule but take the noisy signal at face...
Persistent link: https://www.econbiz.de/10009375745
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Overconfidence in the markets for lemons
Herweg, Fabian; Müller, Daniel - 2013
We extend Akerlof (1970)'s 'Market for Lemons' by assuming that some buyers are overconfident. Buyers in our model receive a noisy signal about the quality of the good that is on display for sale. Overconfident buyers do not update according to Bayes' rule but take the noisy signal at face...
Persistent link: https://www.econbiz.de/10010342215
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Persistent overconfidence and biased memory : evidence from managers
Huffman, David; Raymond, Collin; Shvets, Julia - 2023
A long-standing puzzle is how overconfidence can persist in settings characterized by repeated feedback. This paper …
Persistent link: https://www.econbiz.de/10014311540
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Going on the long race? : employment duration and (de)regulation of experimental stochastic labor markets
Berninghaus, Siegfried; Bleich, Sabrina; Güth, Werner - 2009
If the future market wage is uncertain, engaging in long–term employment is risky, with the risk depending on how regulated the labor market is. In our experiment long–term employment can result either from offering long–term contracts or from repeatedly and mutually opting for...
Persistent link: https://www.econbiz.de/10003906133
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Wage Flexibility in Ongoing Employment Relations - An Experiment With a Stochastic Labor Market
Berninghaus, Siegfried; Bleich, Sabrina; Güth, Werner - 2007
Facing a stochastic market wage, which is independent of their own hiring policy, employers offer contracts specifying fixed wage, revenue share and employment duration. In ongoing employment relations it depends on the treatment whether fixed wages can be only increased or also decreased. Will...
Persistent link: https://www.econbiz.de/10014223201
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Overconfidence and Moral Hazard
de la Rosa, Leonidas Enrique - 2008
In this paper, I study the effects of overconfidence on incentive contracts in a moral-hazard framework in which … overconfidence can have conflicting effects on the equilibrium contract. On the one hand, an overconfident agent disproportionately …; because the agent bears less risk in this case, he actually benefits from his overconfidence. If the agent is significantly …
Persistent link: https://www.econbiz.de/10014217614
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Resolution of Information Asymmetry in Management Accounting : A Game Theoretic Way
Sinha, Avik - 2015
Information asymmetry has been a critical issue in management accounting. Non-co-linearity of interests among market participants brings forth this problem. As a decision making tool, firms should leverage out the benefits of management accounting system to encounter this problem, as it has a...
Persistent link: https://www.econbiz.de/10014163109
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Overconfidence and Moral Hazard
de la Rosa, Leonidas Enrique - 2008
In this paper, I study the effects of overconfidence on incentive contracts in a moral-hazard framework in which … overconfidence can have conflicting effects on the equilibrium contract. On the one hand, an overconfident agent disproportionately …; because the agent bears less risk in this case, he actually benefits from his overconfidence. If the agent is significantly …
Persistent link: https://www.econbiz.de/10014051500
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Investments under Vertical Relations and Agency Conflicts : A Real Options Approach
Zormpas, Dimitrios - 2018
We examine the case of a firm holding the option to make an uncertain and irreversible investment. The firm is decentralized and there is information asymmetry between the owner and the investment manager regarding the price of an input (e.g. a key equipment) that needs to be purchased by an...
Persistent link: https://www.econbiz.de/10012932000