IDEAS home Printed from https://ideas.repec.org/p/ssa/lemwps/2007-13.html
   My bibliography  Save this paper

Boom and Bust Behavior: On the Persistence of Strategic Decision Biases and their Collective Outcome

Author

Listed:
  • Michael Shayne Gary
  • Giovanni Dosi
  • Dan Lovallo

Abstract

This work discusses the boom and bust dynamics which are a common feature of a large range of different industries. especially but not only new born ones. The common managerial behavior underpinning such dynamics is aggressive capacity expansion in the boom period ultimately yielding excess capacity turning the boom into bust. This paper examines the underlying cognitive and behavioral factors responsible for strategic decisions driving boom and busts, nested in the interaction between cognitive biases and capacity adjustment delay, and together tries to identify some tentative heuristics which tend to mitigate them. At the same time, we shall conjecturally conclude, there might be a positive collective side to boom and bust behavio r fostering accumulation of knowledge and physical infrastructure, especially regarding new technological paradigms.

Suggested Citation

  • Michael Shayne Gary & Giovanni Dosi & Dan Lovallo, 2007. "Boom and Bust Behavior: On the Persistence of Strategic Decision Biases and their Collective Outcome," LEM Papers Series 2007/13, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  • Handle: RePEc:ssa:lemwps:2007/13
    as

    Download full text from publisher

    File URL: http://www.lem.sssup.it/WPLem/files/2007-13.pdf
    Download Restriction: no

    More about this item

    Keywords

    Boom and bust; Overconfidence; Capacity adjustment; Adaptive behavior;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ssa:lemwps:2007/13. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/labssit.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.