Hide and seek search: Why angels hide and entrepreneurs seek.
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| Title: | Hide and seek search: Why angels hide and entrepreneurs seek. |
|---|---|
| Authors: | Engineer, Merwan H.1, Schure, Paul1 schure@uvic.ca, Vo, Dan H.2 |
| Source: | Journal of Economic Behavior & Organization. Jan2019, Vol. 157, p523-540. 18p. |
| Subjects: | Capital market, Profitability, Investors, Businesspeople, Economic equilibrium |
| Abstract: | Highlights • Traditional search theory assumes search frictions are part of the technology; search frictions are imposed by the environment. • We introduce the idea that search frictions may be the consequence of a deliberate choice. • Our leading example is the angel capital market, a large market for arms-length entrepreneurial finance. • In our model entrepreneurs engage in costly search for financiers as these financiers choose to make themselves hard to find. • Entrepreneurs signal (high) productivity by engaging in costly search for financiers. Abstract The angel capital market poses a puzzle for search theory. Angel investors ("angels") are often described in the literature as if they were hiding from entrepreneurs that seek angel capital investment. Such behavior by angels forces entrepreneurs to engage in costly search for angels. In our model, a separating equilibrium exists in which hiding by angels discourages search by low-productivity entrepreneurs who would inundate any visible angels. Only high-productivity entrepreneurs incur the time and effort costs of search to signal their type and avoid the lemons problem in the visible capital market. As the search market generates higher quality, hence more profitable matches, social surplus may increase despite the costs of hiding and searching. Hide and seek search contrasts with standard search theory where agents choose strategies to mitigate inherent physical and informational search frictions. [ABSTRACT FROM AUTHOR] |
| Copyright of Journal of Economic Behavior & Organization is the property of Elsevier B.V. and its content may not be copied or emailed to multiple sites without the copyright holder's express written permission. Additionally, content may not be used with any artificial intelligence tools or machine learning technologies. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.) | |
| Database: | Engineering Source |
| FullText | Text: Availability: 0 |
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| Header | DbId: egs DbLabel: Engineering Source An: 135624708 AccessLevel: 6 PubType: Academic Journal PubTypeId: academicJournal PreciseRelevancyScore: 0 |
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| Items | – Name: Title Label: Title Group: Ti Data: Hide and seek search: Why angels hide and entrepreneurs seek. – Name: Author Label: Authors Group: Au Data: <searchLink fieldCode="AR" term="%22Engineer%2C+Merwan+H%2E%22">Engineer, Merwan H.</searchLink><relatesTo>1</relatesTo><br /><searchLink fieldCode="AR" term="%22Schure%2C+Paul%22">Schure, Paul</searchLink><relatesTo>1</relatesTo><i> schure@uvic.ca</i><br /><searchLink fieldCode="AR" term="%22Vo%2C+Dan+H%2E%22">Vo, Dan H.</searchLink><relatesTo>2</relatesTo> – Name: TitleSource Label: Source Group: Src Data: <searchLink fieldCode="JN" term="%22Journal+of+Economic+Behavior+%26+Organization%22">Journal of Economic Behavior & Organization</searchLink>. Jan2019, Vol. 157, p523-540. 18p. – Name: Subject Label: Subjects Group: Su Data: <searchLink fieldCode="DE" term="%22Capital+market%22">Capital market</searchLink><br /><searchLink fieldCode="DE" term="%22Profitability%22">Profitability</searchLink><br /><searchLink fieldCode="DE" term="%22Investors%22">Investors</searchLink><br /><searchLink fieldCode="DE" term="%22Businesspeople%22">Businesspeople</searchLink><br /><searchLink fieldCode="DE" term="%22Economic+equilibrium%22">Economic equilibrium</searchLink> – Name: Abstract Label: Abstract Group: Ab Data: Highlights • Traditional search theory assumes search frictions are part of the technology; search frictions are imposed by the environment. • We introduce the idea that search frictions may be the consequence of a deliberate choice. • Our leading example is the angel capital market, a large market for arms-length entrepreneurial finance. • In our model entrepreneurs engage in costly search for financiers as these financiers choose to make themselves hard to find. • Entrepreneurs signal (high) productivity by engaging in costly search for financiers. Abstract The angel capital market poses a puzzle for search theory. Angel investors ("angels") are often described in the literature as if they were hiding from entrepreneurs that seek angel capital investment. Such behavior by angels forces entrepreneurs to engage in costly search for angels. In our model, a separating equilibrium exists in which hiding by angels discourages search by low-productivity entrepreneurs who would inundate any visible angels. Only high-productivity entrepreneurs incur the time and effort costs of search to signal their type and avoid the lemons problem in the visible capital market. As the search market generates higher quality, hence more profitable matches, social surplus may increase despite the costs of hiding and searching. Hide and seek search contrasts with standard search theory where agents choose strategies to mitigate inherent physical and informational search frictions. [ABSTRACT FROM AUTHOR] – Name: AbstractSuppliedCopyright Label: Group: Ab Data: <i>Copyright of Journal of Economic Behavior & Organization is the property of Elsevier B.V. and its content may not be copied or emailed to multiple sites without the copyright holder's express written permission. Additionally, content may not be used with any artificial intelligence tools or machine learning technologies. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract.</i> (Copyright applies to all Abstracts.) |
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| RecordInfo | BibRecord: BibEntity: Identifiers: – Type: doi Value: 10.1016/j.jebo.2018.10.007 Languages: – Code: eng Text: English PhysicalDescription: Pagination: PageCount: 18 StartPage: 523 Subjects: – SubjectFull: Capital market Type: general – SubjectFull: Profitability Type: general – SubjectFull: Investors Type: general – SubjectFull: Businesspeople Type: general – SubjectFull: Economic equilibrium Type: general Titles: – TitleFull: Hide and seek search: Why angels hide and entrepreneurs seek. Type: main BibRelationships: HasContributorRelationships: – PersonEntity: Name: NameFull: Engineer, Merwan H. – PersonEntity: Name: NameFull: Schure, Paul – PersonEntity: Name: NameFull: Vo, Dan H. IsPartOfRelationships: – BibEntity: Dates: – D: 01 M: 01 Text: Jan2019 Type: published Y: 2019 Identifiers: – Type: issn-print Value: 01672681 Numbering: – Type: volume Value: 157 Titles: – TitleFull: Journal of Economic Behavior & Organization Type: main |
| ResultId | 1 |
