Reconsidering Herbert A. Simon’s Major Themes in Economics: Towards an Experimentally Grounded Capital Structure Theory Drawing from His Methodological Conjectures

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Abstract

Drawing inspiration from a renowned critique of standard economics moved by Simon (Q J Econ 69(1):99–118, 1955, Am Econ Rev 49(3):253–283, 1959), the authors of this paper develop a novel experimental design moving beyond the hypothesis-testing framework traditionally based on the use of deductive logic, while introducing a new way suitable for addressing the problem of understanding the impact of fluctuations and uncertainty in business decision-making. As claimed in the paper, this can be achieved by adopting an abductive approach to research design that incorporates an experimental methodology based on an original computerised real effort task, so that to explore firms—and other forms of business organisations—serving as experimental incubators in the market process, pursuing a range of economic enquiries more adherent to real world business applications. Among these enquiries, in this paper the authors focus on firms’ capital structure decisions in order to attempt to advance existing knowledge on the topic of experimental business research within the framework of economics.

Keywords

Experimental economics Design research Abduction Iterative algorithm Data-driven discovery Corporate finance 

JEL Classification

C81 C91 D81 D91 G32 

Notes

Acknowledgements

We are very grateful to Kumaraswamy Vela Velupillai for prompting us to further explore Herbert A. Simon’s issues, even related to experimental design research. Furthermore, we are both very grateful to Stefano Zambelli and Shu-Heng Chen for many enlightening conversations and helpful comments on earlier drafts.

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Authors and Affiliations

  1. 1.Department of Philosophical, Pedagogical and Economic-Quantitative Sciences (PPEQS), Section of Quantitative Methods and EconomicsUniversity of Chieti-PescaraPescaraItaly

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