Option type

Abstract: We present a new predicative and decidable type system, called ML≤, suitable for languages that integrate functional programming and parametric polymorphism in the tradition of ML [21, 28], and class-based object-oriented programming and higher-order multimethods in the tradition of CLOS [12]. Instead of using extensible records as a foundation for object-oriented extensions of functional languages, we propose to reinterpret ML datatype declarations as abstract and concrete class declarations, and to replace pattern matching on run-time values by dynamic dispatch on run-time types. ML≤ is based on universally quantified polymorphic constrained types. Constraints are conjunctions of inequalities between monotypes built from type constructors organized into extensible and partially ordered classes. We give type checking rules for a small, explicitly typed functional language a la XML [20] with multi-methods, show that the resulting system has decidable minimal types, and discuss subject reduction. Finally, we propose a new object-oriented programming language based on the ML≤ type system.

Abstract: With Java 5 and C# 2.0, first-order parametric polymorphism was introduced in mainstream object-oriented programming languages under the name of generics. Although the first-order variant of generics is very useful, it also imposes some restrictions: it is possible to abstract over a type, but the resulting type constructor cannot be abstracted over. This can lead to code duplication. We removed this restriction in Scala, by allowing type constructors as type parameters and abstract type members. This paper presents the design and implementation of the resulting type constructor polymorphism. Furthermore, we study how this feature interacts with existing object-oriented constructs, and show how it makes the language more expressive.

Abstract: Real options analysis is an important but costly tool for valuing many information technology (IT) investments. As a low-cost substitute for real options-based methods, firms often depend on managerial intuition, which sometimes approximates real options-based valuations and sometimes does not. Making good choices about how to value IT investments requires an understanding of why, and therefore when, intuitive judgment is more or less likely to be consistent with real options-based valuations. Field and survey studies have provided ex post observations of systematic variations in consistency by option type, but ex ante hypotheses explaining this variation have been rare. This study uses two behavioral economic theories to predict option-type-specific differences between intuitive judgments and real options prescriptions. Regret theory posits that individuals will value decision outcomes based on both the expected utility of payoffs and on anticipated regret for not having made an alternative decision. As a consequence, intuitive IT investment decisions are less aggressive as uncertainty increases (higher valuation of deferral options, lower valuation of growth options), in contrast to higher normative values for both real option types with higher uncertainty. Consistent with competitive behavior theories that predict overaggressive behavior to contest market behavior, intuitive IT investment decisions are more aggressive in the presence of a potential competitor (lower valuation of deferral and higher valuation of growth options), holding constant the normative value of the options. We present experimental evidence consistent with these predictions. An important implication of our results is that future research should not test for general consistency between intuitive judgment and real options theory, but should identify and explain systematic variation in consistency across option types and settings. Such variation is important in practice because it determines when intuitive judgment is and is not likely to be an adequate substitute for costly formal real options valuation. It also determines when training in real options concepts needs to be more intensive to overcome inconsistency with intuitive judgment, and when the outputs of formal real options valuation are likely to be unintuitive and thus not readily acceptable to managers with limited option theory training.

Abstract: textThis thesis combines four studies that contribute to our understanding of corporate acquisitions by taking a behavioral and real options perspective. Chapter 2 classifies acquisitions based on real option characteristics and shows option type (single vs. compound) and option nature (shared vs. proprietary) influence the value and premium paid in acquisitions. Chapter 3 considers a specific serial acquisition strategy aimed at industry consolidation and finds higher premiums are paid for first deals in the sequence, showing part of the potential future value generated in the consolidation strategy is already reflected at the start. Chapter 4 takes a behavioral perspective and shows a stock’s historical high influences the risk firms take in their acquisitions. Firms with a larger deviation from their past stock price high initiate relatively larger deals, but are unsuccessful in their effort to return to prior stock price levels. Finally, chapter 5 merges real option theory, behavioral theory and acquisitions by considering the influence of executive level behavioral biases on the perception of acquisition outcome uncertainty. Given the uncertainties surrounding acquisitions, staging the investment through the initial purchase of a minority stake is beneficial as it allows deferring the full acquisition until outcome uncertainty has decreased. However, behavioral biases can cause disparities between perceived and actual uncertainty, resulting in inconsideration of a staged investment strategy. These insights provide a new explanation for the limited number of observed minority stake purchases prior to full-scale acquisitions.