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Affordable loss: behavioral economic aspects of the plunge decision
Author(s) -
Dew Nicholas,
Sarasathy Saras,
Read Stuart,
Wiltbank Robert
Publication year - 2009
Publication title -
strategic entrepreneurship journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 5.061
H-Index - 46
eISSN - 1932-443X
pISSN - 1932-4391
DOI - 10.1002/sej.66
Subject(s) - entrepreneurship , order (exchange) , behavioral economics , economics , heuristic , action (physics) , marketing , public economics , actuarial science , business , microeconomics , finance , computer science , physics , quantum mechanics , artificial intelligence
Affordable loss involves decision makers estimating what they might be able to put at risk and determining what they are willing to lose in order to follow a course of action. Using the entrepreneur's new venture plunge decision, this article combines insights from behavioral economics to develop a detailed analysis of the affordable loss heuristic. Specifically, we develop propositions to explain how individuals: (1) decide what they can afford to lose; and (2) what they are willing to lose in order to plunge into entrepreneurship. The article also discusses the implications of affordable loss for the economics of strategic entrepreneurship. Copyright © 2009 Strategic Management Society.