Organizational decision-maker bias supports market wave formation: Evidence with logical formalization

Gábor Peli and Hans Schenk

ACED Working Papers from University of Antwerp, Faculty of Business and Economics

Abstract: Imitation of first-mover firms in opting for a merger or acquisition (M&A) facilitates merger-wave formation. Empirical evidence suggests that, under uncertainty of outcomes, firms regret more not following their rivals’ strategy than possibly failing jointly by copying it. We explore the outcomes and look for underlying behavioral assumptions in that decision-making framework by modal logic. Biased expectations, represented by the B (belief) modal operator, filter out relevant scenarios from managerial consideration. The theorems highlight the drive to imitate first-mover M&As. Our approach goes against the view that human behavior, being non-logical in many respects, defies logic-based rendering. Logic is a flexible representation tool that can model even faulty behavior in a transparent way, also exploring the consequences of the cognitive mistakes made. Our findings suggest that threats to wealth creation may not necessarily find their origins in morally dubious organizational behavior, but rather in modalities of decision making under uncertainty.

Keywords: Mergers; Perception bias; Adaptation; Logical formalization (search for similar items in EconPapers)
Pages: 26 pages
Date: 2011-05
References: Add references at CitEc
Citations:

Downloads: (external link)
http://anet.uantwerpen.be/docman/irua/a173b4/cb2d94f1.pdf (application/pdf)

Related works:
Working Paper: Organizational decision-maker bias supports market wave formation: Evidence with logical formalization (2011)
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:ant:acedwp:2011011

Access Statistics for this paper

More papers in ACED Working Papers from University of Antwerp, Faculty of Business and Economics Contact information at EDIRC.
Bibliographic data for series maintained by Joeri Nys ().