Exogenous Uncertainty

Exogenous Uncertainty

Anything outside a company's control. For example, a company may fail because of a recession even if it does everything right. In this case, the possibility of recession is an exogenous uncertainty.
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The aim of this research is to contrast the expected long-run impact of exogenous uncertainty on labor force flows and expected wages under alternative scenarios of institutional wage setting and barriers to mobility.
Exogenous uncertainty itself may interplay with the underlying local technologies in different ways.
Specifically, we argue the level of endogenous and exogenous uncertainty surrounding IT offshoring determines whether a client firm adopts a captive offshoring, joint-venture, third-party or onsite IT offshoring model.
In order to develop a parsimonious theoretical framework to effectively capture the various uncertainties involved in the IT offshoring decision, we introduce and rely on the distinction between endogenous and exogenous uncertainty (Dixit & Pindyck, 1994; Folta, 1998).
A firm can be perceived to be experiencing either high or low levels of endogenous uncertainty or high or low levels of exogenous uncertainty. An illustrative exercise to introduce the relationship between the uncertainties is to consider moving along various paths from any given point in a hypothetical two-dimensional space as depicted in Figure 1.
Hence, the Poole analysis showed explicitly how policymakers could deal with exogenous uncertainty in a formal mathematical way.
According to Williamson (1985), the opportunistic behavior of the transacting parties is irrelevant in the absence of exogenous uncertainty. This study uses the volatility of a firm's stock (BETA) with respect to market as a measure of exogenous uncertainty.
Future studies may also explore the possibility that the impact of exogenous uncertainty on transaction modes may be qualitatively different from behavioral uncertainty (cf.
Exogenous uncertainty is characterized by a time-homogeneous Markov process {[X.sub.t]}, where [X.sub.t] is the state at time t.
In the two-armed bandit study, in which exogenous uncertainty is present, consistent deviations from the "maximizing" strategy, described by the authors as experimentation and hedging, are observed.
There is no strategic uncertainty, no risk, no exogenous uncertainty, and no complex computation.
The removal of all strategic uncertainty, risk, exogenous uncertainty, and complex computations is not sufficient to ensure that subjects choose an optimal decision.