This is a study of firm strategic decision making under uncertainty combining empirical examination with formal models. The resource-based theory (RBV) has established a causal relationship between competitive advantage and superior resources. Yet, future payoffs for deploying resources and implementing a certain product market strategy depend upon both a firm's own resources and its competitors' resources. The fundamental "competitive imperfection" assumption of RBV in the presence of strategic interactions indicates a prominent role of decision-makers, or "strategists", in modifying the relationship between competitive advantage and superior resources. Disentangling mechanisms underlining firm decision making, this study formally demonstrates varying dynamics among firms of making strategic decisions in a variety of scenarios of uncertainty (imperfect information) and strategic interactions. The U.S. electric utility companies' adoption of solar technology is used as a novel empirical setting for testing how firms respond to competitors' strategic decisions under environmental uncertainty. The empirical examination provides support for predictions derived from the formal models. This study revives focus on the "strategist" in explaining performance differences, and helps determine more precise boundaries for theories of strategic decision making.

Finally, in Chapter 4, we compare the efficacy of communication between individual and group decision makers. The literature on pre-play communication suggests people fulfill promises because doing so avoids guilt. Our results indicate this conclusion does not apply to team decision makers. In our experiment, individuals and teams participate in a hidden-action trust game with and without pre-play communication. Both make non-binding promises to cooperate at the same rate, but individuals live up to their promises while teams do not. Teams first decide on their action and use non-binding communication to support their chosen action. Teams and individuals receiving non-binding communication generally trust promises and choose to cooperate, and do so at similar rates.

Knight (1921) defines uncertainty as an informational market failure that, while being detrimental to most existing businesses, presents possible profitable opportunities for others. This book builds upon that classic work by providing an analysis of the alternative approaches to strategic decision-making under such uncertainty. It covers what uncertainty is, why it is important, and what connections it has to business and related fields, culminating in a new and comprehensive typology and a valuable guide for how to appropriately address various types of uncertainties, even under AI. It clarifies the current terminological and categorical confusion about ‘unknowns’ while complementing the mathematical, probability-based approaches that treat uncertainty as ‘knowable’ (i.e., as risk). It corrects the mistaken approaches that treat ‘unknowables’ as ‘shapeable’ or ‘discoverable’. This book widens the perspective for viewing uncertainty, in terms of its impacts across humanity, by offering a shrewder understanding of what roles uncertainties play in human activity. It will appeal to academics across business, economics, philosophy, and other disciplines looking for approaches to apply, test, and hone for dealing with decision-making under uncertainty.

This dissertation studies several economic questions related to decision making under uncertainty. In the first chapter, I consider the question of to what extent an external observer can infer the underlying information structure by observing an equilibrium action distribution in an incomplete information game. I investigate this issue in a general linear-quadratic-Gaussian framework. A simple class of canonical information structures is offered and proves rich enough to rationalize any possible equilibrium action distribution that can arise under an arbitrary information structure. I show that the class is parsimonious in the sense that the relevant parameters can be uniquely pinned down by an observed equilibrium outcome, up to some qualifications. This implies, for example, that the accuracy of each agent's signal about the state is identified, as measured by how much observing the signal reduces the state variance. Moreover, I show that a canonical information structure characterizes the lower bound on the amount by which each agent's signal can reduce the state variance, across all observationally equivalent information structures. The lower bound is tight, for example, when the actual information structure is uni-dimensional, or when there are no strategic interactions among agents, but in general, there is a gap since agents' strategic motives confound their private information about fundamental and strategic uncertainty.The second chapter is based on my joint work with Federico Echenique, Yuta Nakamura, Luciano Pomatto, and Jamie Vinson. We propose a model of incomplete preferences, termed twofold multiprior preferences, in which an act f is ranked above an act g only when f provides higher utility in a worst-case scenario than what g provides in a best-case scenario. The model explains the experimental phenomenon, called failures of contingent reasoning, captured through a weakening of the state-by-state monotonicity (or dominance) axiom. Our model gives rise to rich comparative statics results, which demonstrate that the two important decision criteria in the literature--subjective expected utility representation and obvious dominance--can be encapsulated as the respective extreme cases of our model. We present an application to second-price auctions and illustrate that our model can explain a wide array of anomalistic bidding behaviors caused by failures of contingent reasoning, yet it can provide sharper predictions than obvious dominance.The third chapter, coauthored with Carlo Cusumano, extends the analysis of the second chapter by studying a general class of twofold preferences that compare different acts based on two possibly different utility functions. We find that the twofold preferences are useful for analyzing economic problems for at least two reasons. From a behavioral perspective, it enables theoretical models to account for the indecisiveness of a decision maker's choice in a way depending on the scale of odds. From a modeling perspective, the twofold approach can be a unified framework for modeling various incomplete preferences that differ in additional independence-type axioms to be imposed. Our series of axiomatization results provide the characterizations of the incomplete counterparts of existing complete preferences in the literature.

In this book, leading researchers on Managerial and Organizational Cognition consider the foundations of individual and social cognition and their effect on strategic decision-making.

Essay from the year 2017 in the subject Business economics - Business Management, Corporate Governance, grade: 1,0, Tongji University, language: English, abstract: Decision making is a fundamental skill for any successful executive. But decisions at strategic level are hard to make. They require large amounts of resources and commitments which may be irreversible. They involve long-term consequences that are hard to predict. And, they require considering multiple, often conflicting, strategic objectives which are difficult to balance, particularly in the presence of risk and uncertainty. Research and thinking about modern business strategy emerged as a field of study and practice in the 1960s. Prior to that time, the words "strategy" and "competition" rarely appeared in the most prominent management literature. When influential academics in the USA started to think fundamentally about strategic decision making in the 1980s and ‘90s, they made the assumption that everything works in a competitive working, free market and developed thereof generic strategy tools, that are supposed to work everywhere. However, Elmes (the guest speaker) argues that they are not well founded, since strategies need to be developed in the respective context of an industry or market. This position will be explained in more detail during this essay. Especially the determinant of market efficiency, meaning how competitive a market is, strongly influences the development of strategic decisions. There are many industries where government involvement or asymmetric competition need to be considered to make strategic decisions, whereby generic strategy tools tend to be ineffective. Therefore, the key questions for this essay will be firstly what are the traditional concepts of strategy and how have they involved, secondly what actually makes a strategy successful and lastly how does it apply in practice.

Professor Dreze is a highly respected mathematical economist and econometrician. This book brings together some of his major contributions to the economic theory of decision making under uncertainty, and also several essays. These include an important essay on 'Decision theory under moral hazard and state dependent preferences' that significantly extends modern theory, and which provides rigorous foundations for subsequent chapters. Topics covered within the theory include decision theory, market allocation and prices, consumer decisions, theory of the firm, labour contracts, and public decisions.

The objective of this thesis is to improve the understanding of human behavior that goes beyond monetary rewards. In particular, it investigates social influences in individual’s decision making in situations that involve coordination, competition, and deciding for others. Further, it compares how monetary and social outcomes are perceived. The common theme of all studies is uncertainty. The first four essays study individual decisions that have uncertain consequences, be it due to the actions of others or chance. The last essay, in turn, uses the advances in research on decision making under uncertainty to predict behavior in riskless choices. The first essay, Fairness Versus Efficiency: How Procedural Fairness Concerns Affect Coordination, investigates whether preferences for fair rules undermine the efficiency of coordination mechanisms that put some individuals at a disadvantage. The results from a laboratory experiment show that the existence of coordination mechanisms, such as action recommendations, increases efficiency, even if one party is strongly disadvantaged by the mechanism. Further, it is demonstrated that while individuals’ behavior does not depend on the fairness of the coordination mechanism, their beliefs about people’s behavior do. The second essay, Dishonesty and Competition. Evidence from a stiff competition environment, explores whether and how the possibility to behave dishonestly affects the willingness to compete and who the winner is in a competition between similarly skilled individuals. We do not find differences in competition entry between competitions in which dishonesty is possible and in which it is not. However, we find that due to the heterogeneity in propensity to behave dishonestly, around 20% of winners are not the best-performing individuals. This implies that the efficient allocation of resources cannot be ensured in a stiff competition in which behavior is unmonitored. The third essay, Tracing Risky Decision Making for Oneself and Others: The Role of Intuition and Deliberation, explores how individuals make choices under risk for themselves and on behalf of other people. The findings demonstrate that while there are no differences in preferences for taking risks when deciding for oneself and for others, individuals have greater decision error when choosing for other individuals. The differences in the decision error can be partly attributed to the differences in information processing; individuals employ more deliberative cognitive processing when deciding for themselves than when deciding for others. Conducting more information processing when deciding for others is related to the reduction in decision error. The fourth essay, The Effect of Decision Fatigue on Surgeons’ Clinical Decision Making, investigates how mental depletion, caused by a long session of decision making, affects surgeon’s decision to operate. Exploiting a natural experiment, we find that surgeons are less likely to schedule an operation for patients who have appointment late during the work shift than for patients who have appointment at the beginning of the work shift. Understanding how the quality of medical decisions depends on when the patient is seen is important for achieving both efficiency and fairness in health care, where long shifts are popular. The fifth essay, Preferences for Outcome Editing in Monetary and Social Contexts, compares whether individuals use the same rules for mental representation of monetary outcomes (e.g., purchases, expenses) as for social outcomes (e.g., having nice time with friends). Outcome editing is an operation in mental accounting that determines whether individuals prefer to first combine multiple outcomes before their evaluation (integration) or evaluate each outcome separately (segregation). I find that the majority of individuals express different preferences for outcome editing in the monetary context than in the social context. Further, while the results on the editing of monetary outcomes are consistent with theoretical predictions, no existing model can explain the editing of social outcomes.

My dissertation consists of three chapters and I take different approach in each chapter to investigate economic decision making behavior. The first chapter analyzes individuals' strategic decisionmaking when players have replaceable identities and private information in a repeated prisoner's dillmma game. The second chapter studies individuals' non-strategic decision making when she has incomplete information about her underlying preference in a sequential choice situation. The third chapter experimentally examines a link between an individual's strategic thinking and nonstrategic decision making in a setting designed to elicit beliefs about independent random variables. In the first chapter, I focus on strategic decision making of economic agents when they are replaceable in a repeated prisoners dilemma. I assume that agents have different private information that restricts their set of actions, and that replacement of agent involves change of such private information. In this environment, some agents are required to signal their own private information to induce their opponents cooperative response, which may induce Pareto improvement of their expected continuation payoffs. Except for a trivial equilibrium, we can have non-trivial equilibria supporting cooperative action as a part of the equilibrium play; however, different from the environment with two long-run agents, replaceable agents environment puts a restriction on an existence of the equilibrium in which agents share the risk of type uncertainty equally regardless of the past history. Because of replacement, agents can avoid a full cost of signaling by shifting it to their successor upon their own replacement. As replacement incurs such a situation with a strictly positive probability, the equilibrium cannot avoid failure. In the second chapter I focus on an economic agent's optimal decision making in a non-strategic environment. Especially, I study a sequential choice problem where an agent's preferences evolve over time. I assume that an agent has an underlying preference, and she learns about her underlying preference depending on her choice histories. Given that an agent makes an optimal decision upon her current available menu, I characterize the sequential choice behavior that follows a Sequential Weak Axiom of Revealed Preference (WARP-S). Using this characterization, I provide criteria for sequential choice data that recovers agents underlying preference. In the third chapter I and my co-author, Duk-Gyoo Kim, focus on a link between an optimal decision making in a non-strategic environment and strategic environment. Our research investigates whether an individual decision maker follows own subjective optimization in a non-strategic decision making, and such a difference in subjective optimization is correlated with strategic decision making pattern. We conducted two separate sessions in the same subject. Each session is designed to identify subjects' behavioral pattern in strategic and non-strategic decision making environment respectively. From the data, we observed that subjects behavioral pattern shows significant similarity in two sessions.