Editorial Statement—Behavioral Economics and Decision Analysis

Talking Behind Your Back: Communication and Team Cooperation

Management Science ◽

10.1287/mnsc.2021.4143 ◽

2021 ◽

Author(s):

Klaus Abbink ◽

Lu Dong ◽

Lingbo Huang

Keyword(s):

Behavioral Economics ◽

Decision Analysis ◽

Experimental Evidence ◽

Team Communication ◽

Team Cooperation ◽

Profit Allocation ◽

Asymmetric Communication ◽

Present Experimental Evidence

Communication is one of the most effective devices in promoting team cooperation. However, asymmetric communication sometimes breeds collusion and hurts team efficiency. Here, we present experimental evidence showing that excluding one member from team communication hurts team cooperation; the communicating partners collude in profit allocation against the excluded member, and the latter reacts by exerting less effort. Allowing the partners to reach out to the excluded member partially restores cooperation and fairness in profit allocation, but it does not stop the partners from talking behind that member’s back even when they could have talked publicly. The partners sometimes game the system by tricking the excluded member into contributing but then grabbing all profits for themselves. This paper was accepted by Axel Ockenfels, behavioral economics and decision analysis.

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The Attraction and Compromise Effects in Bargaining: Experimental Evidence

Management Science ◽

10.1287/mnsc.2021.4025 ◽

2021 ◽

Author(s):

Fabio Galeotti ◽

Maria Montero ◽

Anders Poulsen

Keyword(s):

Behavioral Economics ◽

Decision Analysis ◽

Experimental Evidence ◽

Attraction Effect ◽

Compromise Effect

We experimentally investigate, in an unstructured bargaining environment with commonly known money payoffs, the attraction effect and compromise effect (AE and CE) in bargaining, namely, a tendency for bargainers to agree to an intermediate option (CE) or to an option that dominates another option (AE). We conjecture that the relevance of the AE and CE in bargaining is constrained by how focal the feasible agreements’ payoffs are. We indeed observe that there are significant AEs and CEs, but these effects are mediated by the efficiency and equality properties of the feasible agreements. Due to the allure of equality, the effects are harder to observe when an equal earnings contract is available. Decoys are more effective in shifting agreements from a very unequal contract to a less unequal one rather than the reverse. This paper was accepted by Yuval Rottenstreich, behavioral economics and decision analysis.

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Optimal Management of Evolving Hierarchies

Management Science ◽

10.1287/mnsc.2021.4185 ◽

2021 ◽

Author(s):

Jens Leth Hougaard ◽

Juan D. Moreno-Ternero ◽

Lars Peter Østerdal

Keyword(s):

Behavioral Economics ◽

Decision Analysis ◽

Private Information ◽

Joint Venture ◽

Social Mobilization ◽

Optimal Management ◽

Allocation Scheme ◽

Multilevel Marketing ◽

Potential Applications

We study the optimal management of evolving hierarchies of revenue-generating agents. The initiator invests into expanding the hierarchy by adding another agent, who will bring revenues to the joint venture and who will invest herself into expanding the hierarchy further, and so on. The higher the investments (which are private information), the higher the probability of expanding the hierarchy. An allocation scheme specifies how revenues are distributed, as the hierarchy evolves. We obtain schemes that are socially optimal and initiator-optimal, respectively. Our results have potential applications for blockchain, cryptocurrencies, social mobilization, and multilevel marketing. This paper was accepted by Manel Baucells, behavioral economics and decision analysis.

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On the Fair Division of a Random Object

Management Science ◽

10.1287/mnsc.2021.3973 ◽

2021 ◽

Author(s):

Anna Bogomolnaia ◽

Hervé Moulin ◽

Fedor Sandomirskiy

Keyword(s):

Probability Distribution ◽

Behavioral Economics ◽

Decision Analysis ◽

Expected Utility ◽

Design Problem ◽

Fair Division ◽

Statistical Information ◽

Equal Division ◽

Fair Share ◽

The Mean

Ann likes oranges much more than apples; Bob likes apples much more than oranges. Tomorrow they will receive one fruit that will be an orange or an apple with equal probability. Giving one half to each agent is fair for each realization of the fruit. However, agreeing that whatever fruit appears will go to the agent who likes it more gives a higher expected utility to each agent and is fair in the average sense: in expectation, each agent prefers the allocation to the equal division of the fruit; that is, the agent gets a fair share. We turn this familiar observation into an economic design problem: upon drawing a random object (the fruit), we learn the realized utility of each agent and can compare it to the mean of the agent’s distribution of utilities; no other statistical information about the distribution is available. We fully characterize the division rules using only this sparse information in the most efficient possible way while giving everyone a fair share. Although the probability distribution of individual utilities is arbitrary and mostly unknown to the manager, these rules perform in the same range as the best rule when the manager has full access to this distribution. This paper was accepted by Ilia Tsetlin, behavioral economics and decision analysis.

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The (In)Elasticity of Moral Ignorance

Management Science ◽

10.1287/mnsc.2021.4153 ◽

2021 ◽

Author(s):

Marta Serra-Garcia ◽

Nora Szech

Keyword(s):

Behavioral Economics ◽

Decision Analysis ◽

Social Norm ◽

Demand Curve ◽

Behavioral Model ◽

Monetary Incentives ◽

Keen Interest ◽

Moral Ignorance ◽

Percentage Points ◽

The Face

Ignorance enables individuals to act immorally. This is well known in policy circles, in which there is keen interest in lowering moral ignorance. In this paper, we study how the demand for moral ignorance responds to monetary incentives and how the demand curve for ignorance reacts to social norm messages. We propose a simple behavioral model in which individuals suffer moral costs when behaving selfishly in the face of moral information. In several experiments, we find that moral ignorance decreases by more than 30 percentage points with small monetary incentives, but we find no significant change with social norm messages, and we document strong persistence of ignorance across moral contexts. Our findings indicate that rather simple messaging interventions may have limited effects on ignorance. In contrast, changes in incentives could be highly effective. This paper was accepted by Yan Chen, behavioral economics and decision analysis.

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Editorial Statement: Behavioral Economics

Management Science ◽

10.1287/mnsc.1110.1405 ◽

2011 ◽

Vol 57 (7) ◽

pp. iv-iv

Author(s):

Uri Gneezy ◽

Teck-Hua Ho ◽

John List

Keyword(s):

Behavioral Economics ◽

Editorial Statement

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Complex Disclosure

Management Science ◽

10.1287/mnsc.2021.4037 ◽

2021 ◽

Author(s):

Ginger Zhe Jin ◽

Michael Luca ◽

Daniel Martin

Keyword(s):

Structural Analysis ◽

Behavioral Economics ◽

Decision Analysis ◽

Laboratory Experiment ◽

Private Information ◽

Present Evidence ◽

Complex Information ◽

Strategic Incentives

We present evidence that unnecessarily complex disclosure can result from strategic incentives to shroud information. In our laboratory experiment, senders are required to report their private information truthfully but can choose how complex to make their reports. We find that senders use complex disclosure more than half the time. This obfuscation is profitable because receivers make systematic mistakes in assessing complex reports. Regression and structural analysis suggest that these mistakes could be driven by receivers who are naive about the strategic use of complexity or overconfident about their ability to process complex information. This paper was accepted by Yan Chen, behavioral economics and decision analysis.

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