scholarly journals The Attraction and Compromise Effects in Bargaining: Experimental Evidence

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.

Talking Behind Your Back: Communication and Team Cooperation

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.

Self-Interested Giving: The Relationship Between Conditional Gifts, Charitable Donations, and Donor Self-Interestedness

2021 ◽  
Author(s):  
Matthew Chao ◽  
Geoffrey Fisher
Keyword(s):  
Decision Analysis ◽  
Experimental Evidence ◽  
Laboratory Experiments ◽  
Self Report ◽  
Negative Effects ◽  
Charitable Donations ◽  
Prosocial Motives ◽  
The Gift ◽  
Other Regarding ◽  
The Relationship

Nonprofits regularly use conditional “thank you” gifts to entice prospective donors to give, yet experimental evidence suggests that their effects are mixed in practice. This paper uses multiple laboratory experiments to test when and why thank you gifts vary in effectiveness. First, we demonstrate that although gifts often increase donations to charities that donors did not rate highly, many of the same gifts had no effects or negative effects for charities that prospective donors already liked. We replicate these findings in a second experiment that uses a different range of charity and gift options as well as different measures of participant perceptions of a charity. We also find that making gifts optional, as is common in fundraising campaigns, does not eliminate these negative gift effects. In additional experiments, we directly test for donor motives using self-report and priming experiments. We find that thank you gifts increase (decrease) the weight that donors place on self-interested (prosocial) motives, leading to changes in donation patterns. Altogether, our results suggest that practitioners may find gifts more useful when appealing to donors not already familiar with or favorably inclined to their charity, such as during donor acquisition campaigns. They may be less useful when appealing to recent donors or others who already favor the charity, in part because the gift may activate mindsets or norms that emphasize self-interested motives instead of more prosocial, other-regarding motives. This paper was accepted by Yan Chen, decision analysis.

Moral Perceptions of Advised Actions

2019 ◽  
Vol 65 (8) ◽  
pp. 3904-3927 ◽  
Author(s):  
Lucas C. Coffman ◽  
Alexander Gotthard-Real
Keyword(s):  
Behavioral Economics ◽  
Experimental Evidence ◽  
Decision Makers ◽  
Relational Contract ◽  
Suggestive Evidence ◽  
Present Experimental Evidence

Can an organization avoid blame for an unpopular action when an adviser advises it to do it? We present experimental evidence suggesting this is the case—advice to be selfish substantially decreases punishment of being selfish. Further, this result is true despite advisers’ misaligned incentives, known to all: Through a relational contract incentive, advisers are motivated to tell the decision makers what they want to hear. Through incentivized elicitations, we find suggestive evidence that advice moves punishment by affecting beliefs of how necessary the selfish action was. In follow-up treatments, however, we show advice does not decrease punishment solely through a beliefs channel. Advice not only changes beliefs about what happened, but also the perceived morality of it. Finally, in treatments in which advisers are available, the data suggest selfish decision makers act more selfishly. This paper was accepted by Axel Ockenfels, behavioral economics.

scholarly journals Testing a preference inference account of classic preference reversals

2019 ◽  
Author(s):  
Harish Balakrishnan ◽  
Nisheeth Srivastava
Keyword(s):  
Decision Making ◽  
Choice Experiments ◽  
Attraction Effect ◽  
Recent Theory ◽  
Compromise Effect ◽  
Preference Reversals ◽  
Rational Basis ◽  
Preferential Choice ◽  
Future Work ◽  
Different Sources

Different theories of decision making assume different sources of preferences for the choices we make. A recent theory has proposed that preferences are inferred from past choices in respective contexts, and that such preference inference offers a rational basis for the origin of classic preference reversals given certain sequences of observations. In this paper, we empirically test this theory for some of the classic preference reversals - the attraction effect and the compromise effect, through longitudinal preferential choice experiments. In this paradigm, participants provide their preferences for different choices occurring in different contexts throughout the experiment. Results indicate evidence in favour of a considerable attraction effect but are mixed for a compromise effect. We briefly discuss the theoretical implications of our findings and possible directions for future work.

scholarly journals Optimal Management of Evolving Hierarchies

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.

Selling the Premium in Freemium

2018 ◽  
Vol 82 (6) ◽  
pp. 10-27 ◽  
Author(s):  
Xian Gu ◽  
P.K. Kannan ◽  
Liye Ma
Keyword(s):  
Significant Contribution ◽  
Positive Impact ◽  
Product Line ◽  
Attraction Effect ◽  
Compromise Effect ◽  
Book Price ◽  
Randomized Field Experiment ◽  
Standard Product ◽  
Line Setting ◽  
Number Of Customers

The success of a freemium model depends on the number of customers who purchase the premium version in the presence of the free version. The authors investigate the strategy of extending the premium product line to spur demand for the existing premium version. Extending the results of the standard product line model is insufficient in such cases because of the conceptual nuances in a freemium context. The authors conduct a randomized field experiment with an online content provider that offers book titles in a PDF version for free and sells the paperback version for a premium. The authors show that paperback titles accompanied by an additional premium version, either in e-book or hardcover format, have higher sales than those in the control condition. The positive impact on paperback sales is stronger for titles that are more popular or cheaper, and the effect of introducing the e-book version is higher when the e-book price is closer to the paperback price. By analyzing individual customer choices, the authors identify the existence of the compromise effect and the attraction effect in the extended product line setting, a significant contribution not only in the freemium context but also to the product line literature.

scholarly journals On the Fair Division of a Random Object

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.

The Effect of Forced Choice on Choice

2003 ◽  
Vol 40 (2) ◽  
pp. 146-160 ◽  
Author(s):  
Ravi Dhar ◽  
Itamar Simonson
Keyword(s):  
Consumer Preferences ◽  
Forced Choice ◽  
Attraction Effect ◽  
Compromise Effect ◽  
Implicit Assumption ◽  
Industry Studies ◽  
General Proposition ◽  
The Impact ◽  
Choice Option ◽  
Practical Implications

Whereas most academic and industry studies of consumer preferences and decision making involve forced choice (i.e., participants are told to choose one of the presented product or service alternatives), buyers usually also have the option not to select any alternative. An implicit assumption in the experimental practice of forcing choice is that the no-choice option draws proportionately from the various available alternatives, such that the qualitative conclusions are unaffected. However, the authors propose that the no-choice option competes most directly with alternatives that buyers tend to select when they are uncertain about their preferences. Building on this general proposition, the authors show that the introduction of the no-choice option strengthens the attraction effect, weakens the compromise effect, and decreases the relative share of an option that is “average” on all dimensions. They also examine the mechanisms underlying the impact of having the option not to choose and the conditions under which the no-choice option is likely to affect relative option shares. The results are consistent with the notion that the no-choice option provides an alternative way of resolving difficult choices that is not available when subjects are forced to choose. The authors discuss the theoretical and practical implications of this research.

scholarly journals The (In)Elasticity of Moral Ignorance

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.

Sign in / Sign up

Export Citation Format

Share Document