2020

The Impact of Overconfidence and Ambiguity Attitude on Market Entry

Reprint No. 2020:27

Author(s): Cédric Gutierrez, Thomas Åstebro and Tomasz OblojYear: 2020 Title: Organization Science Volume (No.): 31 (2) Pages: 308–329
Online article (restrictions may apply)


We study the behavioral drivers of market entry. An experiment allows us to disentangle the impact on entry across different types of markets of two key behavioral mechanisms: overconfidence and attitude toward ambiguity. We theorize and show that the causal effect of overconfidence on entry is limited to skill-based markets and does not appear in those that are chance based. Moreover, we also find that, independent of confidence levels, individuals exhibit ambiguity-seeking behavior when the result of the competition depends on their skills, which, in turn, leads to higher levels of entry. This preference for ambiguity thus can explain results that have previously been attributed to overconfidence. Our results challenge existing literature that has inferred overconfidence from differential entry levels across types of markets.


Reference:
Gutierrez, Cédric, Thomas Åstebro and Tomasz Obloj (2020), "The Impact of Overconfidence and Ambiguity Attitude on Market Entry". Organization Science 31(2), 308–329.

Thomas Åstebro

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Ph: +33 1 39677483
astebro@hec.fr

Interdisciplinary European Studies

The European Union and the Return of the Nation State

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This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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