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Value-Capture in the Face of Known and Unknown Unknowns

Kevin Bryan (), Michael Ryall () and Burkhard Schipper ()

No 333, Working Papers from University of California, Davis, Department of Economics

Abstract: A large theoretical literature on value capture following Brandenburger and Stuart (1996) uses cooperative games under complete information to study how and why firms earn supernormal profits. However, firms often have different information, beliefs, or creative foresight. We extend value capture theory to incomplete information (“known unknowns”) or unawareness (“unknown unknowns”), and illustrate some conceptual issues with that extension. Using the case study of Cirque du Soleil, we show how an entrepreneurial firm can profit even when it does not contribute materially to value creation. In a case study of Apple iTunes, we show how value capture depends quantitatively on the beliefs of other firms.

Keywords: cooperative games; unawareness; incomplete information; coarse core; business strategy; value-capture theory (search for similar items in EconPapers)
JEL-codes: C71 D21 D83 (search for similar items in EconPapers)
Pages: 56
Date: 2019-08-28
New Economics Papers: this item is included in nep-bec, nep-ent and nep-gth
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