Behavioral Decision-making Theory Research Articles

How social interaction induce energy-saving behaviors in buildings: Interpersonal & passive interactions v.s. public & active interactions

Programs and policies that reduce energy consumption take the home, workplaces, and communities as the unit of analysis, with little consideration of the social interactions among people. Based on social interaction theory and behavioral decision-making theory, this paper conducted a questionnaire study and collected >1000 samples to analyze the effects of social relationships, active or passive interaction, and individual characteristics on energy-saving behaviors at different levels of difficulty, such as habit adjustments, equipment upgrades, and housing retrofits. The results show that social interactions positively contribute to individual energy-saving behaviors, but there are significant differences in the effects on different behaviors. Low-difficulty energy-saving behaviors are susceptible to interpersonal and passive interactions, while high-difficulty energy-saving behaviors are susceptible to public relations and active interactions. In addition, individual perceived value and information processing depth play a mediating and moderating role, respectively, in the impact of social interactions on energy-saving behaviors. Based on a new social interaction perspective, the findings of this paper can provide scientific support for the formulation of differentiated, non-economically motivated energy-saving policies.

The computational roots of positivity and confirmation biases in reinforcement learning.

Humans do not integrate new information objectively: outcomes carrying a positive affective value and evidence confirming one's own prior belief are overweighed. Until recently, theoretical and empirical accounts of the positivity and confirmation biases assumed them to be specific to 'high-level' belief updates. We present evidence against this account. Learning rates in reinforcement learning (RL) tasks, estimated across different contexts and species, generally present the same characteristic asymmetry, suggesting that belief and value updating processes share key computational principles and distortions. This bias generates over-optimistic expectations about the probability of making the right choices and, consequently, generates over-optimistic reward expectations. We discuss the normative and neurobiological roots of these RL biases and their position within the greater picture of behavioral decision-making theories.

Markowitz Mean-Variance Portfolio Selection and Optimization under a Behavioral Spectacle: New Empirical Evidence

This paper investigates the robustness of the conventional mean-variance (MV) optimization model by making two adjustments within the MV formulation. First, the portfolio selection based on a behavioral decision-making theory that encapsulates the MV statistics and investors psychology. The second aspect involves capturing the portfolio asset dependence structure through copula. Using the behavioral MV (BMV) and the copula behavioral MV (CBMV), the results show that stocks with lower behavioral scores outperform counterpart portfolios with higher behavioral scores. On the other hand, in the Forex market, the reverse is observed for the BMV approach, while the CBMV remains consistent.

The influence of ICT instruments on a transmission of interest rates by business entities and public authorities – A scientific comment

Purpose of the study: This article aims to present the role played by electronic communication tools from the economic and investor perspective. The paper focuses on three axes: ICT for a transmission of information on interest rates, ICT as a source of information for investors and ICT for improving market efficiency.
 Methodology: The article is exploratory in nature, which means that in order to investigate the individual pillars of this work, an analysis of the corresponding literature sources has been made. An extensive review of scientific articles, scientific books, and working papers corresponding to individual axes was made.
 Main Findings: ICT tools show an advantage over other (more traditional) communication channels, which is reflected in more dynamic and immediate market reactions. High use of these tools is observed both among enterprises and central agencies. The effective transmission of information about interest rates minimizes the risk of making wrong investment decisions. However, it is important to bear in mind the challenges of, inter alia, still low level of digital literacy among the society.
 Applications of the study: This work may be an incentive for entrepreneurs to digitize their companies more widely, but also for investors to use ICT to make investment decisions more accurately.
 Novelty/Originality of the study: The paper presents a broad literature overview on using ICT tools in economic applications, including investment. The starting point is also behavioral decision-making theories along with classical heuristics.

Who wants to reopen the economy during the COVID-19 pandemic? The daring and uncaring

Economic shutdowns, which refer to disallowing employees to work on site, are among the most contentious approaches to reduce the spread of COVID-19. While economic shutdowns save lives, their large economic costs have caused some people to develop strong attitudes and even break government-issued mandates, which incurs health risks and often the need to extend the economic shutdowns. In the current article, we argue that the interaction of two personality characteristics, risk-taking tendencies and prosocial tendencies, is a strong determinant of attitudes toward economic shutdowns, and we assess the impact of this interaction on three different attitudes toward economic shutdowns that differ by their focal target: employees, customers, and organizations. The results demonstrate that this interaction significantly predicted economic shutdown attitudes toward customers and organizations but not employees. We suggest that these results can be understood via the lens of behavioral decision-making theories as well as a recent framework on antisocial risk takers, both of which provide several subsequent directions for future research. We conclude with recommendations for the development of effective messages to curb defiant behaviors toward economic shutdowns, such as focusing on those most likely to perform these problematic behaviors – the daring and uncaring.

What explains managers’ escalating behaviors in a failing NPD project? The impact of managerial perceptions of opportunities and threats in a stage-gate process

ABSTRACT Drawing on recent advancement in behavioral decision-making theory and the escalation-of-commitment literature, we examine how managers’ perceptions of threats and opportunities in the external environment may shape their decision to escalate investment in a failing new product development (NPD) project. We test our theoretical model with two studies: first, a behavioral decision-making experimental study with a sample of 128 managers; and, second, an interview study with 12 managers. Our results show that managers’ perceptions of environmental opportunities and business threats significantly shape their decision to escalate commitment and that the impact of such managerial perceptions on escalating tendency is contingent on the stage of the innovation process.

Peculiarities of the evoked brain activity of carriers of different genotypes on polymorphic loci Val66Met of the BDNF gene

Incorporation of behavioral decision-making theory into supply chain contracts has been in vogue for the last few years. However, most studies consider only one contract type at a time. We consider a scenario wherein a rational supplier sells perishable goods to a boundedly rational retailer experiencing random market demand. Contrary to previous literature, choice is available between two contract types: buyback and revenue sharing. Using a mental accounting-based utility structure for the boundedly rational retailer; we develop contract preference profiles for both the retailer and the supplier. We further examine the region of consensus between the players to arrive at situations in which empowering the boundedly rational retailer to choose the contract type might potentially improve the supply chain performance. Our results are relevant to large consumer goods companies dealing with a highly fragmented and heterogeneous retailer base.

Managing the misbehaving retailer under demand uncertainty and imperfect information

Incorporation of behavioral decision-making theory into supply chain contracts has been in vogue for the last few years. However, most studies consider only one contract type at a time. We consider a scenario wherein a rational supplier sells perishable goods to a boundedly rational retailer experiencing random market demand. Contrary to previous literature, choice is available between two contract types: buyback and revenue sharing. Using a mental accounting-based utility structure for the boundedly rational retailer; we develop contract preference profiles for both the retailer and the supplier. We further examine the region of consensus between the players to arrive at situations in which empowering the boundedly rational retailer to choose the contract type might potentially improve the supply chain performance. Our results are relevant to large consumer goods companies dealing with a highly fragmented and heterogeneous retailer base.

Investor Response to Workforce Downsizing: The Influence of Industry Waves, Macroeconomic Outlook, and Firm Performance

Building on behavioral decision-making theory, we study the extent to which current industry downsizing intensity, changes in future macroeconomic outlook, and a firm’s past performance trend influence the relationship between downsizing magnitude and investor response. Based on the analysis of a large-scale sample of downsizing announcements in the United States over a period of 12 years, our results indicate that negative investor responses to downsizings are amplified in periods of industry downsizing waves, in the face of changes in macroeconomic outlook, and subsequent to deteriorating firm financial performance. Additionally, our empirical results suggest that investors’ cross-level aggregation of these cues has a significant, negative compound effect on downsizing firms’ market valuations.

The cognitive antecedents of go/stop decisions in a failing new product development project

This study highlights managers’ perception of organizational environment as an important structural determinant of escalation of commitment in a new product development (NPD) setting. We connect escalation behavior literature with behavioral decision-making theory, and argue that managers’ perception of organizational environment as a threat or an opportunity may stimulate them to further continuing the investment in an NPD project in the face of negative consequence. We test our hypotheses in a behavioral decision- making experiment with 200 managers. While prior escalation behavior research focus on project-related information and decision maker’s personal bias, this study focuses on the impact of organizational contexts (e.g., firm performance and business environment). Empirical results show that escalating tendency is increased by managers’ perception of environmental opportunity, critical threat and performance-reducing threat.

Theoretical Construction of Decision-Making Styles: An Information-Processing Approach

Decision-making style(DMS) is the learned habitual response pattern exhibited by an individual confronted with a situation requiring a decision. DMS is an important concept in empirical literature on decision making, management, consumer behavior, counseling, and vocation behavior. The recently developed DMS models were based on information processing strategies, such as dual-processing theory and regret theory, and focused on the effects of decision strategies, biases, emotions, and unconscious processing on decision making. The DMS field has also made significant progress in theoretical constructions, such as definitions, measurements, and theoretical examinations. Future research should integrate DMSs and behavioral decision-making theories, such as dual-processing theory, and construct DMS models from the perspective of evolutionary psychology.

The Intervention Effects of Succession Planning on Offspring’s Willingness to Take over Family Businesses—An Experimental Study Based on Behavioral Decision-Making and Opportunity Cost Theories

The fact that offspring’s willingness to take over family business is extremely low is a severe problem hindering Chinese family businesses’ succession. This paper, based on behavioral decision-making theory and opportunity cost theory, identifies the decision-making attribute of offspring’s willingness to take over the business first, then explores and verifies the intervention effects of succession planning and temporal distance on such willingness. Experimental data from 135 samples indicate: offspring’s willingness to take over the business is significantly higher in the situation where parents develop a complete succession plan than in the situation where no succession plan is made; temporal distance moderates the effects of succession planning on offspring’s willingness. The study is supposed to provide theoretical evidence and practical suggestions for family business to promote offspring’s willingness to be the successor of family business.

Timing and selectivity of mutual fund managers: An empirical test of the behavioral decision-making theory

Classical decision-making theory suggests that decisions made by an individual or a team of decision makers should lead to the same performance outcome. Conversely, behavioral decision-making theory argues that decisions made by teams result in superior micro or macro forecasts and performance outcomes. Our tests using mutual funds support the classical decision-making theory. The empirical results are time invariant and robust with respect to the selected index or model specification.

Modeling the Selection of High Customer-Contact Personnel: An Application of Behavioral Decision-Making Theory

The purpose of this study is to explore the utility of behavioral decision-making theory in differentiating potential high customer-contact employees with passions for service and working with people from those who have motivation to work in positions that require less customer interaction. Specifically, a multiple criteria decision-making instrument was developed based on a set of performance and motivational criteria relevant to the hospitality industry. The data were gathered from a group of college students attending a hospitality school in the northeastern part of the United States. Although the research effort described in this study is exploratory in nature, the results revealed that application of behavioral decision theory is possible. The most prevalent motive for this sample of hospitality students in choosing high customer-contact jobs was their need for affiliation (n-Aff).

The Use of Information in Decision Making: An Experimental Investigation of the Impact of Computer-Based Decision Aids

The traditional assumption in the decision support systems (DSS) literature is that if decision makers are provided with expanded processing capabilities they will use them to analyze problems in more depth and, as a result, make better decisions. Empirical studies investigating the relationship between DSS and decision quality have not borne this out. The explanation for such outcomes could be found in behavioral decision-making theories. The literature on behavioral decision making indicates that the conservation of effort may be more important than increased decision quality in some cases. If ths is so, then the use of a decision aid may result in effort savings but not improved decision performance. The two experiments reported here use verbal protocol analysis to compare the extent of information use by unaided decision makers and users of a decision aid designed to support preferential choice problems. The results of the two studies indicate that subjects with a decision aid did not use more information than those without one. Overall, subjects behaved as if effort minimization was an important consideration. For DSS researchers these studies indicate that to understand the DSS-decision quality relationship, it is necessary to consider the decision maker's tradeoff between improving decision quality and conserving effort. For DSS designers these results imply a need to focus on the moderating role that effort will play in determining DSS effectiveness.

Factors affecting treatment decisions for a life-threatening illness: The case of medical treatment of breast cancer

Despite notions that patients are now playing a more proactive role in directing their own health care, our study of breast cancer patients considering adjuvant therapy indicates that, at least for a life-threatening illness, patients still rely heavily on their physicians to make treatment decisions. Out of 100 patients, 80.0% accepted their physician's primary treatment recommendation. Using behavioral decision-making theory we examined why some patients chose to disregard the physician's treatment recommendation despite its importance within the decision-making process. The discriminant function analysis performed to examine the factors influencing acceptance or rejection of a physician's treatment recommendation identified two sets of factors. Factors related to the amount and specificity of information about treatments conveyed to the patients, and the strength of the treatment recommendation itself. Patients who did not accept their physician's treatment recommendation were told in more specific terms what the benefits of treatment would be; they also rated side effects of treatment to be more probable and more severe than patients who did concur with the physician's treatment recommendation. These patients also rated their physicians' treatment recommendations as less strong than other physicians'. Nonacceptor patients were also better educated and were more likely to be risk takers. This study supports the findings of other studies that patients want more specific disease and treatment information, but suggests that the provision of this information might lead to therapy decisions which diverge from physicians' recommendations.