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PurposeDecision-making problems in emergency plan selection for epidemic prevention and control (EPAC) are generally characterized by risky and uncertainty due to multiple possible emergency states and vagueness of decision information. In the process of emergency plan selection for EPAC, it is necessary to consider several obvious features, i.e. different states of epidemics, dynamic evolvement process of epidemics and decision-makers' (DMs') psychological factors such as risk preference and loss aversion.Design/methodology/approachIn this paper, a novel decision-making method based on cumulative prospect theory (CPT) is proposed to solve emergency plan selection of an epidemic problem, which is generally regarded as hybrid-information multi-attribute decision-making (HI-MADM) problems in major epidemics. Initially, considering the psychological factors of DMs, the expectations of DMs are chosen as reference points to normalize the expectation vectors and decision information with three different formats. Subsequently, the matrix of gains and losses is established according to the reference points. Furthermore, the prospect value of each alternative is obtained and the comprehensive prospect values of alternatives under different states are calculated. Accordingly, the ranking of alternatives can be obtained.FindingsThe validity and robustness of the proposed method are demonstrated by a case calculation of emergency plan selection. Meanwhile, sensitivity analysis and comparison analysis with fuzzy similarity to ideal solution (FTOPSIS) method and TODIM (an acronym in Portuguese for interactive and MADM) method illustrate the effectiveness and superiority of the proposed method.Originality/valueAn emergency plan selection method is proposed for EPAC based on CPT, taking into account the psychological factors of DMs.HighlightsThis paper proposes a new CPT-based EDM method for EPAC under a major epidemic considering the psychological factorsof DMs, such as risk preference, loss aversion and so on.The authors' work gives approaches of normalization, comparison and distance measurement for dealing with the integration of three hybrid formats of attributes.This article gives some guidance, which contributes to solve the problems of risk-based hybrid multi-attribute EDM.The authors illustrate the advantages of the proposed method by a sensitivity analysis and comparison analysis with existing FTOPSIS method and TODIM method.
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Many practical decisions are more realistic concerning preventing bad decisions than seeking better ones. However, there has been no behavioral decision theory research on avoiding the worst decisions. This study is the first behavioral decision research on decision strategies from the perspective of avoiding the worst decisions. We conducted a computer simulation with the Mersenne Twister method and a psychological experiment using the monitoring information acquisition method for two-stage decision strategies of all combinations for different decision strategies: lexicographic, lexicographic semi-order, elimination by aspect, conjunctive, disjunctive, weighted additive, equally weighted additive, additive difference, and a majority of confirming dimensions. The rate of choosing the least expected utility value among the alternatives was computed as the rate of choosing the worst alternative in each condition. The results suggest that attention-based decision rules such as disjunctive strategy lead to a worse decision, and that striving to make the best choice can conversely often lead to the worst outcome. From the simulation and the experiment, we concluded that simple decision strategies such as considering what is most important can lead to avoiding the worst decisions. The findings of this study provide practical implications for decision support in emergency situations.
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This study investigates the disposition effect with regard to Brazilian investors, with focus on the year 2020. The database is composed by more than 12,000 trades by 274 investors. We follow the method of Odean (1998) to estimate the proportions of gains and losses realized and test the null hypothesis of equality of these proportions in each portfolio. The results suggest that Brazilian investors behave in line with the disposition effect. They sell winning stocks too early and hold losing stocks too long. A stock that is gaining value is more likely to be sold from day to day compared to a stock that is losing value. The disposition effect was not found in March, which suggests that investors employed a loss-limit during periods of market stress, no matter if the stock went up or down.
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Sustainable entrepreneurship is an economic activity that integrates entrepreneurial activities with environmental and social sustainability, which is a frontier research field that integrates the triple bottom line of economy, environment, and society. A comprehensive survey was conducted in this study by collecting data from 203 potential entrepreneurs in China, such as employees with work experience, freelancers, and college students, by means of a questionnaire in March 2022. Structural equation modeling (SEM) was employed to investigate the research hypotheses considered, testing the impact of entrepreneurial intention on sustainable entrepreneurial behavior from the perspective of risk perception and institutional environment. The reliability and validity of the measurements are demonstrated. The outcomes from the conducted analyses show that entrepreneurial intention and risk perception do not directly affect sustainable entrepreneurial behavior, while entrepreneurial intention significantly affects risk perception. Moreover, risk perception serves a mediating role in the relationship between entrepreneurial intention and sustainable entrepreneurship. The institutional environment positively predicts sustainable entrepreneurship behavior and could even have a greater effect by reducing risk perception. Hence, this study suggests that the government should provide policy and financial support to create an open, stable, and inclusive institutional environment, to reduce the cost and risk of innovation and entrepreneurship. At the same time, it also provides theoretical and practical references for potential entrepreneurs to improve their entrepreneurial intention and carry out sustainable entrepreneurial behavior.
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The free-riding behavior of companies that do not act will bring losses to companies that provide services. A market consists of two secondary supply chains: manufacturers and retailers. Each supply chain can choose to adopt promotional strategies to expand its market demand. This paper constructs the centralized decision-making in the supply chain and the Nash game competition model between supply chains and primarily studies the impact of risk aversion and the free-riding coefficient on supply chain pricing, promotion strategy selection, and expected utility. We show that the supply chain with high-risk aversion has relatively low pricing, but the demand and a total expected utility are high. We also identify that, on the premise of the same risk aversion degree of the two supply chains, when the free-riding coefficient between the chains is small and equal, the supply chain tends to implement the promotion strategy. When consumers have the same preference for the products of two retailers, the pricing of the free-riding supply chain increases with the increase in the free-riding coefficient, while the supply chain with a promotion strategy is the opposite. Based on the numerical results, we further give the optimal one-way free-riding coefficient when the two supply chains have the same degree of risk aversion;when there is a bidirectional free-riding behavior in the market, competition among supply chains gradually tends to the first two scenarios.
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Purpose>In the food delivery industry, mobile applications have become an important platform for providing services and interacting with customers. Thus, this study aims to examine whether customers’ perceived innovation changes their patronizing behavior intention toward the brand’s application.Design/methodology/approach>Using data from food delivery customers in the USA, this study identifies the relative impact of multidimensional innovation (i.e. service concept innovation, service process innovation and customer experience innovation) on customers’ behavior. Partial least squares-structural equation modeling is used to test the hypotheses.Findings>Results show that customers’ perceived service process and experience innovation increase commitment, which turns into reuse intention of the delivery application. Commitment also increases the impact of customers’ perceived innovation on loyalty. However, in this study, service concept innovation is insufficient to solely create positive behavioral intention.Practical implications>Findings suggest that a food delivery application that continues to innovate to improve the service process and experience can be an effective marketing tool because they increase bonding with customers. This study recommends that food delivery companies manage their relationship with customers to achieve sustainable growth.Originality/value>Despite the growing attention in the mobile service industry, limited studies have examined the effects of innovations of food delivery application on customers’ behavior. Thus, this study provides useful guidelines that advance mobile commerce research, especially in the food delivery industry.
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In this work, we study the optimal investment and premium control problem with the short-selling constraint under the mean-variance criterion. The claim process is assumed to follow the non-homogeneous compound Poisson process. The insurer invests the surplus in one risk-free asset and one risky asset described by the Heston model. Under these, we consider an optimization objective that maximizes the return (the expectation of terminal wealth) and minimizes the risk (the variance of terminal wealth). By constructing the extended Hamilton–Jacobi–Bellman (HJB) system with the dynamic programming method, the time-consistent strategies and the corresponding value function are obtained. Furthermore, we provide numerical examples to illustrate the effects of the model parameters on the optimal policies.
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Companies in the energy sector, due to their important role in the economy and the specificity of energy sources, are exposed to many types of risk, ranging from the risk associated with the company’s operations and the global economic and political situation in the world. Energy companies are usually large capital companies whose shares are listed on the stock market. The mentioned risk factors may shape the risk level of these companies. The study aims to examine the relationship between market and accounting risk measures for Polish energy companies listed on the Warsaw Stock Exchange. This paper uses market and accounting betas in the conventional and downside approach. In addition to market measures of total risk, it also examines the variability of ROA for energy companies. The study of the relationship between market risk measures and accounting risk measures was based on Pearson’s correlation coefficient, standard linear regression, and quantile regression. The relationship between market and accounting measures of total and systematic risk was identified. Moreover, quantile regressions revealed that the slope for accounting variables varies across the quantiles. Our research shows that for energy companies not listed on the capital markets, for which no market risk measures can be derived, accounting betas and downside accounting can be useful tools in risk analysis. The contribution of the article to the risk analysis of energy companies is the use of unpopular accounting beta factors and a new modification of these coefficients for downside risk.
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The purpose of this study is to ascertain behavioral biases and preference of investors in their investment. In this study, open ended interviews from the investors were conducted at Pakistan Stock Exchange-Lahore to describe their preferences and behavioral aspect in investment. The findings from 10 open-ended interviews shows that the investors hold different preferences and beliefs regarding investment decisions. collectively, three themes emerged as common beliefs of investors from this study. Knowledge with risk appears more sensible than high risk high return. Secondly, investor does not hold any consistent behavioral pattern, but their behavior is influenced by circumstances. The concept of luck can be justified as irrational behavior only and only if the timing match with your investment. This study contributes in terms of qualitative assessment of individual behaviors and preferences using interviews.
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Investors intuitively view future possibilities as a combination of historical outcomes, shocks that occur suddenly, and drifts that unfold gradually over several years. The authors show how to build portfolios based on such a view of the future. Their key innovation is to create a mixed-frequency return sample that properly balances short-term and long-term returns and to form portfolios by considering all the returns of the sample instead of a statistical summary of them.
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Family business firms, like other firms, face internal and external risks such as accidents, errors, omissions, fire, unexpected casualties, natural disasters, the COVID-19 pandemic, etc., that can lead to investment losses. This study aimed to investigate the impact of the perceived risk of investment losses from operations (RISK_ILFO) and the perceived risk of investment losses from casualties (RISK_ILFC) on the commercial insurance coverage (CIC) decision of family business owners in India. This study utilized a survey research design to collect data from the owners of micro, small, and medium-sized family business firms located in India. The research participants were asked about their perceptions of the impact of RISK ILFO and RISKILFC on CIC. Findings show that perceived RISK_ILFO and RISK_ILFC positively impact CIC decision of family business owners. The results also show that the impact of perceived RISK_ILFO on CIC is higher than the impact of perceived RISK_ILFC on CIC. This study contributes to the literature on the relationship between the risk of investment losses and insurance coverage decisions. Insurance planners may find results useful to provide suggestions to family business owners on commercial insurance coverage. Research scholars may find empirical results useful to develop further studies in risk management and insurance areas. Family business owners may find the results useful to mitigate the risk of investment losses.
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The purpose of this paper is an analysis of the presence of self-selection mechanisms on the market that could bring the market closer to the separating equilibrium state, in line with the Rothschild–Stiglitz equilibrium model and its subsequent modifications. An example is the Polish market of compulsory third-party liability insurance of vehicle owners. This paper describes this market in terms of both its structure and its financial results. The main focus is on describing the assumptions of the Rothschild–Stiglitz model for markets operating under the conditions of information asymmetry and based on the self-selection mechanism, allowing for an unequivocal determination of the insured’s profile without the need to actually observe the insured’s behaviour. Finally, we show that thanks to the self-selection induced by the possibility of driving behaviour monitoring, the industry can minimise the negative effect information asymmetry has on the motor insurance market. This can be achieved, for example, by observing the choices made by the insured after being offered a new voluntary contract with a premium based on telematics data. Our analysis was carried out with the use of three selected characteristics that can determine the insured’s risk profile, i.e., distance covered, self-assessment, and insurance premium paid;the significance of the latter—although it may be intuitive—is questionable at commonly accepted significance levels. Therefore, the main result is that although there is some evidence on the disputed matter, there can be no definitive conclusion—especially in terms of risk as measured by insurance premium.
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This paper investigates the optimal asset allocation of a financial institution whose customers are free to withdraw their capital-guaranteed financial contracts at any time. In accounting for the asset-liability mismatch risk of the institution, we present a general utility optimization problem in a discrete-time setting and provide a dynamic programming principle for the optimal investment strategies. Furthermore, we consider an explicit context, including liquidity risk, interest rate, and credit intensity fluctuations, and show by numerical results that the optimal strategy improves both the solvency and asset returns of the institution compared to a standard institutional investor’s asset allocation.
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Over the last years, farmers have been increasingly exposed to income risk due to the volatility of the commodities prices. Among others, hedging in futures markets (i.e., financial markets) represents an available strategy for producers to cope with income risks at farm level. To better understand the advantages of such promising tools, this paper aims at analyzing the hedging effectiveness for soybean, corn and milling wheat producers in Italy. Following the literature, three different methodologies (i.e., naïve, OLS, GARCH) are applied for the estimation of the hedge portfolio, then compared to an unhedged portfolio for assessing the income risk reduction. Findings confirm the hedging effectiveness of futures contracts for all the considered commodities, showing also that this effect increases with longer hedge horizons, and also showing better performances for the European exchange market (i.e., Euronext), compared to the North American counterpart.
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In this personal vision paper the Swedish approach to COVID-19 prompts an exploration of how and why assuming individual rationality coupled with minimal social restriction may be as good a solution as any and better than most. A COVID sub-model is developed and populated with probabilities for four outcomes of infecting another person (asymptomatic, sick, hospitalized, dead), conditional on three observable characteristics (sex, age, and BMI), and (dis)utilities for three categories of person (nearest/dearest, friends/colleagues and unknown others) experiencing those outcomes. The implications for a liberal democracy are drawn, based on the assumptions that individual citizens will and should maximise their informed expected utility, exhibiting 'commons sense' as well as common sense.