A search strategy for assessing a business opportunity

  • Shepherd D
  • Lévesque M
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Abstract

The optimal stopping model presented here explores opportunity
assessment with reference to a tradeoff between, on the one hand,
reducing decision accuracy and, on the other hand, both increasing
search costs and a higher probability that the opportunity is grasped by
a competitor. From this model we propose a heuristic that specifies
three threshold lines to define four decision areas. Decision area 1
prescribes the business opportunity be accepted, decision areas 2 and 4
prescribe that search continue, and decision area 3 prescribes that the
business opportunity be rejected. We use a simulation to investigate the
robustness of the heuristic beyond the model's boundary conditions

Author-supplied keywords

  • Decision model
  • Dynamic programming
  • Entrepreneurship
  • Innovation
  • Opportunity recognition/search
  • Optimal stopping
  • Sequential information gathering

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Authors

  • Dean A. Shepherd

  • Moren Lévesque

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