In recent years, venture capital industry develops rapidly in China and the number of venture capital deals increased substantially. However, fewer venture capital projects may bring significant returns. The fault in the selection of venture capital project is the main reason which causes the failure of venture capital. Thus, the selection of venture capital before investment is especially important. The value of venture capital project is the critical factor which the decision maker concerns in the process of the venture capital project selection. Usually, the decision maker may take into account a number of venture capital projects among multiple industries the process of the venture capital project selection and choose the most satisfactory one or more venture capital projects to invest considering the prospect of each market and the value of each venture capital project. In the process of the venture capital project selection, the decision maker is usually bounded rational. The decision maker may compare the venture capital project under consideration with other venture capital projects and may feel regret when choosing other venture capital projects may bring better result. In reality, the decision maker will forecast the values of venture capital projects among multiple industries in different market states before investing. The deviation between venture capital projects may make decision maker generate feelings of anticipated regret. The feelings of anticipated regret will affect the selection of venture capital project, which shows that the decision maker tends to avoid choosing the regrettable venture capital project. How to consider decision maker's psychological behavioral factors in the process of the venture capital project selection among multiple industries needs to be especially concerned. In this paper, a method for selecting venture capital project among multiple industries considering the decision maker's regret aversion is proposed. In the method, firstly, the value of each venture capital project in different market states is calculated. Then, the probability of combined market state is calculated. Furthermore, the regret function is constructed to describe the decision maker's psychological perception of regret and the overall utility value of each venture capital project is calculated so as to determine a ranking of venture capital projects in different industries. Finally, an example is used to illustrate the feasibility and validity of the proposed method.
YU Chao, FAN Zhi-ping
. Method for Venture Capital Project Selection Considering Decision Maker's Regret Aversion[J]. Chinese Journal of Management Science, 2016
, 24(6)
: 29
-37
.
DOI: 10.16381/j.cnki.issn1003-207x.2016.06.004
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