Archivio per 3 dicembre 2014

03
Dic
14

Corporate Competition: A Self-Organized Network | NECSI

See on Scoop.itBounded Rationality and Beyond

Abstract
A substantial number of studies have extended the work on universal properties in physical systems to complex networks in social, biological, and technological systems. In this paper, we present a complex networks perspective on interfirm organizational networks by mapping, analyzing and modeling the spatial structure of a large interfirm competition network across a variety of sectors and industries within the United States. We propose a model that is able to reproduce experimentally observed characteristics of competition networks as a natural outcome of a minimal set of general mechanisms governing the evolution of competition networks. The model suggests that macro dynamical processes determine to a large extent the ecology of industry structure. There is an asymmetry between companies that are considered competitors, and companies that consider others as their competitors. All companies only consider a small number of other companies as competitors, however there are a few companies that are considered as competitors by many others. Geographically, the density of corporate headquarters strongly correlates with local population density, and the probability two firms are competitors declines with geographic distance. We construct these properties by growing a corporate network with competitive links using random incorporations modulated by population density and geographic distance. Despite randomness, the historical order of incorporation matters to network structure. Our new analysis, methodology and empirical results are relevant to various phenomena of organizational behavior, and have implications to research fields such as economic geography, economic sociology, and regional economic development.

See on necsi.edu

Annunci
03
Dic
14

Corporate Competition: A Self-Organized Network | NECSI

Abstract
A substantial number of studies have extended the work on universal properties in physical systems to complex networks in social, biological, and technological systems. In this paper, we present a complex networks perspective on interfirm organizational networks by mapping, analyzing and modeling the spatial structure of a large interfirm competition network across a variety of sectors and industries within the United States. We propose a model that is able to reproduce experimentally observed characteristics of competition networks as a natural outcome of a minimal set of general mechanisms governing the evolution of competition networks. The model suggests that macro dynamical processes determine to a large extent the ecology of industry structure. There is an asymmetry between companies that are considered competitors, and companies that consider others as their competitors. All companies only consider a small number of other companies as competitors, however there are a few companies that are considered as competitors by many others. Geographically, the density of corporate headquarters strongly correlates with local population density, and the probability two firms are competitors declines with geographic distance. We construct these properties by growing a corporate network with competitive links using random incorporations modulated by population density and geographic distance. Despite randomness, the historical order of incorporation matters to network structure. Our new analysis, methodology and empirical results are relevant to various phenomena of organizational behavior, and have implications to research fields such as economic geography, economic sociology, and regional economic development.

Source: www.necsi.edu

See on Scoop.itBounded Rationality and Beyond

03
Dic
14

Evidence of market manipulation in the financial crisis

Abstract

We provide direct evidence of market manipulation at the beginning of the financial crisis in November 2007. The type of market manipulation, a “bear raid,” would have been prevented by a regulation that was repealed by the Securities and Exchange Commission in July 2007. The regulation, the uptick rule, was designed to prevent market manipulation and promote stability and was in force from 1938 as a key part of the government response to the 1929 market crash and its aftermath. On November 1, 2007, Citigroup experienced an unusual increase in trading volume and decrease in price. Our analysis of financial industry data shows that this decline coincided with an anomalous increase in borrowed shares, the selling of which would be a large fraction of the total trading volume. The selling of borrowed shares cannot be explained by news events as there is no corresponding increase in selling by share owners. A similar number of shares were returned on a single day six days later. The magnitude and coincidence of borrowing and returning of shares is evidence of a concerted effort to drive down Citigroup’s stock price and achieve a profit, i.e., a bear raid. Interpretations and analyses of financial markets should consider the possibility that the intentional actions of individual actors or coordinated groups can impact market behavior. Markets are not sufficiently transparent to reveal or prevent even major market manipulation events. Our results point to the need for regulations that prevent intentional actions that cause markets to deviate from equilibrium value and contribute to market crashes. Enforcement actions, even if they take place, cannot reverse severe damage to the economic system. The current “alternative” uptick rule which is only in effect for stocks dropping by over 10% in a single day is insufficient. Improved availability of market data and reinstatement of either the original uptick rule or other transaction limitations may help prevent market instability.

 

Source: necsi.edu

See on Scoop.itBounded Rationality and Beyond

03
Dic
14

Evidence of market manipulation in the financial crisis

See on Scoop.itBounded Rationality and Beyond

Abstract

We provide direct evidence of market manipulation at the beginning of the financial crisis in November 2007. The type of market manipulation, a “bear raid,” would have been prevented by a regulation that was repealed by the Securities and Exchange Commission in July 2007. The regulation, the uptick rule, was designed to prevent market manipulation and promote stability and was in force from 1938 as a key part of the government response to the 1929 market crash and its aftermath. On November 1, 2007, Citigroup experienced an unusual increase in trading volume and decrease in price. Our analysis of financial industry data shows that this decline coincided with an anomalous increase in borrowed shares, the selling of which would be a large fraction of the total trading volume. The selling of borrowed shares cannot be explained by news events as there is no corresponding increase in selling by share owners. A similar number of shares were returned on a single day six days later. The magnitude and coincidence of borrowing and returning of shares is evidence of a concerted effort to drive down Citigroup’s stock price and achieve a profit, i.e., a bear raid. Interpretations and analyses of financial markets should consider the possibility that the intentional actions of individual actors or coordinated groups can impact market behavior. Markets are not sufficiently transparent to reveal or prevent even major market manipulation events. Our results point to the need for regulations that prevent intentional actions that cause markets to deviate from equilibrium value and contribute to market crashes. Enforcement actions, even if they take place, cannot reverse severe damage to the economic system. The current “alternative” uptick rule which is only in effect for stocks dropping by over 10% in a single day is insufficient. Improved availability of market data and reinstatement of either the original uptick rule or other transaction limitations may help prevent market instability.

 
See on necsi.edu

03
Dic
14

The Catastrophic Harm Precautionary Principle by Cass R. Sunstein

Abstract:      

When catastrophic outcomes are possible, it makes sense to take precautions against the worst-case scenarios — the Catastrophic Harm Precautionary Principle. This principle is based on three foundations: an emphasis on people’s occasional failure to appreciate the expected value of truly catastrophic losses; a recognition that political actors may engage in unjustifiable delay when the costs of precautions would be incurred immediately and when the benefits would not be enjoyed until the distant future; and an understanding of the distinction between risk and uncertainty. The normative arguments are illustrated throughout with reference to the problem of climate change; other applications include avian flu, genetic modification of food, protection of endangered species, and terrorism.

#precautionary_principle #catastrophe #availability #heuristic

Source: papers.ssrn.com

See on Scoop.itBounded Rationality and Beyond

03
Dic
14

The Catastrophic Harm Precautionary Principle by Cass R. Sunstein

See on Scoop.itBounded Rationality and Beyond

Abstract:      

When catastrophic outcomes are possible, it makes sense to take precautions against the worst-case scenarios — the Catastrophic Harm Precautionary Principle. This principle is based on three foundations: an emphasis on people’s occasional failure to appreciate the expected value of truly catastrophic losses; a recognition that political actors may engage in unjustifiable delay when the costs of precautions would be incurred immediately and when the benefits would not be enjoyed until the distant future; and an understanding of the distinction between risk and uncertainty. The normative arguments are illustrated throughout with reference to the problem of climate change; other applications include avian flu, genetic modification of food, protection of endangered species, and terrorism.

#precautionary_principle #catastrophe #availability #heuristic

See on papers.ssrn.com

03
Dic
14

Avoiding the Agony of a ‘Bogey’: Loss Aversion in Golf – and Business – Knowledge@Wharton

See on Scoop.itBounded Rationality and Beyond

In a working paper titled, “Is Tiger Woods Loss Averse? Persistent Bias in the Face of Experience, Competition, and High Stakes,”  (PDF) Wharton operations and information management professors Devin Pope and Maurice Schweitzer examine putts during pro golf tournaments and determine that even the best golfers systematically miss the opportunity to score a “birdie” — when a player sinks a ball in one stroke less than the number of expected strokes for a given hole — out of fear of having a “bogey” — or taking one stroke more than what is expected. According to the researchers, for many, the agony of a bogey seems to outweigh the thrill of a birdie.

The researchers calculate that this type of decision-making bias costs the average professional golfer about one stroke during a 72-hole tournament. For the top 20 golfers, that translates to a combined loss of about $1.2 million in prize money a year. According to the paper, golfers frame their approach to putting based on the risk of coming in worse than “par” — or the number of strokes a professional golfer would be expected to take to complete a given hole. The researchers’ analysis shows that golfers avoid the possibility of loss by playing conservatively when they have the opportunity to do better than par, but will try harder if they are at risk of coming in worse than par.

#Loss_Aversion #neuroeconomy 

See on knowledge.wharton.upenn.edu




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