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Value Capture in the Face of Known and Unknown Unknowns

Author

Listed:
  • Kevin A. Bryan

    (Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada)

  • Michael D. Ryall

    (Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada)

  • Burkhard C. Schipper

    (Department of Economics, University of California, Davis, California 95616)

Abstract

A large theoretical literature on value capture uses cooperative games under complete information to study how and why firms earn supernormal profits. However, firms often have different information, beliefs, or creative foresight. We extend value capture theory to incomplete information (“known unknowns”) or unawareness (“unknown unknowns”) and illustrate some conceptual issues with that extension. Using the case study of Cirque du Soleil, we show how an entrepreneurial firm can profit even when it does not contribute materially to value creation. In a case study of Apple iTunes, we show how value capture depends quantitatively on the beliefs of other firms.

Suggested Citation

  • Kevin A. Bryan & Michael D. Ryall & Burkhard C. Schipper, 2022. "Value Capture in the Face of Known and Unknown Unknowns," Strategy Science, INFORMS, vol. 7(3), pages 157-189, September.
    • Handle: RePEc:inm:orstsc:v:7:y:2022:i:3:p:157-189
    DOI: 10.1287/stsc.2021.0126
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    Cited by:

    1. Burkhard C. Schipper & Tina Danting Zhang, 2025. "Matching, Unanticipated Experiences, Divorce, Flirting, Rematching, Etc," Working Papers 371, University of California, Davis, Department of Economics.

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    Keywords

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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games

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