23 research outputs found
Are Groups more Rational than Individuals? A Review of Interactive Decision Making in Groups
Many decisions are interactive; the outcome of one party depends not only on its decisions or on acts of nature but also on the decisions of others. In the present article, we review the literature on decision making made by groups of the past 25 years. Researchers have compared the strategic behavior of groups and individuals in many games: prisoner’s dilemma, dictator, ultimatum, trust, centipede and principal-agent games, among others. Our review suggests that results are quite consistent in revealing that groups behave closer to the game-theoretical assumption of rationality and selfishness than individuals. We conclude by discussing future research avenues in this area.group decision making, interactive decision making, rationality, discontinuity effect
Regret Salience and Accountability in the Decoy Effect
National Science Foundatio
Regret salience and accountability in the decoy effect
Two experiments examined the impact on the decoy effect of making salient the possibility of post-decision regret, a manipulation that has been shown in several earlier studies to stimulate critical examination and improvement of decision process. Experiment 1 (N = 62) showed that making regret salient eliminated the decoy effect in a personal preference task. Experiment 2 (N = 242) replicated this finding for a different personal preference task and for a prediction task. It also replicated previous findings that external accountability demands do not reduce, and may exacerbate, the decoy effect. We interpret both effects in terms of decision justification, with different justification standards operating for different audiences. The decoy effect, in this account, turns on accepting a weak justification, which may be seen as adequate for an external audience or one’s own inattentive self but inadequate under the more critical review triggered by making regret possibilities salient. Seeking justification to others (responding to accountability demands) thus maintains or exacerbates the decoy effect; seeking justification to oneself (responding to regret salience) reduces or eliminates it. The proposed mechanism provides a theoretical account both of the decoy effect itself and of how regret priming provides an effective debiasing procedure for it
Does overconfidence pay off when things go well?: CEO overconfidence, firm performance, and the business cycle
We investigate the moderating effect of the business cycle on the positive relationship between CEO overconfidence and firm performance. We propose that the expansion years of the business cycle enhance the positive impact of overconfident CEOs on firms’ performance. However, this effect is reduced during recession periods. We analyze the effect of CEO overconfidence on the Return on Equity of publicly listed US firms from 1992 to 2015, a period that includes the bursting of the dot-com bubble in 2001 and the Great Recession of 2008–2009. The empirical findings support the hypotheses that expansion periods increase the positive relationship between overconfident CEOs and firms’ performance, but this positive effect weakens during recessions.Fil: Reyes, Tomas. Pontificia Universidad Católica de Chile; ChileFil: Vassolo, Roberto Santiago. Universidad Austral. Instituto de Altos Estudios; Argentina. Pontificia Universidad Católica de Chile; Chile. Consejo Nacional de Investigaciones Científicas y Técnicas; ArgentinaFil: Kausel, Edgar E.. Pontificia Universidad Católica de Chile; ChileFil: Peña Torres, Diamela. Pontificia Universidad Católica de Chile; ChileFil: Zhang, Stephen. University of Adelaide; Australi
The Reciprocal Relationships Between Escalation, Anger, and Confidence in Investment Decisions Over Time
Research on escalation of commitment has predominantly been studied in the context of a single decision without consideration for the psychological consequences of escalating. This study sought to examine (a) the extent to which people escalate their commitment to a failing course of action in a sequential decision-making task, (b) confidence and anger as psychological consequences of escalation of commitment, and (c) the reciprocal relationship between escalation of commitment and confidence and anger. Participants were 110 undergraduate students who completed a series of investment decisions regarding a failing endeavor. Results revealed that although a high proportion of individuals escalate through all decisions, the extent to which they escalated decreased with each decision as they were less willing to invest money in the project. Furthermore, as participants escalated, confidence in one’s decision decreased and anger increased. Lastly, the analyses revealed that the relationship between escalation and confidence is reciprocal. Escalation was negatively associated with confidence, and confidence predicted escalation in the subsequent decision. These results highlight the importance of considering both the determinants and psychological consequences of escalation of commitment
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EMOTIONS AND THE PSYCHOLOGY OF SOCIAL CHESS: HOW OTHERS' INCIDENTAL AFFECT CAN SHAPE EXPECTATIONS AND STRATEGIC BEHAVIOR
Researchers have increasingly directed attention to the importance of emotions in decision making. Recent theories have focused on the interpersonal effects of emotions--the influence of the decision maker's expressed emotions on observers' decisions and judgments. In the current research, we examine people's expectations of how incidental, discrete emotions affect behavior. We also study how these expectations affect decisions in interactive settings, and contrast them with how emotions actually impact other people's behavior.These ideas were tested in four studies. In Study 1a, participants (N = 58) answered a questionnaire asking their perceptions of how different emotions affect behavior. In Study 1b, participants (N = 203) read a number of hypothetical scenarios in which different interactions between them and another person took place. Studies 2 (N = 98) and 3 (N = 132) were two economic games -- a Stag-Hunt game and a Trust Game -- involving decisions with non-trivial financial consequences.Across these four studies, I found that people do have strong beliefs about how incidental emotions affect behaviors. Because of these beliefs, when told about their counterparts' emotional state, people in interactive settings modify their behavior. The impact of people's beliefs on behavior, however, was more consistent for negative emotions such as anger and fear, than for positive emotions such as happiness and gratitude. These findings also indicate that people are sensitive to the different effects of different emotions: different negative emotions such as guilt and anger have different effects on their expectations. Finally, I found that people's expectations about how their counterparts' emotions affect behavior can be inaccurate in specific settings
Assessing Others’ Risk‐Taking Behavior from Their Affective States: Experimental Evidence Using a Stag Hunt Game
Researchers are increasingly exploring the role of emotions in interactive decision‐making. Recent theories have focused on the interpersonal effects of emotions—the influence of the decisionmaker’s expressed emotions on observers’ decisions and judgments. In this paper, we examine whether people assess others’ risk preferences on the basis of their emotional states, whether this affects their own behavior, and how this assessment matches others’ actual behavior. To test these ideas, we used an experimental Stag Hunt game (n = 98), and included non‐trivial financial consequences. Participants were told (truthfully) that their counterparts’ previous task had left them happy, fearful, or emotionally neutral. People who were told their counterparts were fearful reported that they expected less risky decisions from these counterparts than people told their counterparts were neutral or happy. As a result, given that the Stag Hunt is a coordination game, these participants were themselves less risky. Interestingly, these participants’ expectations were not accurate; thus, coordination failed, and payoffs were low. This raises the possibility of a “curse of knowledge” whereby one player’s erroneous beliefs about the effects of the counterpart’s emotional state leads the first player to make poor action choices