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The reality is that modern shipping is an industrial operation comprising a complex web of logistics, thousands upon thousands of transactions, multi-million dollar deals, and billions of dollars' worth of cargo.

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2014 July

Presentation Motivations behind Irrationality in the Shipping Asset Management New

 

 

 

 

Paper titled “Motivations behind Irrationality in the Shipping Asset Management: Assumptions Drive Investors” is presented at the Conference of International Association of Maritime Economists (IAME) 2014, Norfolk, VA, USA.

 

Motivations behind Irrationality in the Shipping Asset Management: Assumptions Drive Investors

Okan Duru

 

Abstract

This paper investigates the role of irrationality in the shipping asset management and the motivation of investors in shipping business which induces the irrationality under the temporal choice, hyperbolic discounting and short-termism in general terms. The behavioral economics of shipping business is investigated in the last few years and the impact of irrational preferences is a growing debate in the field. Particularly the super cyclic nature of shipping markets and unexpected changes on volume of shipping demand need to be investigated in terms of which factors drive shipping investors to a market crash through the tragedy of commons (herding). Based on the empirical and theoretical evidences, the irrationality of shipping investors is driven by three major factors: Cognitive bias of the investor (e.g. false reasoning, misconception), the errors of crowds (e.g. herding, group thinking bias) and the adverse motivations stimulated by the industry and organizations.

 

Keywords: Behavioral economics of shipping, irrationality, cognitive bias, short-termism, temporal myopia, tragedy of commons.

 

International Association of Maritime Economists (IAME) 2014, Norfolk, VA, USA

 

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