Monetization of customer futures through machine learning and artificial intelligence based persuasive technologies

Research Summary While real options theory has been applied with the optimality assumption, actual real options investments are made by managers, who are subject to cognitive biases, especially under uncertainty. In this article, we focus on one important type of cognitive bias, overconfidence, to provide new insights on real options literature. We argue that overconfident CEOs will invest less in real options than non‐overconfident CEOs. We also predict that the relationship between overconfident CEOs and firms' real options intensity will be strengthened when market uncertainty is higher. In a study of U.S. public firms, we find strong support across various tests that use multiple measures of overconfidence in CEOs and real options investments, and control for potential selection issues and other endogeneity concerns. Managerial Summary This article studies how a CEO's cognitive bias, overconfidence, may shape a firm's real option investments, which could result in a different level of strategic flexibility. We argue that overconfident CEOs have overly high expectations of their performance under uncertainty and/or underestimate the level of uncertainty in their strategic decision‐making, which leads to lower investments in the firms' real options relative to non‐overconfident CEOs. We study a sample of U.S. public firms and find strong evidence that an overconfident CEO is positively related to the real options investments at the firm level. We also find that this overconfidence effect becomes more pronounced in markets with greater uncertainty.

Research Summary: Combining studies on real options theory and economic short‐termism, we propose that, depending on CEOs’ career horizons, CEOs have heterogeneous interests in strategic flexibility, and thus, have different incentives to make real options investments. We argue that compared to CEOs with longer career horizons, CEOs with shorter career horizons will be less inclined to make real options investments because they may not fully reap the rewards during their tenure. In addition, we argue that long‐term incentives and institutional ownership will mitigate the relationship between CEOs’ career horizons and real options investments. U.S. public firms as an empirical setting produced consistent evidence for our predictions. Our study is the first to theoretically explain and empirically show that a CEO's self‐seeking behavior will impact real options investments. Managerial Summary: This article helps to explain how a CEO's self seeking‐behavior may shape a firm's real option investment, which could result in different level of strategic flexibility. We argue that CEOs with short career horizons have less time to exercise their firms’ real options, which should lower the investments in the firms’ real options portfolios relative to CEOs with long career horizons. We study a sample of U.S. public firms and find strong evidence that a CEO's expected tenure in the firm is positively related to the real options investments at the firm level. We find that this agency issue can be mitigated by adopting appropriate corporate governance mechanisms such as long‐term incentives and institutional investors.

Using detailed project‐level investment data from the U.S. upstream natural gas industry, we examine the effect of the unexercised real options on individual firms’ real options investments. Drilling an unconventional well is a real options investment that is exercised by fracturing and completing the drilled well at an opportune time. We find a small negative but statistically significant effect of the number of unexercised options on real options investments. There is also a significant difference in the effect of unexercised real options on real options investment decisions of publicly traded and privately held firms.

Combining studies on real options theory and economic short-termism, we propose that, depending on CEOs’ career horizons, CEOs will have heterogeneous interests in and incentives to make real options investments. We argue that compared to CEOs with longer career horizons, CEOs with shorter career horizons will be less inclined to make real options investments because they may not fully reap the rewards during their tenure. In addition, we argue that long-term incentives and institutional ownership will mitigate the relationship between CEOs’ career horizons and real options investments. U.S. public firms as an empirical setting produced consistent evidence for our predictions. Our study is the first to theoretically explain and empirically show that a CEO’s self-seeking behavior will impact decisions regarding real options investments.

While real options theory has been applied with the rationality assumption, the actual real options investments are made by managers, who are often subjective to cognitive biases, especially under uncertainty. In this paper, we focus on one important type of cognitive bias, overconfidence, to provide new insights on real options literature. We argue that an overconfident cognitive bias will impede CEOs from effectively evaluating the magnitude of the uncertain environments and/or will make them overestimate their capability to perform under uncertainty, resulting in CEOs investing less in firm-level strategic flexibility. Hence, we predict that overconfident CEOs will invest less in real options than other CEOs. We also predict that the relationship between overconfident CEOs and firms’ real options intensity will be strengthened when market uncertainty is higher. We test our arguments using a sample of US public firms covering the 17-year period from 1997 to 2013. We find strong support across various tests that use multiple measures of CEO overconfidence and real options intensity and control for potential selection issues and other endogeneity concerns.

Firms invest in exploration‐oriented activities to seek competitive advantage and in response to changing environments. Real options formulations represent an emerging strand of thinking on such investments. In this paper we begin with the observation that firms often simultaneously invest in multiple exploration projects. We identify two sources of potential interactions among these real options investments. First, we investigate the effects of correlations between the outcomes in different options. Second, we analyze the effects of investments that are fungible across project options. We show that under different conditions multiple options can be sub‐additive (due to redundancies in outcomes) or super‐additive (due to fungible inputs). We test the implications of our model with data from the biotech industry and find supporting evidence. Our model and results have some interesting implications for the exploration literature and real options lens. Copyright © 2004 John Wiley & Sons, Ltd.

Research has shown the effectiveness of persuasive technologies in promoting desirable behaviors in many domains such as marketing and eCommerce. However, according to a recent meta-review, most of the existing studies of persuasive technologies have focused on people from the developed countries. There is still a dearth of research on persuasive technology (PT) application to eCommerce, in the African context. Therefore, the overall objective of this paper is to study an African online marketplace to identify persuasive technology (PT) techniques used to optimize customer experiences on Jumia (an African eCommerce site). It is essential to evaluate how PT techniques were used to motivate desirable behaviours in the African context. Consequently, eCommerce conducted an expert evaluation to deconstruct what persuasive techniques were used in Jumia using the Persuasive System Design (PSD) framework. We also analyzed how each of the PT techniques was operationalized on the Jumia eCommerce. As a secondary objective, we conducted a study of 112 users to determine their awareness of the use of PT techniques in Jumia. The results Jumia employed some persuasive techniques to attract and retain customers. It also shows that customers are aware of and appreciated the fact that certain PT techniques were operationalized on the Jumia site. Finally, we compared our findings with that of a similar study from the Western culture. We contribute to the AfriCHI, Persuasive Technology, and HCI community in general by establishing the applicability of persuasive techniques in African context and suggesting some design implications for eCommerce sites.

In this paper we propose a conceptual framework for continuous-time valuation of real (investment) options in the presence of costly controls with random outcomes (learning), that affect the value of the underlying asset or a relevant state-variable. These controls represent optional efforts by management to add value to the underlying real investments over which it has monopoly power, albeit with uncertain results. Special cases of such controls include pure learning (but costly) actions, as in many research and development, marketing research or natural resource exploration projects. We demonstrate a discrete-time Markov-chain solution methodology implemented in a finite-difference scheme, and we discuss numerical results. The impact of such uncertain jumps is seen to be relatively more significant in the case of non-profitable options than in the case of very profitable real (investment) options. When the potential for information revelation is significant, we are even willing to pay for an action with a negative expected outcome. With numerical simulations we capture the value of embedded exploration (pure learning) options and we demonstrate the improvement over the traditional (sequential/compound) real options approach. We show that such exploration options enhance the value of investment opportunities in the most significant manner, and justify the (mostly unexplained) observed practice of “overpaying” for the purchase of rights to natural resources extraction.

This study investigates the value of the strategic flexibility provided by firms' international investments during an economic crisis, defined here as an unanticipated significant downturn in the economy. To avoid below‐par performance, firms need to adapt quickly to this significant change in their environment, making real options very valuable to them. Although firms' international investments can potentially provide such flexibility, this issue has not been empirically examined in a context of such dramatic negative change. We consider two types of international investments by firms in this regard, foreign direct investments and export‐related international investments, developing two measures that directly assess the flexibility derived from each that are new to the literature. Based on these measures, we find evidence that both types of international investments provided valuable flexibility for Korean firms during the economic crisis conditions. This study contributes to the literature by showing that firms with real options investments in place have a greater ability to flexibly adapt their overall operations in line with unforeseen negative environmental change, in contrast to firms without such investments. Copyright © 2009 John Wiley & Sons, Ltd.

There have been increasing demonstrations of criminal enterprises normalizing the adaptation of persuasivetechnologies to target and victimize people all over the world online and offline. Persuasive technologies include anysoftware or hardware that we interact with that can influence our behaviors, including changing our behaviors or maintainingour behaviors, making people vulnerable to behavioral or technical exploitation of our information and communication. Thisvulnerability may be heightened in isolated environments like futurist Moon Bases, suggesting there may be a uniquevictimology for people living and working on a Moon Base. To counter this activity, in theory, policing criminal persuasivetechnology use on a Moon Base environment must consider the behavioral design of persuasive technologies and this uniquevictimology. This practitioner’s paper will discuss the shifting research direction of persuasive technologies towarddeception, since the introduction of this model focused on improving people’s health almost two decades ago, suggestingthat generative artificial intelligence and machine learning will accelerate adaptive, deceptive persuasive technologies. Thispaper will visualize theoretical scenarios describing how criminal enterprises could victimize people on Moon Bases withpersuasive technology design specific to that environment. This paper provides a comparative example when consideringArctic contexts as similar isolated environments. These futurist theoretical scenarios provide some demonstrations ofcriminal behaviors using persuasive technologies to victimize people, highlighting the unique victimology of users in isolatedenvironments of interest to criminals and nations alike.

The levels of foreign investment globally have increased at a rapid pace during recent years. However valuing these investments is complex and involves additional risks. We argue that foreign investment opportunities can often be best structured as a series of investment options, and thus the investment appraisal should often be carried out using a real options framework. The ability to expand globally is now a core corporate skill. Quality appraisals will assist businesses to make fundamentally better capital budgeting decisions. We illustrate the use of real option investment appraisal via a case study re-traces Force Corporation’s troubled investment via Village South America in Argentina. A FDI investment decision is recreated and evaluated.

Fuzzy real options modeling has developed greatly in the last decade. Fuzzy real options are for real investments what financial options are for investments on financial assets. Main differences from the valuation perspective include, e.g., that real investments are often unique, and their real option value cannot be derived from market data. The valuation of real investments typically uses investors’ in-house knowledge, which can be combined with real-time market data. The investor in our case is an acquiring company with a task to ex-ante evaluate potential acquisition target companies for which the acquirer obtains real options to create value through managerial flexibility arising from the merger and acquisition process, where strategic and economic capital of the acquired and the target company are put together. In this paper, we extend the credibilistic fuzzy pay-off method to interval-valued fuzzy trapezoidal numbers with an optimism–pessimism measure and discuss how it can be integrated into a digital coaching tool developed by the authors. We demonstrate through a numerical example with R code how the method can be used in valuing corporate acquisition targets with real options available to an acquiring company together with an optimism–pessimism level of analysts about the value-creation through managerial actions.KeywordsCredibility theoryOptimism–pessimism measureReal optionsInterval-valued fuzzy numbersMergers and acquisitions

The 1996 Food and Agriculture Organization’s (FAO) ‘Guidelines on the Precautionary Approach to Fisheries and Species Introduction’ raise important issues for fisheries managers, but fail to prescribe an approach for risk management. The distinguishing characteristics of the ‘precautionary approach’ are the inclusion of uncertainty and ‘an elaboration on the burden of proof’. The FAO precautionary approach emphasizes that managers should be risk‐averse, but does not provide tools for determining the appropriate degree of risk aversion. Consequently, application of the precautionary approach often leads to decision‐making based onad hocsafety margins. These safety margins are seldom chosen with explicit consideration of trade‐offs. If the emphasis was shifted to choosing between competing uncertainties, then managers could manage risk. By attempting to avoid risk, managers may gain exposure to other risks and perhaps miss valuable opportunities. We place fishery management problems within the rubric of ‘real investment’ problems, and compare and contrast the consideration of risk by alternative investment frameworks. We show that traditional investment frameworks are inappropriate for fishery management, and furthermore, that traditional precautionary approaches are arbitrary and without basis in decision theory. Quantitative decision‐making techniques, such as formal decision analysis (FDA), enable integration of competing hypotheses that help alleviate burden‐of‐proof issues. These techniques help analysts consider sources of uncertainty. FDA, however, can still be subject to arbitrary safety margins because such analyses often focus on determining which strategies best achieve, or avoid, targets that have been established without complete consideration of trade‐offs. A managerial finance approach, real options analysis (ROA), is an alternative and complementary decision‐making technique that enables managers to compute precautionary adjustments that couple the size of the ‘safety margin’ with the amount of uncertainty, thereby optimizing risk exposure and avoiding the need for arbitrary safety margins. We illustrate the advantages of an approach that combines FDA and ROA, using a heuristic example about a decision to re‐introduce Atlantic salmon (Salmo salarL.) into Lake Ontario. Finally, we provide guidance on applying ROA to other fishery problems. The precautionary approach requires that managers consider risk, but considering risk is not the same as managing it. Here ROA is useful.

With the increase in the number of e-commerce companies over the last decade, there is stiffer competition for e-businesses to win and retain customers. Companies have to give clients reasons to shop with them and become return customers. The use of personalization strategies and persuasive technology have been identified as means through which e-businesses can engage their clients and give them a unique shopping experience. To con-tribute to ongoing research in personalization and persuasive technology in e-commerce, my thesis proposes a framework that can create a personalized shopping experience for clients using the consumers' personality and shopping type. This paper presents the results of the first stage of my research which is a user study carried out on 324 e-commerce shoppers to identify the persuasive strategies and its implementation in an e-commerce site, Amazon, and to evaluate the persuasiveness of these strategies to consumers. The result of this thesis can contribute to ongoing research in development of personalization and persuasive strategies that work in e-commerce especially for new companies.

This article studies real option behavior of Chinese listed corporation and how it influences the investment decisions by using the panel data of Chinese stock market. It discussed the relationship between the uncertainty risk and enterprise investment. As the investment is irreversible, uncertainty displays a negative effect on firm investment. The increased idiosyncratic risk will reduce the firm investment, this phenomenon is not the result of risk aversion but it can be attributed to the behavior of real option. The empirical result indicates that to the large companies, state-owned firms and high degree of reversibility investment of the enterprise, they may take the real option investment approach because the idiosyncratic risks significantly reduce the investment behaviors.