Game Theory and Prospect Theory: Ultimatum Bargaining and Entrepreneurship in a Non-Laboratory Environment

Date of Award

Summer 2022

Document Type

Dissertation

Degree Name

Doctor of Business Administration (DBA)

Committee Chair

Charles Fenner

Committee Member

Gary Stroud

Committee Member

Steven Tincher

Abstract

The purpose of this mixed methods study was to determine how entrepreneurs who start new businesses can mitigate business decision risk while exploring how their business experience plays a role in their decision-making process. Previous meta-analysis of Ultimatum Game bargaining has shown that student populations do not follow a Nash Equilibrium. Based on a review of literature, the author’s study explored if entrepreneurs would make offers closer to the Nash Equilibrium, (risker) based on their business background. While entrepreneurs did not make statistically different offers than the student group, their unique background and experiences did play a significant role in how they approached the problem with several significant findings: 1) Entrepreneurs ($4.76, average offer) did not make different (p = .805) offers than those of the students ($4.86 average offer). 2) There was not a significant difference (p = 0.846) between the acceptance rates of the entrepreneurs (88%) and the students (91%). 3) There was a significant difference (p = <0.001) between how entrepreneurs (3.85 on a Likert scale) viewed their background’s role in decision making, and that of the student group (2.90). 4) There was a significant (p=0.017) medium negative correlation (-0.348) between entrepreneurs’ feelings of risk and the size of their offer amounts. The qualitative results found that the decision making of the entrepreneurs was influenced by key themes of: Responsible Risk Taking, A Sense of Fairness, Altruistic Outlook, Application of Business Experience, and A Nash Mindset.

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