Yes or no
Hiding personal information reveals the worst
Leslie John, Kate Barasz & Michael Norton
Proceedings of the National Academy of Sciences, 26 January 2016, Pages 954-959
Abstract:
Seven experiments explore people's decisions to share or withhold personal information, and the wisdom of such decisions. When people choose not to reveal information - to be "hiders" - they are judged negatively by others (experiment 1). These negative judgments emerge when hiding is volitional (experiments 2A and 2B) and are driven by decreases in trustworthiness engendered by decisions to hide (experiments 3A and 3B). Moreover, hiders do not intuit these negative consequences: given the choice to withhold or reveal unsavory information, people often choose to withhold, but observers rate those who reveal even questionable behavior more positively (experiments 4A and 4B). The negative impact of hiding holds whether opting not to disclose unflattering (drug use, poor grades, and sexually transmitted diseases) or flattering (blood donations) information, and across decisions ranging from whom to date to whom to hire. When faced with decisions about disclosure, decision-makers should be aware not just of the risk of revealing, but of what hiding reveals.
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Bin Liu, Ramesh Govindan & Brian Uzzi
PLoS ONE, January 2016
Abstract:
Emotions are increasingly inferred linguistically from online data with a goal of predicting off-line behavior. Yet, it is unknown whether emotions inferred linguistically from online communications correlate with actual changes in off-line activity. We analyzed all 886,000 trading decisions and 1,234,822 instant messages of 30 professional day traders over a continuous 2 year period. Linguistically inferring the traders' emotional states from instant messages, we find that emotions expressed in online communications reflect the same distributions of emotions found in controlled experiments done on traders. Further, we find that expressed online emotions predict the profitability of actual trading behavior. Relative to their baselines, traders who expressed little emotion or traders that expressed high levels of emotion made relatively unprofitable trades. Conversely, traders expressing moderate levels of emotional activation made relatively profitable trades.
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Stefan Schulz-Hardt, Annika Giersiepen & Andreas Mojzisch
Journal of Experimental Social Psychology, forthcoming
Abstract:
During discussions, people typically introduce more information supporting their preferences as compared to information conflicting with these preferences, and they also repeat the former information more often than the latter. Although this preference-consistent discussion bias has been shown across several studies, its consequences for subsequent decisions have largely escaped attention. In particular, it is unclear whether selectively repeating preference-consistent information increases the likelihood that the recipient decides in accordance with the speaker's preference. From a rational point of view, information repetitions constitute redundancy and, hence, should not affect the recipient's decision. By contrast, in two experiments we demonstrate that selectively repeating information in favor of a particular decision alternative changes preference ratings in favor of this alternative (Experiment 1) and makes a decision for this alternative more likely (Experiment 2). This result is shown for written discussion protocols (Experiment 1) and for face-to-face discussions with a confederate (Experiment 2).
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The tide that lifts all focal boats: Asymmetric predictions of ascent and descent in rankings
Shai Davidai & Thomas Gilovich
Judgment and Decision Making, January 2016, Pages 7-20
Abstract:
In six studies, we find evidence for an upward mobility bias, or a tendency to predict that a rise in ranking is more likely than a decline, even in domains where motivation or intention to rise play no role. Although people cannot willfully change their height (Study 1), and geographical entities cannot willfully alter their temperature (Study 2), number of natural disasters (Study 3), levels of precipitation (Studies 4A and 4B), or chemical concentration (Study 5), subjects believed that each is more likely to rise than drop in ranking. This bias is due to an association between a ranking's order and the direction of absolute change, and to the tendency to give considerable weight to a focal agent over non-focal agents. Because people generally expect change to be represented in terms of higher ranks, and because they tend to focus on specific, focal targets, they believe that any given target will experience a larger relative increase than other targets. We discuss implications for social policy.
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Jakub Steiner & Colin Stewart
American Economic Review, forthcoming
Abstract:
When an agent chooses between prospects, noise in information processing generates an effect akin to the winner's curse. Statistically unbiased perception systematically overvalues the chosen action because it fails to account for the possibility that noise is responsible for making the preferred action appear to be optimal. The optimal perception pattern exhibits a key feature of prospect theory, namely, overweighting of small probability events (and corresponding underweighting of high probability events). This bias arises to correct for the winner's curse effect.
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Are the Disabled Less Loss Averse? Evidence from a Natural Policy Experiment
Yuval Arbel, Danny Ben-Shahar & Stuart Gabriel
Economic Inquiry, forthcoming
Abstract:
Research findings show that disabled persons often develop physical and psychological mechanisms to compensate for disabilities. Coping mechanisms may not be limited to the psychophysiological domain and may extend to cognitive bias and loss aversion. In this study, we apply unique microdata from a natural policy experiment to assess the role of loss aversion in home purchase among nondisabled and disabled households. Results of survival analysis indicate that the physically disabled are substantially less loss averse in home purchase. Furthermore, loss aversion varies with other population characteristics and attenuates with degree of disability. Findings provide new evidence of diminished cognitive bias and more rational economic decision-making among the physically disabled.
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Can irrational investors survive in the long run? The role of generational type transmission
Scott Condie & Kerk Phillips
Economics Letters, February 2016, Pages 40-42
Abstract:
This paper considers whether expected utility maximizers who have incorrect beliefs can survive as controllers of a significant portion of market wealth in the long run. Unlike infinitely-lived agent models, where this is not the case, we consider a model with successive generations of investors. Each generation inherits wealth and investor type from the previous generation. We show that if rational parents produce only rational children, and irrational parents always produce only irrational children, then the results from the infinitely-lived setup carry through. However, if parents of one type can produce even a small fraction of children of the other type, then irrational investors will always control a non-vanishing portion of total wealth. Hence, understanding the exact nature of the transmission of incorrect beliefs is key to understanding long-run market prices.
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Ryan Rahinel et al.
Journal of Experimental Social Psychology, May 2016, Pages 1-7
Abstract:
Life is filled with situations in which cognitive elaboration can powerfully sway outcomes, and yet our understanding of the contextual factors that impact elaboration are greatly limited to those entwined with the focal evaluation, judgment, or decision. In response, this research tests whether a more fundamental, incidental feature of the environment - structure - might influence the extent to which individuals engage in elaboration. Three studies demonstrate that incidental reminders of structure increase elaboration (Experiment 1), which in turn impacts individuals' confidence in their choice (Experiment 2) as well as the choice itself (Experiment 3). Collectively, the findings offer novel insight into the role of structure in promoting elaboration, and suggest that structure-seeking may be functional in part because it leads to more thoughtful, considered judgments and decisions.
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Irrational time allocation in decision-making
Bastiaan Oud et al.
Proceedings of the Royal Society: Biological Sciences, 13 January 2016
Abstract:
Time is an extremely valuable resource but little is known about the efficiency of time allocation in decision-making. Empirical evidence suggests that in many ecologically relevant situations, decision difficulty and the relative reward from making a correct choice, compared to an incorrect one, are inversely linked, implying that it is optimal to use relatively less time for difficult choice problems. This applies, in particular, to value-based choices, in which the relative reward from choosing the higher valued item shrinks as the values of the other options get closer to the best option and are thus more difficult to discriminate. Here, we experimentally show that people behave sub-optimally in such contexts. They do not respond to incentives that favour the allocation of time to choice problems in which the relative reward for choosing the best option is high; instead they spend too much time on problems in which the reward difference between the options is low. We demonstrate this by showing that it is possible to improve subjects' time allocation with a simple intervention that cuts them off when their decisions take too long. Thus, we provide a novel form of evidence that organisms systematically spend their valuable time in an inefficient way, and simultaneously offer a potential solution to the problem.
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Prompting deliberation increases base-rate use
Natalie Obrecht & Dana Chesney
Judgment and Decision Making, January 2016, Pages 1-6
Abstract:
People often base judgments on stereotypes, even when contradictory base-rate information is provided. In a sample of 438 students from two state universities, we tested several hypotheses regarding why people would prefer stereotype information over base-rates when making judgments: A) People believe stereotype information is more diagnostic than base-rate information, B) people find stereotype information more salient than base-rate information, or C) even though people have some intuitive access to base-rate information, they may need to engage in deliberation before they can make full use of it, and often fail to do so. In line with the deliberative failure account, and counter to the diagnosticity account, we found that inducing deliberation by having people evaluate statements supporting the use of base-rates increased the use of base-rate information. Moreover, counter to the salience and diagnosticity accounts, asking people to evaluate statements supporting the use of stereotypes decreased reliance on stereotype information. Additionally, more numerate subjects were more likely to make use of base-rate information.
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Jaakko Aspara & Arvid Hoffmann
Journal of Behavioral and Experimental Finance, December 2015, Pages 18-24
Abstract:
The disposition effect refers to individuals' tendency to sell their winning investments too early, while holding on to their losing investments too long. This behavioral bias has negative consequences for individuals' wealth, because losing investments usually continue to underperform, while winning investments typically continue to outperform. The present research demonstrates that shifting feelings of personal responsibility can reverse individuals' susceptibility to the disposition effect. In particular, results from three experiments indicate that the disposition effect is reversed when (i) prior investment gains are attributed to external factors while prior investment losses are attributed to individuals' own faults, (ii) individuals invest someone else's money instead of their own, and (iii) when individuals have an alternative, socially oriented investment goal, such as self-expression besides a financial gains goal. The results have implications for financial service professionals, such as financial advisors.