[ View menu ]

October 4, 2004

Nonhuman primates discovered to have a sense of fairness

Filed in Research News
Subscribe to Decision Science News by Email (one email per week, easy unsubscribe)

MONKEYS REJECT UNEQUAL PAY

monkeys-02.gif

A juvenile capuchin monkey exhibits cheek-to-cheek begging to an eating adult male, cupping his hand next to the adult’s food in solicitation. This primate is exceptionally tolerant and readily shares food, which may be a precondition for the reported reactions to reward division.

Humans judge fairness according to both the distribution of gains and possible alternative outcomes. There may be species-specific responses concerning the way one ought to be treated in a society and how gains should be distributed. For example, species with highly developed food sharing and cooperation, such as the Capuchin monkeys, may have emotionally-charged predispositions for various expectations about how gains should be distributed. A recent study in Nature by Sarah F. Brosnan and Frans B. M. de Waal examines the responses of 5 female capuchin monkeys to an unequal distribution of gains during experimental exchange with a human experimenter. Females were paired and observed under four exchange conditions: 1) both females received the same reward, 2) one female received a superior reward, 3) one female received a superior reward without exchange (i.e., no work), and 4) a single female observed a superior reward in the absence of a partner.

Monkeys too, it seems, respond negatively to an unequal distribution of gains. They will respond negatively to a previously acceptable gain if their partner receives a better one. Clearly if these emotions evolved in humans to aid in long-term human cooperation, they may exist in other species as well.

“In preliminary studies, two conditions were used: equality, in which two monkeys exchanged tokens with a human experimenter to receive cucumber, and inequality, in which one monkey exchanged for cucumber and its partner for grape, a more favoured food. Whereas in previous tests males and females had been equally reliable exchangers, only females reacted differently to the two conditions. Compared with equality tests, females receiving the less favoured reward in inequality tests were less willing to exchange, whereas males showed no such effect. Our limited sample size did not allow a conclusive comparison of the sexes, but independent evidence indicates that capuchin females pay closer attention than males to the value of exchanged goods and services.”

fig-01.gif

Percentage of failures to exchange for females across the four test types. Black bars (RR) represent the proportion of non-exchanges due to refusals to accept the reward; white bars (NT) represent those due to refusals to return the token. Lines indicate significant differences between conditions (Tukey’s multiple comparisons). ET, equality test; IT, inequality test; EC, effort control; FC, food control.

fig-02.gif

Mean percentage of failures to exchange in the first 15 trials (black bars) versus the last 10 trials per test (white bars). Lines at top indicate significant differences.

Quotes:
“During the evolution of cooperation it may have become critical for individuals to compare their own efforts and pay-offs with those of others. Negative reactions may occur when expectations are violated. One theory proposes that aversion to inequity can explain human cooperation within the bounds of the rational choice model, and may in fact be more inclusive than previous explanations. Although there exists substantial cultural variation in its particulars, this ‘sense of fairness’ is probably a human universal that has been shown to prevail in a wide variety of circumstances. However, we are not the only cooperative animals, hence inequity aversion may not be uniquely human. Many highly cooperative nonhuman species seem guided by a set of expectations about the outcome of cooperation and the division of resources.”

“Failure to hand back a received token (NT) is a highly unusual response in our trained capuchins: in two years of bartering, such failures occurred in less than 5%of trials, as also seen in the equality test. The marked increase in failure to exchange in individuals receiving the lower-value reward in the inequality test and the two control conditions cannot be explained by the absence of positive reinforcement, as rewards continued to be cucumber, an accepted reward in the equality test. Even more curious than a drop in the conditioned response rate was the second manner in which exchanges failed: refusal to accept or consume the reward (RR). In doing so, subjects forfeited a directly accessible food that they readily accept and consume under almost any other set of circumstances.”

“One possible explanation is that reward rejections relate to violated expectations, in which monkeys forego a low-value reward if a high-value one is anticipated. On the basis of her own reward history, however, there would seem no reason for a subject receiving cucumber to expect anything else during the same test.”

“Capuchin monkeys, too, seem to measure reward in relative terms, comparing their own rewards with those available, and their own efforts with those of others.”

“As opposed to primates marked by despotic hierarchies, tolerant species with well-developed food sharing and cooperation, such as capuchins may hold emotionally charged expectations about reward distribution and social exchange that lead them to dislike inequity.”

About the authors:

Dr. Frans B. M. de Waal;

Frans_de_Waal.gif

Currently, Frans B.M. de Waal is the Charles Howard Candler Professor of Psychology and Director of the Living Links Center at the Yerkes National Primate Center, both at Emory University. Born in 1948, in the Netherlands he was trained as a zoologist and ethnologist in the European tradition at three Dutch universities Nijmegen, Groningen, Utrecht), resulting in a Ph.D. in biology from the University of Utrecht, in 1977. His dissertation research concerned aggressive behavior and alliance formation in macaques. In 1975, a six- year project was initiated on the world’s largest captive colony of chimpanzees at the Arnhem Zoo. Apart from a large number of scientific papers, this work found its way to the general public with Chimpanzee Politics (Johns Hopkins University Press, 1982).

Frans B.M. de Waal homepage

Dr. Sarah F. Brosnan

SarahPhotoSmall.gif

Currently Dr. Brosnan is a postdoctoral fellow in the department of anthropology at Emory University. Her primary interests are the evolution of social behavior and social cognition, particularly the cognitive processes underlying cooperation and reciprocity and economic behavior. Specifically, what interest her is the proximate mechanisms underlying such behaviors, particularly how animals perceive the value of different commodities in their reciprocal interactions (i.e., goods and services exchanged within a biological market) and how the social environment affects the acquisition and use of such a concept of value. Currently she is working on a number of different projects in both humans and nonhuman primates (particularly chimpanzees) in an effort to understand more about the evolution of cooperative and economic behavior across the primate lineage.

Sarah F. Brosnan homepage

October 3, 2004

Employment opportunities in decision science

Filed in Jobs
Subscribe to Decision Science News by Email (one email per week, easy unsubscribe)

I. MIAMI UNIVERSITY – Miami, Florida.

Miami University, Assistant Professor in the area of Judgment and Decision-making. The Department of Psychology at Miami University invites applications for a tenure-track position, to begin August 2005, at the assistant professor level in judgment and decision-making. Successful candidates will show promise for conducting outstanding research, mentoring doctoral students, and providing high-quality teaching and research supervision at the undergraduate level. Our department offers doctoral programs in Brain and Cognitive, Social, and Clinical Psychology. We anticipate moving into a new spacious, and well-equipped building in 2006. Applicants must have completed the Ph.D. by August 2005. Applicants should submit curriculum vitae, reprints or preprints, research and teaching statements, and three letters of reference supporting both research and teaching excellence to: Robin Thomas, Chair, JDM Search Committee, Department of Psychology, Miami University, Oxford, OH, 45056, FAX (513) 529-2420 (www.muohio.edu/psychology). Review of applications will begin November 1, 2004, but applications will be accepted until the position is filled. Miami University is an Equal35 Opportunity /Affirmative Action employer, applications from women and minorities are especially encouraged.

II. MASSACHUSETS INSTITUTE OF TECHNOLOGY – Cambridge, Massachusets

The Management Science area at the MIT Sloan School has three faculty openings in the areas of Operations Management, Operations Research and System Dynamics. We are primarily looking for people at the level of Assistant or untenured Associate Professor. Applicants are expected to have a strong methodological research base, the potential for research and teaching excellence, and an ability to contribute to application areas of high impact. At least one of the appointments will be in the area of applied probability, stochastic processes and their applications. We particularly want to identify qualified female and minority candidates for consideration in these positions.

The OM/OR/SD Groups support MBA, PhD, BS, and Executive education programs. We have a broad range of well-supported research programs, including the MIT Operations Research Center, the Leaders for Manufacturing Program, the Integrated Supply Chain Management Program, the Center for Innovation on Product Development, the Entrepreneurship Center, and the Center for eBusiness@MIT.

Information about the Alfred P. Sloan School of Management can be found at: http://mitsloan.mit.edu

Applicants should possess a PhD in a relevant field by the date of appointment. Applicants must submit hard copies of the following: an up-to-date curriculum vitae, copies of representative publications, a statement of their objectives and aspirations in research and education, an official graduate transcript, information about teaching interests, experience and performance, and at least three letters of recommendation by December 15, 2004.

Please send applications to: Chair, OM/OR/SD Faculty Search Committee (indicate your primary field of interest), c/o Ms. S. Nemat-Nasser, MIT Sloan School, 50 Memorial Drive E53-360, Cambridge, MA 02142-1347.

MIT is an equal opportunity employer committed to building a culturally diverse and pluralistic intellectual community and strongly encourages applications from women and minorities.

-John Sterman
Jay W. Forrester Professor of Management
Director, MIT System Dynamics Group
MIT Sloan School of Management
E53-351
30 Wadsworth Street
Cambridge, MA 02142
617/253-1951 (voice); 617/258-7579 (fax), jsterman@mit.edu
http://web.mit.edu/jsterman/www

III. UNIVERSITY OF CALIFORNIA-BERKELEY – Berkeley, California

Pending budgetary approval, the Department of Economics is seeking applicants for a tenure track opening at the assistant professor level or an opening at the associate or full professor levels with tenure, at 100% time for academic year 2005-06. The field is open.

Qualifications for the tenure track opening include: a Ph.D. in Economics or a related discipline, at or near completion; the potential for significant research accomplishment and for distinguished teaching at both the undergraduate and graduate levels. Applicants must send a resume, one research paper, and arrange for submission of three letters of recommendation. Qualifications for the tenured opening include outstanding research accomplishment and the capacity for distinguished teaching at both the undergraduate and graduate levels. Applicants must send a resume and the names of three references.

Please refer your referees to the University’s statement on confidentiality, found at http://www.chance.berkeley.edu/apo/evalltr.html. The application deadline is December 7, 2004. Applications submitted after the deadline will not be considered.

MIT is an equal opportunity- affirmative action employer.

CONTACT: Personnel Committee/Recruitment (for tenure-track applicants) or Maurice Obstfeld (for tenured applicants), Department of Economics, 549 Evans Hall #3880, University of California-Berkeley, Berkeley, CA 94720-3880.

IV. CORNELL UNIVERSITY – Ithaca, New York

As seen in the 17 September issue of Science:

THE NEW LIFE SCIENCES INITIATIVE at Cornell University

CORNELL UNIVERSITY HAS ANNOUNCED A $600-MILLION INITIATIVE to recruit faculty and provide resources that foster the multidisciplinary study of organisms in the post-genomics era. This faculty-driven effort serves to integrate the life sciences with Cornell’s outstanding programs in the physical, engineering, and computational sciences through 13 interconnected, campus-wide focus areas composing The New Life Sciences Initiative. Having begun in 1998 and extending through the next five years, Cornell is in the process of making 110 professorial appointments, establishing a new graduate fellowship program, creating new research core facilities, and building several major capital projects. Active faculty searches are listed on the next three pages. For more information, please visit our websites: http://www.genomics.cornell.edu/, http://lifesciences.cornell.edu/about/initiative.php, and http://vivo.library.cornell.edu.

Neuroscience
Cornell University invites applications for three junior faculty positions in neuroscience that use:
(1) Genomic/genetic, developmental, molecular, computational, and/or biophysical approaches to the study of excitable cells or tissues (contact David Lin at dml45@cornell.edu for more information);
(2) Cell and/or developmental approaches to study the functional organization of the nervous system; for this position, we especially seek individuals with expertise in murine model systems that will contribute to a university-wide interdisciplinary mouse program (contact Tony Bretscher at apb5@cornell.edu for more information); and
(3) Integrative approaches to CNS function with interests that could include, but are not limited to, the organization of sensory or motor systems; social behavior, social communication, social cognition; emotion or any other aspect of cognition such as learning and memory at the network level, spatial navigation, or decision-making; a variety of current recording or imaging techniques would be welcome (contact Barbara Finlay at blf2@cornell.edu for more information).

Search for more jobs:
American Economic Association
CareerBuilder.com
The Economist Classifieds
PhDs.org
ScienceCareers.org

September 30, 2004

Upcoming Decision Science Conference

Filed in Conferences
Subscribe to Decision Science News by Email (one email per week, easy unsubscribe)

SOCIETY FOR JUDGEMENT AND DECISION MAKING 2004 ANNUAL CONFERENCE 25TH ANNIVERSARY EDITION

SJDM small.gif

The 25th Annual Conference of the Society for Judgment and Decision Making will be held November 19th to the 22th 2004 at the Millennium Hotel Minneapolis in Minneapolis, Minnesota.

The Society for Judgment and Decision Making is an interdisciplinary academic organization dedicated to the study of normative, descriptive, and prescriptive theories of decision. Its members include psychologists, economists, organizational researchers, decision analysts, and other decision researchers. The Society’s primary event is its Annual Meeting at which Society members present their research.

The registration form for the 2004 annual meeting is now available! Go to the Society for Judgment and Decision Making Home page and please print out the form. Then mail it to the address given to register. And to members, don’t forget to pay your annual dues. You can read the 2004 annual meeting program (PDF format) and a list of posters with abstracts (Excel format). Another listing can be found in the September 2004 SJDM Newsletter.

The Organization Comitte is:
Eric Johnson, President (ejj3@columbia.edu)
Joshua Klayman, Past President (joshk@uchicago.edu)
Maya Bar-Hillel, President-Elect (msmaya@math.huji.ac.il)
Bud Fennema, Secretary-Treasurer (bfennema@garnet.acns.fsu.edu)
Alan Schwartz, Webmaster (alansz@sjdm.org)
Warren Thorngate, Newsletter Editor (warrent@ccs.carleton.ca)
Richard Coughlan, Conference Coordinator (rcoughla@richmond.edu)
Craig Fox, Program Committee Chair (craig.fox@anderson.ucla.edu)

This meeting will be held just after the Brunswik Society 20th Annual International Meeting and the Psychonomic Society Annual Meeting.

September 27, 2004

Daniel Kahneman

Filed in Profiles
Subscribe to Decision Science News by Email (one email per week, easy unsubscribe)

DECISION SCIENCE RESEARCHER PROFILE: DANIEL KAHNEMAN WINNER OF THE 2002 NOBEL PRIZE IN ECONOMIC SCIENCES

kahneman.gif

Currently, Daniel Kahneman is both the Eugene Higgins Professor of Psychology and professor of public affairs in the Woodrow Wilson School of Public and International Affairs at Princeton University and a fellow at The Hebrew University in Jerusalem. He is a pioneer and theorist in human judgment and decision-making research. He is known for his collaboration with Amos Tversky in establishing a cognitive basis for common human reasoning using heuristics, and in developing Prospect Theory and other pivotal theories. Kahneman received his B.Sc. in Mathematics and Psychology from The Hebrew University in Jerusalem in 1954, and his Ph.D. in Psychology from the University of California, Berkeley in 1961.

Recent Academic History:
*Former professor of psychology at The University of California, Berkeley
*Fellow at The Canadian Institute for Advanced Research
*Former professor of psychology at The University of British Columbia
*Fellow at The Center for Advanced Study in the Behavioral Sciences
*Former professor at The Hebrew University in Jerusalem
*Member of The American Academy of Arts and Sciences
*Member of The National Academy of Sciences
*Fellow of The American Psychological Association
*Fellow of The American Psychological Society
*Fellow of The Society of Experimental Psychologists
*Fellow of The Econometric Society

Awards:
*The Distinguished Scientific Contribution Award of the American Psychological Association
*The Warren Medal of the Society of Experimental Psychologists
*The Hilgard Award for Career Contributions to General Psychology
*The winner of the 2002 Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel

Quotes:
“In one experience I remember vividly, there was a rich range of shades. It must have been late 1941 or early 1942. Jews were required to wear the Star of David and to obey a 6 p.m. curfew. I had gone to play with a Christian friend and had stayed too late. I turned my brown sweater inside out to walk the few blocks home. As I was walking down an empty street, I saw a German soldier approaching. He was wearing the black uniform that I had been told to fear more than others – the one worn by specially recruited SS soldiers. As I came closer to him, trying to walk fast, I noticed that he was looking at me intently. Then he beckoned me over, picked me up, and hugged me. I was terrified that he would notice the star inside my sweater. He was speaking to me with great emotion, in German. When he put me down, he opened his wallet, showed me a picture of a boy, and gave me some money. I went home more certain than ever that my mother was right: people were endlessly complicated and interesting.”

“A framing effect is demonstrated by constructing two transparently equivalent versions of a given problem, which nevertheless yield predictably different choices. The standard example of a framing problem, which was developed quite early, is the ‘lives saved, lives lost’ question, which offers a choice between two public-health programs proposed to deal with an epidemic that is threatening 600 lives: one program will save 200 lives, the other has a 1/3 chance of saving all 600 lives and a 2/3 chance of saving none. In this version, people prefer the program that will save 200 lives for sure. In the second version, one program will result in 400 deaths, the other has a 2/3 chance of 600 deaths and a 1/3 chance of no deaths. In this formulation most people prefer the gamble. If the same respondents are given the two problems on separate occasions, many give incompatible responses. When confronted with their inconsistency, people are quite embarrassed. They are also quite helpless to resolve the inconsistency, because there are no moral intuitions to guide a choice between different sizes of a surviving population.”

“The focus of my research for the past fifteen years has been the study of various aspects of experienced utility – the measure of the utility of outcomes as people actually live them. The concept of utility in which I am interested was the one that Bentham and Edgeworth had in mind. However, experienced utility largely disappeared from economic discourse in the twentieth century, in favor of a notion that I call decision utility, which is inferred from choices and used to explain choices. The distinction could be of little relevance for fully rational agents, who presumably maximize experienced utility as well as decision utility. But if rationality cannot be assumed, the quality of consequences becomes worth measuring and the maximization of experienced utility becomes a testable proposition.”

“Although behavioral economics has enjoyed much more rapid progress and gained more respectability in economics than appeared possible fifteen years ago, it is still a minority approach and its influence on most fields of economics is negligible. Many economists believe that it is a passing fad, and some hope that it will be. The future may prove them right. But many bright young economists are now betting their careers on the expectation that the current trend will last. And such expectations have a way of being self-fulfilling.”

Selected Books:
*Choices, Values and Frames by Daniel Kahneman and Amos Tversky

*Judgment under Uncertainty: Heuristics and Biases by Daniel Kahneman, Paul Slovic, Amos Tversky

*Well-Being: Foundations of Hedonic Psychology by Daniel Kahneman, Edward Diener, Norbert Schwarz

Read More:
Daniel Kahneman Curriculum Vitae

Daniel Kahneman Autobiography at Nobelprize.org .

Daniel Kahneman’s Prize Lecture

September 13, 2004

Looking for a good introduction to decsion science?

Filed in Books
Subscribe to Decision Science News by Email (one email per week, easy unsubscribe)

RATIONAL CHOICE IN AN UNCERTAIN WORLD BY REID HASTIE AND ROBYN M. DAWES

rational choice in an uncertain world.jpg

The Psychology of Judgement and Decision Making.

Intended as an introductory textbook for both undergraduate and graduate students, Rational Choice In An Uncertain World lays out the foundations of decision science. In a non-technical style, Hastie and Dawes compare basic principles of rationality with actual behavior in decision-making. This book is not about what to choose, rather about how we choose.

Excerpt:

“Humans evolved from ancestors hundreds of thousands of years ago who lived in small groups and spent most of their waking hours foraging for sustenance. When we weren’t searching for something to eat or drink, we were looking for safe places to live, selecting mates, and protecting the offspring from those unions. Our success in accomplishing these “survival tasks” did not arise because of acute senses or especially powerful physical capacities. We dominate this planet today because of our distinctive capacity for good decision making.”

“The new knowledge that underlies the filed of decision making is simple principles that define rationality in decision making and empirical facts about the cognitive limits that lead us not to decide rationally.”

“One fundamental point of this book is that we often think in automatic ways when making judgments and choices, that these automatic thinking processes can be described by certain psychological rules (e.g., heuristics) and that they can systematically lead us to make poorer judgments and choices that we would by thinking in a more controlled manner abut our decisions. This is not to say that controlled thought is always better than intuitive thought. In fact, we hope the reader who finishes the book will have a heightened appreciation of the relative advantages of the two modes of thinking.”

Review by Practical Philosophy: The Journal of the Society for Philosophy in Practice

About the Authors:

PROFESSOR REID HASTIE

Hastie.jpg

Reid Hastie is a Professor of Behavioral Science on the faculty of the Graduate School of Business in the Center for Decision Research at the University of Chicago. His primary research interests are in the areas of judgment and decision making (legal, managerial, medical, engineering, and personal), memory and cognition, and social psychology. He is best known for his research on legal decision making (Social Psychology in Court [with Michael Saks]; Inside the Jury [with Steven Penrod and Nancy Pennington]; and Inside the Juror [edited]) and on social memory and judgment processes (Person Memory: The Cognitive Basis of Social Perception [several co-authors]). Currently he is studying: the role of explanations in category concept representations (including the effects on category classification, deductive, and inductive inferences); civil jury decision making; the role of frequency information in probability judgments; and the psychology of reading statistical graphs and maps.

Reid Hastie vita

ROBYN M. DAWES, Ph.D.

dawes.jpg

Robyn Dawes is the Charles J. Queenan, Jr. University Professor Ph.D.: University of Michigan Department Member Since: 1985 at the Department of Social & Decision Sciences at Carnegie Mellon University. His research interests spans five areas: intuitive expertise, human cooperation, retrospective memory, methodology and United States AIDS policy. He states, “I write journal articles and books because I believe the information they contain could be valuable — at least on a “perhaps, maybe” basis. I have never written anything with the expectation that it will sell, or become a “citation classic” (although one of my articles has). I believe that in American culture we are obsessed with outcomes rather than with behaving in ways that tend to bring about the best expected outcomes, while “time and chance” play a very important role. […] Some of my clinical colleagues claim that feelings are not understood until they can be put into words. My own view is that every translation of a feeling, thought, idea or mathematical form into words involves at least a small element of automatic distortion, often a much larger element.”

Robyn Dawes Home Page at CMU

September 12, 2004

Do crowds make better decisions than individuals? Yes, says author James Surowiecki in The Wisdom of Crowds

Filed in Books
Subscribe to Decision Science News by Email (one email per week, easy unsubscribe)

THE WISDOM OF CROWDS BY JAMES SUROWIECKI

the-wisdom-of-crowds.gif

Why the many are smarter than the few and how collective wisdom shapes business, economies, societies, and nations

Traditionally, social sciences view the crowd as an unpredictable, dumb, and panicky monster. Now there is another point of view. New Yorker columnist James Surowiecki, who writes a popular business column and much about how markets work, has noticed a few things about crowd behavior that contradicts this view. He says in fact that crowds of all kinds can be remarkably wise. In The Wisdom of Crowds, Surowiecki explores the notion that large groups of people are smarter than an elite few, no matter how brilliant; crowds can be better at solving problems, fostering innovation, coming to wise decisions and even predicting the future.

Excerpt:

“If, years hence, people remember anything about the TV game show “Who Wants to Be a Millionaire?,” they will probably remember the contestants’ panicked phone calls to friends and relatives. Or they may have a faint memory of that short-lived moment when Regis Philbin became a fashion icon for his willingness to wear a dark blue tie with a dark blue shirt. What people probably won’t remember is that every week “Who Wants to Be a Millionaire?” pitted group intelligence against individual intelligence, and that every week, group intelligence won.”

“There are four key qualities that make a crowd smart. It needs to be diverse, so that people are bringing different pieces of information to the table. It needs to be decentralized, so that no one at the top is dictating the crowd’s answer. It needs a way of summarizing people’s opinions into one collective verdict. And the people in the crowd need to be independent, so that they pay attention mostly to their own information, and not worrying about what everyone around them thinks.”

Review from the Wisdom of Crowds Home Page:

“The Wisdom of Crowds is a brilliant but accessible biography of an idea, one with important lessons for how we live our lives, select our leaders, conduct our business, and think about our world.”

About the Author:

JSurowiecki.gif

James Surowiecki is a staff writer at The New Yorker, where he writes the popular business column, “The Financial Page.” His work has appeared in a wide range of publications, including the New York Times, the Wall Street Journal, Artforum, Wired, and Slate. He lives in Brooklyn, New York.

Review of The Wisdom of Crowds by The New York Times

September 7, 2004

Why do people choose to work alone or on teams? Which has better outcomes?

Filed in Research News
Subscribe to Decision Science News by Email (one email per week, easy unsubscribe)

INDIVIDUAL OR TEAM DECISION-MAKING – CAUSES AND CONSEQUENCES OF SELF-SELECTION

teams.jpg

People are social animals. There are at least two kinds of decision-making techniques. One technique is to make decisions individually. The other technique is to make decisions as a team. A recent study by Martin Kocher, Sabine Straub and Matthias Sutter, in Discussion Papers on Strategic Interaction from Max Planck Institute for Research into Economic Systems, Strategic Interaction Group, investigates the causes and consequences of individual or team decision-making and what effect the liberty to opt for either technique has on an individual’s ability to make effective decisions. Kocher, Straub and Sutter found that the endogenously formed teams performed significantly better by earning nearly twice as much money in an experiment as did individuals.

Average Profits:
graph-4.gif

We can see here that teams earned significantly more than individuals in rounds 1, 3, and 4 as well as for all rounds together. Team members win on average 13.2 euros but individuals only 7.4 euros.

Reasons for deciding alone or in groups:
graph-2.gif

Participants were encouraged to write down any additional reasons that were important for their decisions. We see here a summary of the additional arguments into nine different categories.

The most important reason for participants who opted for team decision-making was the expectation of better decisions and, thus, higher profits. Most of the subjects choosing individual decision making stressed the importance of being able to decide alone, without any need for discussion or compromise. No participant who prefered to act alone referred to profits or the quality of decision-making, instead all arguments were related to the process of decision-making. Both types of decision makers, interestingly, were highly satisfied with their chosen role.

Abstract:

Even though decision-making in small teams is pervasive in business and in private life, little is known about subjects’ preferences with respect to individual and team decision-making and about the consequences of respecting these preferences. We report the results from an experimental beauty-contest game, where subjects could endogenously choose their preferred way of decision-making. About 60% of subjects prefer to act in a team, and teams win the game significantly more often than individuals. Nevertheless, both individuals and team members are highly satisfied with their chosen role, but for different reasons.

Excerpt:

“Teams are generally expected to make better decisions than individuals, and decisions made by teams are often accepted to a larger extent by those affected by these decisions. Furthermore, decision-making teams allow for the possibility to decentralize authority, encourage gains from knowledge transfers and may help to introduce optimal incentive schemes that can be supervised by peer pressure rather than by more costly shirking detection technologies. Thus, teams have become important vehicles for identifying high-quality solutions to emerging organizational problems (Jehn et al., 1999).”

Full text of article.

August 24, 2004

Fame at last

Filed in Gossip
Subscribe to Decision Science News by Email (one email per week, easy unsubscribe)

FAST AND FRUGAL IN THE NEW YORKER

current_cover.jpg

The catchiest of the concepts I’ve coined, “fast and frugal reasoning”, has made the New Yorker!

The Unpolitical Animal by Louis Menand

The author doesn’t use it quite correctly, but one can’t ask for everything I suppose. The fast and frugal heuristics I came up with do reason well in real-world environments.

I came up with the term in 1994 or so, it first appeared in print here: Gigerenzer, G. & Goldstein, D. G. (1996). Reasoning the fast and frugal way: Models of bounded rationality. Psychological Review, 103, 650-669.

August 23, 2004

A Model of Reference-Dependent Preferences

Filed in Research News
Subscribe to Decision Science News by Email (one email per week, easy unsubscribe)

MODELING PREFERENCES THAT RESPECT REFERENCE POINTS

RATCHET.jpg

Reference-dependent preferences are everywhere. A working paper by Berkeley’s Botond Koszegi and Matt Rabin provides a welcome model of them. Read on.

Quote:
“Our goal in this paper was to put forward a fully specified model of reference dependent preferences that can accommodate existing evidence and, most importantly, be applied to a wide range of economic situations. The centerpiece of our model is the proposal that a person’s reference point is her recent probabilistic beliefs about the outcomes she is going to get. Thus, for example, if she expects improvements in her circumstances, and these changes fail to occur, she experiences a painful sensation of loss, even if she has retained or improved on her status quo. Indeed, our model provides an avenue to study an intuition about the strong role that expectations play in employee satisfaction with wages; it predicts both a status quo bias in stagnant environments, and a taste for improvement in environments where workers have become accustomed to improvement.”

Abstract:
“We develop a model that fleshes out, extends, and modifies existing models of reference dependent preferences and loss aversion while accomodating most of the evidence motivating these models. Our approach makes reference-dependent theory more broadly applicable by avoiding some of the ways that prevailing models—if applied literally and without ancillary assumptions—make variously weak and incorrect predictions. Our model combines the reference-dependent gain-loss utility with standard economic consumption utility and clarifies the relationship between the two. Most importantly, we posit that a person’s reference point is her recent expectations about outcomes (rather than the status quo), and assume that behavior accords to a personal equilibrium: The person maximizes utility given her rational expectations about outcomes, where these expectations depend on her own anticipated behavior. We apply our theory to consumer behavior, and emphasize that a consumer’s willingness to pay for a good is endogenously determined by the market distribution of prices and how she expects to respond to these prices. Because a buyer’s willingness to buy depends on whether she anticipates buying the good, for a range of market prices there are multiple personal equilibria. This multiplicity disappears when the consumer is sufficiently uncertain about the price she will face. Because paying more than she anticipated induces a sense of loss in the buyer, the lower the prices at which she expects to buy the lower will be her willingness to pay. In some situations, a known stochastic decrease in prices can even lower the quantity demanded.”

Full article available for download

Related Books:
*Colin F. Camerer, George Loewenstein & Matthew Rabin (Eds.) (2004). Advances in Behavioral Economics.
*Daniel Kahneman & Amos Tversky (Eds.) (2000). Choices, Values, and Frames.

August 19, 2004

Richard H. Thaler

Filed in Profiles
Subscribe to Decision Science News by Email (one email per week, easy unsubscribe)

DECISION SCIENCE RESEARCHER PROFILE: RICHARD H. THALER

thaler.jpg

Richard Thaler is the Robert P. Gwinn Professor of behavioral science and economics at University of Chicago. He currently serves as the director of the Center for Decision Research, and is a research associate at the National Bureau of Economic Research and co-director of the project on behavioral economics. His research focuses on behavioral economics and finance, as well as the psychology of decision making. He has served as a visiting professor at the Sloan School of Management, Massachusetts Institute of Technology, as well as the H. J. Louis Professor of Economics, Johnson Graduate School of Management, Cornell University. Dr. Thaler earned his B.A. in economics from Case Western Reserve University and his Ph.D. in economics from the University of Rochester.

Current Positions:
*Robert P. Gwinn Professor of Behavioral Science and Economics, and Director of the Center for Decision Research, Graduate School of Business, University of Chicago.
*Research Associate, National Bureau of Economic Research (co-director -with Robert Shiller- of the Behavioral Economics Project, funded by the Russell Sage Foundation)

Recent Academic History:
*January 1988-June 1995: Henrietta Johnson Louis Professor of Economics, Johnson Graduate School of Management, Cornell University and Director, Center for Behavioral Economics and Decision Research
*Septeber 1994-June 1995: Visiting Professor, Sloan School of Management, MIT
*January 1993-July 1993: Visiting Scholar, Sloan School of Management, MIT
*September 1991-July 1992: Visiting Scholar, Russell Sage Foundation, New York, NY

Quotes:
“I am an economist by training, but for the last 25 years I have been exploring ways to incorporate the findings of modern psychology into economic analysis.”

“As firms switch from defined-benefit plans to defined-contribution plans, employees bear more responsibility for making decisions about how much to save. The employees who fail to join the plan or who participate at a very low level appear to be saving at less than the predicted life cycle savings rates. Behavioral explanations for this behavior stress bounded rationality and self-control and suggest that at least some of the low-saving households are making a mistake and would welcome aid in making decisions about their saving”.

“We tend to think others are just like us. My colleague, George Wu, asked his students two questions: Do you have a cell phone? What percentage of the class has a cell phone? Cell phone owners thought 65 percent of the class had mobile phones, while the immobile phoners thought only 40 percent did. The right answer was about halfway in between. The false consensus effect will trap me into thinking that other economists will agree with me, 20 years of contrary evidence notwithstanding.”

Selected Books:
* Richard Thaler (1991). Quasi-Rational Economics. Russell Sage Foundation.
* Richard Thaler (1991). The Winner’s Curse: Paradoxes and Anomalies of Economic Life. Free Press.
* Richard Thaler (ed.) (1993). Advances in Behavioral Finance, editor. Russell Sage Foundation.

Selected Articles:
* Barberis , Nicholas and Richard H. Thaler (2003), A Survey of Behavioral Finance. In Handbook of the Economics of Finance. George M. Constantinides, Milton Harris, and Rene Stultz editors. Elsevier Science, North Holland, Amsterdam.
* Lamont, Owen and Richard Thaler, (2003), Can the Market Add and Subtract? Mispricing in Tech Stock Carve-Outs , Journal of Political Economy. 111(2): 227-268
* Benartzi , Shlomo, and Richard Thaler, (2002), How Much Is Investor Autonomy Worth? Journal of Finance Vol. 57.4, pp. 1593-1616.
* Benartzi, S.and Thaler, R., 2004, Save More Tomorrow: Using Behavioral Economics to Increase Employee Savings, Journal of Political Economy, Vol. 112:1, 164-187.

Other Interests:
Tennis, skiing, wine.

Read more:
Richard H. Thaler’s Home page at the Univerity of Chicago

Richard H. Thaler’s Activity page at the University of Chicago

Richard H. Thaler Bio