Cooperation and compliance in non-equity alliances

This study clarifies cooperation and compliance in non-equity alliances. Partial least squares structural equation modeling findings show how social interaction and risk-based reasoning are both facets of interorganizational decision making. In line with the notion that behaviors follow intentions, partners’ risk-taking tendencies (i.e., intentions to cooperate) and compliance tendencies both explain the effort that partners devote to an alliance

Exchange operational costs and long-term relationship between firms

Long-term contracts; Transaction costs; Inter-firm relationships; Asset specifity

Behavioral sunk cost. Subsequent choices with prior investment

In this paper we address the sunk cost effect with behavioural investment. From an incentivized task in a survey with a built-in game of two parts. Part one is a game with a 2X2 design: High sunk cost condition, High and Low treatment group. And Relevant sunk cost condition, Relevant and Irrelevant treatment group. The game is where subjects put in time and effort, for which the attributes of the game differed depending on treatment group. Part two is a decision task equal for all treatment groups, where subjects choose between a risk-free alternative and a risky alternative involving a stake. We find no evidence from testing hypothesis 1, being more likely to accept a risky bet when experiencing high sunk costs. We do find evidence from testing hypothesis 2, being more likely to accept a risky bet when experiencing Relevant sunk costs. This evidence is consistent and show robust results at the 10% significance level, in both bivariate and multivariate analyses. Using a contingency table for the bivariate analysis and a logit model for the multivariate analysis

Bargaining with Uncertainty, Moral Hazard, and Sunk Costs: A Default Rule for Precontractual Negotiations

Traditionally, courts have refused to compensate disappointed bargainers for reliance costs incurred prior to the formation of a bargained-for contract. Although these results could be justified under the economic assumptions that prevailed in the late nineteenth and early twentieth centuries, they are wholly inapposite to the structure of modem contracting. Negotiations for complex or long-term transactions often proceed incrementally today, with each party learning more at successive stages before making a final decision whether to commit. Under current law, a promisor may require a promisee to make significant, transaction-specific precontractual investments (sunk costs), profit from the information produced by those investments, and yet avoid all liability should the projected deal fall through. In this Article, Professor Kostritsky proposes a new approach to this problem. Drawing from a model of bargaining behavior based on transaction cost economics, relational theories of contracting, and other economic insights, she argues that courts should impose a new default rule, enforcing the substance of an implicit bargain under which the promisor bears liability for the promisee\u27s sunk costs. She demonstrates that most parties themselves would prefer such a rule because its total costs are lower than the costs of its alternatives: various private devices and alternate legal rules fail to encourage optimal prebargain reliance investments, and thus provide less efficient results. The proposed default rule, Professor Kostritsky concludes, provides a more sound and determinate justification for prebargain liability than do other approaches, would lead courts to reach better results, and would allow parties in negotiation to structure their relationships at a minimum total cost

Lay Rationalism and Inconsistency between Predicted Experience and Decision

Decision-makers are sometimes depicted as impulsive and overly influenced by ‘hot’, affective factors. The present research suggests that decision-makers may be too ‘cold’ and overly focus on rationalistic attributes, such as economic values, quantitative specifications, and functions. In support of this proposition, we find a systematic inconsistency between predicted experience and decision. That is, people are more likely to favor a rationalistically-superior option when they make a decision than when they predict experience. We discuss how this work contributes to research on predicted and decision utilities; we also discuss when decision-makers overweight hot factors and when they overweight cold factors. Copyright © 2003 John Wiley & Sons, Ltd