Searching for the sunk cost fallacy

We seek to isolate in the laboratory factors that encourage and discourage the sunk cost fallacy. Subjects play a computer game in which they decide whether to keep digging for treasure on an island or to sink a cost (which will turn out to be either high or low) to move to another island. The research hypothesis is that subjects will stay longer on islands that were more costly to find. Eleven treatment variables are considered, e.g. alternative visual displays, whether the treasure value of an island is shown on arrival or discovered by trial and error, and alternative parameters for sunk costs. The data reveal a surprisingly small sunk cost effect that is generally insensitive to the proposed psychological drivers. Electronic Supplementary Material Supplementary material is available in the online version of this article at . Jel Classification C91, D11     

EBCT measured coronary artery calcium scores in asymptomatic life insurance applicants

EBCT measured coronary calcium is fast becoming a standard screening tool in asymptomatic patients with and without risk factors who apply for life insurance. Since atherosclerotic plaques become calcified as part of their natural history, the calcium score is an excellent measure of total atherosclerotic burden. Over the past 5 years, various clinical studies have confirmed the predictive value of the coronary calcium score for both soft (revascularization, MI) and hard (MI and sudden cardiac death) events incrementally and independently of traditional coronary risk factors identified by the Framingham Heart Study. Accurate assessment of cardiac mortality risk in asymptomatic applicants for life insurance should include both traditional risk factor assessments in combination with age and gender specific percentiles for coronary calcium. New data from both new and ongoing clinical trials will seek to further support the predictive value of coronary calcium scores as an independent and incremental predictor of hard cardiac events.     

An empirical approach to the organisational determinants of spin-off creation in European universities

Given the importance in recent years of the phenomenon of academic entrepreneurship in European universities, knowledge about determinants and performance of this technology transfer mechanism may have important managerial and policy implications. Applying the resource-based view at universities, we have tested the influence of five bundles of resources and capabilities on spin-off activity rates as well as on the performance of new spin-offs in a sample of seven European universities. These five bundles are: technology transfer policies and strategies; human capital; stock of technology; resources and capabilities of technology transfer offices; and support measures for academic entrepreneurship. Our results show that excellence of human capital and the presence of university-based financial support measures are strongly associated with both spin-off activity and performance. Another interesting finding is related to the availability of university-based non-economic support measures (training, counselling, etc.), which have no influence on spin-off activity but are significantly associated with performance of new spin-offs. We also discuss some interesting relationships between explanatory variables.     

A Geometrical Interpretation of Collinearity: A Natural Way to Justify Ridge Regression and Its Anomalies

Justifying ridge regression from a geometrical perspective is one of the main contributions of this paper. To the best of our knowledge, this question has not been treated previously. This paper shows that ridge regression is a particular case of raising procedures that provide greater flexibility by transforming the matrix X associated with the model. Thus, raising procedures, based on a geometrical idea of the vectorial space associated with the columns of matrix X , lead naturally to ridge regression and justify the presence of the well-known constant k on the main diagonal of matrix X ^′ X . This paper also analyses and compares different alternatives to raising with respect to collinearity mitigation. The results are illustrated with an empirical application.     

Influence of institutional environment on entrepreneurial intention: a comparative study of two countries university students

Institutional environment influences the perceptions of desirability and feasibility, society’s social and cultural environment, such as beliefs, values and attitudes, conditions behaviour and decisions made by individuals. This research evaluates the influence of institutional environment on entrepreneurial intention using a comparative analysis of different attitudes among university students in two countries: Portugal and Spain. In particular, this study aims to examine the perceptions of desirability, feasibility and intention toward the creation of one’s own business and how that variables influence the entrepreneurial intention as compared these two different institutional contexts. Results revealed difference among attitudes toward entrepreneurship in both countries. With respect to the perception of feasibility, the majority of students in Extremadura (Spain) consider that it is easier to create a business in nowadays than it was several decades ago. However, from the students of Beira Interior (Portugal) consider that it is more difficult. Furthermore, in Extremadura, the entrepreneurial intention is higher than in Beira Interior.     

MEDIEVAL MATCHING MARKETS

We study the regulation of brokerage in wholesale markets in premodern Central Western Europe. Examining 1,804 sets of rules from 82 cities, we find brokerage was primarily a centralized matchmaking mechanism. Brokerage was more common in towns with larger populations, better access to sea ports and trade routes, and greater political autonomy. Brokers' fee structures varied systematically: price-based fees were more common for highly heterogeneous goods, quantity-based fees for more homogeneous goods. We show theoretically that this was broadly consistent with total surplus maximization, and that brokerage was more valuable in markets with unequal numbers of buyers and sellers.     

Transnational corporations' strategies and foreign trade patterns in MERCOSUR countries in the 1990s

Market-seeking strategies predominate in the recent FDI boomin MERCOSUR countries. In the trade performance of transnationalcorporation affiliates a sort of ‘asymmetric integration’is clearly visible: they produce for the internal market and,to some extent, for the regional one, while import inputs andfinal goods from developed countries (and a significant partof these trade flows is intra-firm). Thus, even if affiliatesobtained productivity gains in the 1990s, they have not yetbeen reflected in a significant increase in exports, and evenless in extra-regional exports. Hence, the foreign direct investmentboom seemingly has not yet contributed to a better insertionof MERCOSUR countries into the world economy.     

Approximating unanimity orderings: An application to Lorenz dominance

Stochastic dominance and Lorenz dominance are examples of orderings which require unanimous agreement among an infinite set of indices. This paper considers various subsets of inequality measures that respect Lorenz dominance, and assesses the extent to which a small number of indices can reproduce the Lorenz ordering. Using income data for 80 countries, our results suggest that Lorenz dominance can be predicted with 99% accuracy using just 3 or 4 inequality measures, as long as two of them focus on the extreme upper and lower tails of the distribution. In contrast, confining attention to the index families and parameter ranges normally considered may fail to detect the majority of occasions when Lorenz curves intersect. These results lead us to question the faith placed in procedures based on a finite set of inequality indices, and to suggest that similar lessons will apply to other types of unanimity orderings.     

The trend in female labour force participation: what can be expected for the future?

This study investigates the increase in the labour force participation rate of women. We estimate a binary age–period–cohort model for a sample of Dutch women born between 1925 and 1986. The results indicate that the increasing level of education and the diminishing negative effect of children have played an important role. Moreover, we find important unobserved cohort effects for pre-1955 generations, which is in line with results of studies on social norms. It is shown that the growth in female participation is likely to slow down in the near future, as such cohort effects are not relevant for younger generations.