The Impact of Overconfidence and Ambiguity Attitude on Market Entry

58 Pages Posted: 25 Oct 2017 Last revised: 7 Mar 2019

See all articles by Cédric Gutierrez

Cédric Gutierrez

Bocconi University - Department of Management and Technology

Thomas B. Astebro

HEC Paris - Economics and Decision Sciences

Tomasz Obloj

HEC Paris - Strategy & Business Policy

Multiple version iconThere are 2 versions of this paper

Date Written: March 15, 2018

Abstract

We study the behavioral drivers of market entry. An experiment allows us to disentangle the impact on entry across different types of markets of two key behavioral mechanisms: overconfidence and attitude toward ambiguity. We theorize and show that the causal effect of overconfidence on entry is limited to skill-based markets and does not appear in those that are chance based. Moreover, we also find that, independent of confidence levels, individuals exhibit ambiguity-seeking behavior when the result of the competition depends on their skills, which in turn leads to higher levels of entry. This preference for ambiguity can thus explain results that have previously been attributed to overconfidence. Our results challenge existing literature that has inferred overconfidence from differential entry levels across types of markets.

Keywords: Behavioral Strategy, Ambiguity, Market Entry, Overconfidence, Entrepreneurship

JEL Classification: D81, C91, L26

Suggested Citation

Gutierrez, Cédric and Astebro, Thomas B. and Obloj, Tomasz, The Impact of Overconfidence and Ambiguity Attitude on Market Entry (March 15, 2018). Available at SSRN: https://ssrn.com/abstract=2924381 or http://dx.doi.org/10.2139/ssrn.2924381

Cédric Gutierrez (Contact Author)

Bocconi University - Department of Management and Technology ( email )

Via Roentgen 1
Milan, MI 20136
Italy

Thomas B. Astebro

HEC Paris - Economics and Decision Sciences ( email )

Jouy-en-Josas Cedex, 78351
France

HOME PAGE: http://www.hec.edu/Faculty-Research/Faculty-Directory/ASTEBRO-Thomas

Tomasz Obloj

HEC Paris - Strategy & Business Policy ( email )

Jouy-en-Josas Cedex, 78351
France

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