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A lab test on the decision not to decide

Author

Listed:
  • Christian D. Schade

    (Humboldt-Universität Zu Berlin)

  • Avichai Snir

    (Netanya Academic College)

Abstract

Decisions are often postponed even when future profits are not expected to compensate for the losses. This is especially relevant for financial and entrepreneurial disinvestment choices, as investors often have a disposition to hold on to losing assets for too long. We use an experiment with real real-options to study one possible behavioral motivation. Studies in psychology suggest that individuals have different styles of handling the stress involved in making decisions. We find that participants' styles of decision-making and risk aversion as well as the interaction of those can assist in predicting the likelihood that the participants will make investments and the timing of their disinvestment decisions. We also find the overall structure of the findings to be in line with a planner–doer model.

Suggested Citation

  • Christian D. Schade & Avichai Snir, 2020. "A lab test on the decision not to decide," Business Research, Springer;German Academic Association for Business Research, vol. 13(3), pages 1253-1291, November.
    • Handle: RePEc:spr:busres:v:13:y:2020:i:3:d:10.1007_s40685-020-00116-y
    DOI: 10.1007/s40685-020-00116-y
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    More about this item

    Keywords

    Buck-passing; Conflict theory of decision-making; Disinvestment decisions; Financial decisions; Player types; Real monetary-stakes experiment; Risk aversion; Vigilance; Planner–doer model;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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