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Lecture: On the robustness of coordination mechanisms for investment decisions...

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Title:	On the robustness of coordination mechanisms for investment decisions involving 'incompetent' agents
Description:	In this paper we transfer the concept of the competitive hurdle rate (CHR) mechanism introduced by Baldenius et al. (2007) into an agent-based model, and test its robustness with respect to an occurrence of errors in forecasting. We find that our CHR born mechanism is most robust for highly diversified investment alternatives and a limited amount of those projects in need of scarce financial support. For misforecasting both the cash flow time series and the managers' individual efficiencies of operating investment projects, we find that this result reverses with an increasing extent of being wrong, so that a lower level of project heterogeneity appears to be more advantageous than a highly diversified investment landscape, i.e., if managers are really, really wrong about future economic development, the company fares better (or less worse, to be precise) if the investment alternatives are less dissimilar. This investigation allows to quantify the extent of error, when this comes about. Moreover, we provide policy advice for how an organization could design the framework of the CHR born mechanism so that forecasting errors, which inevitably occur, bring only minimal damage to the company.
Keywords:

Type:	Registered lecture
Homepage:	http://ae2013.aau.at/
Event:	Artificial Economics 2013 (Klagenfurt)
Date:	29.08.2013
lecture status:

Participants

(internal)

Speaker

(internal)

Speaker

Assignment

Organisation

Address

Fakultät für Wirtschafts- und Rechtswissenschaften
Institut für Unternehmensführung

Universitätsstrasse 67
AT - 9020 Klagenfurt

Categorisation

Subject areas	502044 - Business management 101015 - Operations research 502052 - Business administration 102009 - Computer simulation 502006 - Controlling
Research Cluster	Entrepreneurship
Focus of lecture	Science to Science (Quality indicator: I) Classification raster of the assigned organisational units: Abteilung für Controlling und Strategische Unternehmensführung
Group of participants	Mainly international
Published?	Yes
working groups	No working group selected

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No partner organisations selected

Research activities

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Projects	Self-Organizing Decision-Making Systems... Self-Organizing Decision-Making Systems with Information Errors Univ.-Prof. Dipl.-Ing. Dr. Christian Bettstetter Univ.-Prof. Dr. Friederike Wall 01.10.2012 - 31.05.2015 To project
Publications	Residual income measurement & the emerg... Residual income measurement & the emergence of cooperation: Results of an agent-based simulation of budget coordination (2013) S. Leitner, D. Behrens Proceedings of the EURO Mini-Conference Graz 2013 No Publisher selected to publication On the efficiency of hurdle rate based ... On the efficiency of hurdle rate based coordination mechanisms (2014) S. Leitner, D. Behrens Mathematical and Computer Modelling of Dynamical Systems No Publisher selected to publication On the fault (in)tolerance of coordinat... On the fault (in)tolerance of coordination mechanisms for distributed investment decisions (2013) S. Leitner, D. Behrens Central European Journal of Operations Research No Publisher selected to publication On the robustness of coordination mecha... On the robustness of coordination mechanisms for investment decisions involving 'incompetent' agents (2014) S. Leitner, D. Behrens Artificial Economics and Self Organization No Publisher selected to publication
Events	Artificial Economics 2013 Artificial Economics 2013 S. Leitner, F. Wall Klagenfurt , Österreich 29.08.2013 - 30.08.2013 To event
Lectures	Is it or is it not a good idea to derive coordination mechanisms from... Is it or is it not a good idea to derive coordination mechanisms from collusion-free agency models? Consequences for residual income measurement D. Behrens, S. Leitner since 06.06.2013 To Lecture On the fault-(in)tolerance of coordination mechanisms for distributed... On the fault-(in)tolerance of coordination mechanisms for distributed investment decisons. Results of an agent-based simluation S. Leitner, D. Behrens Klagenfurt since 06.06.2013 To Lecture Residual income measurement & the emergence of cooperation: Results o... Residual income measurement & the emergence of cooperation: Results of an agent-based simulation of budget coordination S. Leitner, D. Behrens since 18.10.2013 To Lecture