Entrepreneurs: Clueless, Biased, Poor Heuristics, or Bayesian Machines?

Thomas B. Astebro (), Frank Fossen and Cédric Gutierrez ()
Additional contact information
Thomas B. Astebro: HEC Paris
Cédric Gutierrez: Bocconi University

No 1529, HEC Research Papers Series from HEC Paris

Abstract: Entrepreneurship scholars are interested in understanding and describing how entrepreneurs make decisions under uncertainty, where the probabilities of outcomes are not known but perceived, resulting in ambiguous probabilities. In this context, ambiguity refers to the lack of precise and objective probability assessments and the presence of subjective judgments regarding potential outcomes. In this chapter, we discuss the development of thought on how entrepreneurs perceive and react to uncertainty from Frank Knight (1921) to the present day. Recognizing that entrepreneurs face uncertainty rather than risk and are unlikely to have estimates of all probabilities for all potential outcomes, it becomes difficult to accept Expected Utility Theory (EUT), developed by Savage (1951) and von Neumann and Morgenstern (1953), as a relevant model for entrepreneurial decision-making. We examine a range of decision theories, ranking them in an order starting from EUT and proceeding to the most structure-free models of entrepreneurial choice, allowing for comparisons and contrasts of the main components and underlying concepts as they apply to entrepreneurial decision making.

Keywords: entrepreneurship; uncertainty; ambiguity; decision theory; Bayesian Entrepreneurship (search for similar items in EconPapers)
JEL-codes: J24 L26 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2024-08-21
New Economics Papers: this item is included in nep-hpe, nep-sbm and nep-upt
References: Add references at CitEc
Citations:

Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4932226 Full text (text/html)

Related works:
Working Paper: Entrepreneurs: Clueless, Biased, Poor Heuristics, or Bayesian Machines? (2024)
Working Paper: Entrepreneurs: Clueless, Biased, Poor Heuristics, or Bayesian Machines? (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1529

DOI: 10.2139/ssrn.4932226

Access Statistics for this paper

More papers in HEC Research Papers Series from HEC Paris HEC Paris, 78351 Jouy-en-Josas cedex, France. Contact information at EDIRC.
Bibliographic data for series maintained by Antoine Haldemann ().