We propose that the reliance on feelings as information in judgment may involve two separate mechanisms: one involves a metacognitive assessment of whether one's feelings should be trusted in the judgment; the other is more mindless reliance on feelings without much consideration for their perceived diagnosticity.
The preferred risk habitat hypothesis, introduced here, is that individual investors select stocks whose volatilities are commensurate with their risk aversion. The data, 1995-2000 holdings of over 20,000 clients at a large German broker, are consistent with the predictions of the hypothesis: the portfolios contain highly similar stocks in terms of volatility, when stocks are sold they are replaced by stocks of similar volatilities, and the more risk averse customers indeed hold and trade into less volatile stocks.
This paper examines optimal sampling and pricing of information goods for firms that generate revenues from both sales and advertising. We develop a model where the demand for paid information goods is influenced by the sample portion that the firm offers for free. Taking into account the consumers’ initial valuation and experienced quality of the free version, we characterize the firm’s optimal sampling and pricing decisions. We find that the effect of advertising revenues on optimal sample portion and price depends on expected and experienced quality.
Although established money managers operate in an environment which seems com- petitive, they also seem to be very profitable. The present value of the expected future profits from managing a collection of funds is equal to the value of the assets under management times the profit margin, assuming that the managed funds will remain in business forever, zero asset flow into and out of the funds, zero excess returns net of trading costs, fixed management fee proportional to the assets under management and a fixed profit margin for the management company.
Active investors provide entrepreneurs with risk-sharing and value-adding effort, e.g., in form of advising, networking and monitoring. However, holdup problems may create a conflict between two key objectives for high-quality entrepreneurs: to elicit investor effort and to credibly signal their firm type by retaining shares. As a result, pooling of startup firms of different types may arise, in particular when investor effort is essential. More established firms, with access to multiple signals, can always realize both of these objectives.
Paid placements on search engines reached sales of nearly $11 billion in the United States last year and represent the most rapidly growing form of online advertising today. In its classic form, a search engine sets up an auction for each search word in which competing websites bid for their sponsored links to be displayed next to the search results.
In this chapter, DeVoe and Iyengar argue that the perceived fairness of different allocation norms (e.g., equity and equality) depends on the resource being allocated. In particular, they argue that people have a greater preference for allocating resources equitably when the resource to be allocated is money (or other easily monetized goods) relative to nonmonetized goods.