Judgment day
The Loser's Curse: Decision Making and Market Efficiency in the National Football League Draft
Cade Massey & Richard Thaler
Management Science, forthcoming
Abstract:
A question of increasing interest to researchers in a variety of fields is whether the biases found in judgment and decision-making research remain present in contexts in which experienced participants face strong economic incentives. To investigate this question, we analyze the decision making of National Football League teams during their annual player draft. This is a domain in which monetary stakes are exceedingly high and the opportunities for learning are rich. It is also a domain in which multiple psychological factors suggest that teams may overvalue the chance to pick early in the draft. Using archival data on draft-day trades, player performance, and compensation, we compare the market value of draft picks with the surplus value to teams provided by the drafted players. We find that top draft picks are significantly overvalued in a manner that is inconsistent with rational expectations and efficient markets, and consistent with psychological research.
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Past decisions do affect future choices: An experimental demonstration
Ayala Arad
Organizational Behavior and Human Decision Processes, forthcoming
Abstract:
This paper demonstrates experimentally that the mere fact that an alternative was chosen in the past increases the likelihood that it will be re-chosen in the future, when new alternatives are being offered. The experimental design consists of a new variation of the free-choice paradigm that is immune to Chen and Risen's (2010) criticism of how results have been interpreted in previous studies of post-decision effects. An additional experiment indicates that once participants have chosen a particular alternative they view its characteristics more positively. I suggest that the new design can be used to study various aspects of the effect of past decisions on future ones. In the present paper, I apply it to show that the allocation of limited resources among various uses may be biased in favor of a particular use if it was preferred to another in a previous situation.
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Marlone Henderson
Journal of Experimental Social Psychology, forthcoming
Abstract:
Research has shown that more abstract, higher-level thinking induces a greater focus on similarities when comparing things. Using this framework, I posited that individuals' attraction to choice-sets that included a larger number of options would be reduced when they engaged in more abstract thinking, because a greater focus on similarities would lead people to expect options to be more redundant, thereby lowering the expected benefit of having more of them. As predicted, I found that a more abstract (vs. more concrete) mindset reduced (and sometimes even eliminated) individuals' general tendency to prefer larger choice-sets across various hypothetical situations (e.g., purchases; Experiment 1) as well as two real-world helping situations (Experiments 2-4). Further, this effect appeared to be at least partially mediated by the degree to which people expected the options within a choice-set to be similar to one another (Experiment 4). Implications for choice are discussed.
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Kaileigh Byrne & Darrell Worthy
Personality and Individual Differences, forthcoming
Abstract:
We investigated whether narcissism affected dynamic decision-making performance in the presence and absence of misleading information. Performance was examined in a two-choice dynamic decision-making task where the optimal strategy was to forego an option providing larger immediate rewards in favor of an option that led to larger delayed rewards. Information regarding foregone rewards from the alternate option was presented or withheld to bias participants toward the sub-optimal choice. The results demonstrated that individuals high in narcissistic traits performed comparably to low narcissism individuals when foregone reward information was absent, but high narcissism individuals outperformed individuals low in narcissistic traits when misleading information was presented. The advantage for participants high in narcissistic traits was strongest within males, and, overall, males outperformed females when foregone rewards were present. While prior research emphasizes narcissists' decision-making deficits, our findings provide evidence that individuals high in narcissistic traits excel at decision-making tasks that involve disregarding ambiguous information and focusing on the long-term utility of each option. Their superior ability at filtering out misleading information may reflect an effort to maintain their self-view or avoid ego threat.
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Joseph Goodman et al.
Journal of Consumer Psychology, April 2013, Pages 165-174
Abstract:
This research examines whether recommendation signage helps or hinders the consumer when faced with choosing from large product assortments. In spite of frequent usage and retailer intuition suggesting that providing recommendation signs (e.g., "Best Seller," "Award Winner") should help consumers in the choice process, we propose that signs can hinder choice for consumers with more developed preferences by adding to the complexity and difficulty of the decision process. In three experiments using horizontally differentiated products in multiple categories, we provide evidence that recommendation signs create preference conflict for consumers with more developed preferences, leading these consumers to form larger consideration sets and ultimately experience more difficulty from the decision-making process. In addition, we show that these effects are mitigated for consumers with less developed preferences and when the choice is from a small assortment. The results suggest that recommendation signage may not be an effective tool for aiding choice from large assortments; instead signage can exacerbate the difficulties associated with having too many choices, with implications on purchase quantity.
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The Opinion-Changing Power of Computer-Based Multimedia Presentations
Rosanna Guadagno et al.
Psychology of Popular Media Culture, April 2013, Pages 110-116
Abstract:
This study investigated the persuasive impact of information presented in formats possessing varying degrees of technological sophistication on individuals who were novices and experts in the domain of the information. Participants reviewed a presentation of a football scout's favorable report on a potential recruit and evaluated the recruit's projected success. The experimental design was a 2 (participant football expertise: expert vs. novice) × 3 (technological sophistication of presentation: low [typed summary of statistics] vs. moderate [printed PowerPoint charts] vs. high [computer-based animated PowerPoint charts]) factorial. Based on predictions derived from Dual Process Models of persuasion, we expected that the recruit would be rated higher in the PowerPoint presentation condition but that experts would be less swayed by the difference in communication modality than would novices. We found support for these predictions. For both novice and expert participants, the greater the technological sophistication of the presentation, the more highly they rated the projected success of the football recruit. However, this effect was marked for football novices relative to football experts.
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Graham Dixon & Christopher Clarke
Health Education Research, April 2013, Pages 352-359
Abstract:
Controversy surrounding an autism-vaccine link has elicited considerable news media attention. Despite being widely discredited, research suggests that journalists report this controversy by presenting claims both for and against a link in a relatively ‘balanced' fashion. To investigate how this reporting style influences judgments of vaccine risk, we randomly assigned 320 undergraduate participants to read a news article presenting either claims both for/against an autism-vaccine link, link claims only, no-link claims only or non-health-related information. Participants who read the balanced article were less certain that vaccines are safe, more likely to believe experts were less certain that vaccines are safe and less likely to have their future children vaccinated. Results suggest that balancing conflicting views of the autism-vaccine controversy may lead readers to erroneously infer the state of expert knowledge regarding vaccine safety and negatively impact vaccine intentions.
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Predicting free choices for abstract intentions
Chun Siong Soon et al.
Proceedings of the National Academy of Sciences, 9 April 2013, Pages 6217-6222
Abstract:
Unconscious neural activity has been repeatedly shown to precede and potentially even influence subsequent free decisions. However, to date, such findings have been mostly restricted to simple motor choices, and despite considerable debate, there is no evidence that the outcome of more complex free decisions can be predicted from prior brain signals. Here, we show that the outcome of a free decision to either add or subtract numbers can already be decoded from neural activity in medial prefrontal and parietal cortex 4 s before the participant reports they are consciously making their choice. These choice-predictive signals co-occurred with the so-called default mode brain activity pattern that was still dominant at the time when the choice-predictive signals occurred. Our results suggest that unconscious preparation of free choices is not restricted to motor preparation. Instead, decisions at multiple scales of abstraction evolve from the dynamics of preceding brain activity.
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How Do We Want Others to Decide? Geographical Distance Influences Evaluations of Decision Makers
Erin Burgoon, Marlone Henderson & Cheryl Wakslak
Personality and Social Psychology Bulletin, forthcoming
Abstract:
People who decide on behalf of others can be located at various geographical distances from their clients and constituents. Across five experiments, we examined the role distance plays in evaluations of these decision makers. Specifically, drawing on construal level theory, we examined how the type of information (aggregate or case-specific) that closer and more distant decision makers cited as the basis for their decisions influenced how they were evaluated. We found that people expressed more anger toward (Experiment 1) and were less enthusiastic about (Experiments 2 and 4) more distant decision makers who relied on case-specific (vs. aggregate) information. In addition, we found that people were less enthusiastic about decision makers who relied on case-specific (vs. aggregate) information when evaluators were in a higher-level (vs. lower-level) construal mind-set (Experiments 3 and 5). Implications for how decision makers can manage impressions are discussed.
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Paradoxical Effects of Stress and an Executive Task on Decisions Under Risk
Stephan Pabst et al.
Behavioral Neuroscience, forthcoming
Abstract:
In everyday life, decisions are often made under stress and while being occupied with multiple tasks. It has recently been shown that acute stress impairs decision making under risk. Performing a parallel executive task also caused riskier decision making. To investigate the effects of a combination of these two factors on decision making, we conducted a large (N = 126) experimental study with a 2 × 2 design (stress vs. no stress and parallel task vs. no parallel task). Stress was induced using the Trier Social Stress Test (TSST) and controls underwent the placebo TSST. Salivary samples were collected to assess cortisol and alpha amylase concentrations as markers of the two stress response systems. Decision making was measured using the Game of Dice Task (GDT). A 2-back task served as parallel executive task. Our results revealed a significant interaction between stress and the parallel executive task. In line with our earlier findings, acute stress and a parallel executive task individually tended to impair decision making under risk, manifested by more high risky than low risky choices. Interestingly, stressed participants in the parallel-task condition (GDT plus 2-back) showed similar decision-making behavior as nonstressed single-task participants. Regression analyses revealed executive functions to moderate stress effects on decisions under risk. Reasons for these paradoxical findings are discussed with respect to stress-evoked cognitive alterations that may benefit decision making under risk, if an executive task is performed simultaneously.
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The wisdom of crowds: Predicting a weather and climate-related event
Karsten Hueffer et al.
Judgment and Decision Making, March 2013, Pages 91-105
Abstract:
Environmental uncertainty is at the core of much of human activity, ranging from daily decisions by individuals to long-term policy planning by governments. Yet, there is little quantitative evidence on the ability of non-expert individuals or populations to forecast climate-related events. Here we report on data from a 90-year old prediction game on a climate related event in Alaska: the Nenana Ice Classic (NIC). Participants in this contest guess to the nearest minute when the ice covering the Tanana River will break, signaling the start of spring. Previous research indicates a strong correlation between the ice breakup dates and regional weather conditions. We study betting decisions between 1955 and 2009. We find the betting distribution closely predicts the outcome of the contest. We also find a significant correlation between regional temperatures as well as past ice breakups and betting behavior, suggesting that participants incorporate both climate and historical information into their decision-making.
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Sunita Sah, Don Moore & Robert MacCoun
Organizational Behavior and Human Decision Processes, forthcoming
Abstract:
Is it possible to increase one's influence simply by behaving more confidently? Prior research presents two competing hypotheses: (1) the confidence heuristic holds that more confidence increases credibility, and (2) the calibration hypothesis asserts that overconfidence will backfire when others find out. Study 1 reveals that, consistent with the calibration hypothesis, while accurate advisors benefit from displaying confidence, confident but inaccurate advisors receive low credibility ratings. However, Study 2 shows that when feedback on advisor accuracy is unavailable or costly, confident advisors hold sway regardless of accuracy. People also made less effort to determine the accuracy of confident advisors; interest in buying advisor performance data decreased as the advisor's confidence went up. These results add to our understanding of how advisor confidence, accuracy, and calibration influence others.
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Sticky Prospects: Loss Frames Are Cognitively Stickier Than Gain Frames
Alison Ledgerwood & Amber Boydstun
Journal of Experimental Psychology: General, forthcoming
Abstract:
Research across numerous domains has highlighted the current - and presumably temporary - effects of frames on preference and behavior. Yet people often encounter information that has been framed in different ways across contexts, and there are reasons to predict that certain frames, once encountered, might tend to stick in the mind and resist subsequent reframing. We propose that loss frames are stickier than gain frames in their ability to shape people's thinking. Specifically, we suggest that the effect of a loss frame may linger longer than that of a gain frame in the face of reframing and that this asymmetry may arise because it is more difficult to convert a loss-framed concept into a gain-framed concept than vice versa. Supporting this notion, loss-to-gain (vs. gain-to-loss) reframing had a muted impact on both risk preferences (Study 1) and evaluation (Study 2). Moreover, participants took longer to solve a math problem that required reconceptualizing losses as gains than vice versa (Studies 3-5), and reframing changed gain-based conceptualizations but not loss-based ones (Study 6). We discuss implications for understanding a key process underlying negativity bias, as well as how sequential frames might impact political behavior and economic recovery.
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Mood and Processing of Proattitudinal and Counterattitudinal Messages
Rene Ziegler
Personality and Social Psychology Bulletin, April 2013, Pages 482-495
Abstract:
Existing research has established the effects of mood on processing of clearly mood-elevating proattitudinal messages and clearly mood-threatening counterattitudinal messages (i.e., mood-relevant messages). Little is known, however, about mood effects on processing of less mood-elevating proattitudinal messages and less mood-threatening counterattitudinal messages (i.e., mood-irrelevant messages). The present research tested hypotheses regarding processing of mood-irrelevant messages based on a mood-congruent expectancies approach. Specifically, two studies were conducted in which prior attitudes were measured (Study 1) or manipulated (Study 2). As predicted, results showed higher scrutiny in negative mood given a proattitudinal message and in positive mood given a counterattitudinal message than in negative mood given a counterattitudinal message and in positive mood given a proattitudinal message. Discussion focuses on implications regarding the accumulated literature, different accounts proposed to understand mood effects on processing effort, and further research.
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On Confident Men and Rational Women: It's All on Your Mind(set)
Sabine Hügelschäfer & Anja Achtziger
Journal of Economic Psychology, forthcoming
Abstract:
We tested the hypothesis that inducing the deliberative and the implemental mindset differently affects judgment and decision making. More specifically, we explored mindset effects on decision makers' confidence ratings, risk preferences, and susceptibility to anchoring effects. As earlier research on mindsets showed that individual differences sometimes moderate mindset effects, we also tested for interaction effects of mindset and gender. For confidence ratings, we found a main effect of mindset and a main effect of gender. For risk preferences and anchoring effects, mindset interacted with gender. When being in an implemental mindset, the judgments of female decision makers came closer to their actual performance compared to being in a deliberative mindset where they were observed as underconfident. Male decision makers were already overconfident in the deliberative mindset and showed even more overconfidence when being in an implemental mindset. Concerning risk attitudes it was found that female decision makers were more prone to choose the less risky, but also less profitable option (in terms of expected payoffs) when they were in the deliberative compared to the implemental mindset. For men the opposite effects were observed. When investigating anchoring effects, male but not female participants' judgments were influenced by mindset: In an implemental mindset, male participants followed an irrelevant anchor more strongly (i.e., made more anchor-consistent judgments) compared to being in a deliberative mindset.
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Deliberation's Blindsight: How Cognitive Load Can Improve Judgments
Janina Hoffmann, Bettina von Helversen & Jörg Rieskamp
Psychological Science, forthcoming
Abstract:
Multitasking poses a major challenge in modern work environments by putting the worker under cognitive load. Performance decrements often occur when people are under high cognitive load because they switch to less demanding - and often less accurate - cognitive strategies. Although cognitive load disturbs performance over a wide range of tasks, it may also carry benefits. In the experiments reported here, we showed that judgment performance can increase under cognitive load. Participants solved a multiple-cue judgment task in which high performance could be achieved by using a similarity-based judgment strategy but not by using a more demanding rule-based judgment strategy. Accordingly, cognitive load induced a shift to a similarity-based judgment strategy, which consequently led to more accurate judgments. By contrast, shifting to a similarity-based strategy harmed judgments in a task best solved by using a rule-based strategy. These results show how important it is to consider the cognitive strategies people rely on to understand how people perform in demanding work environments.
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Sean Hannah et al.
Journal of Applied Psychology, forthcoming
Abstract:
Complex contexts and environments require leaders to be highly adaptive and to adjust their behavioral responses to meet diverse role demands. Such adaptability may be contingent upon leaders having requisite complexity to facilitate effectiveness across a range of roles. However, there exists little empirical understanding of the etiology or basis of leader complexity. To this end, we conceptualized a model of leader self-complexity that is inclusive of both the mind (the complexity of leaders' self-concepts) and the brain (the neuroscientific basis for complex leadership). We derived psychometric and neurologically based measures, the latter based on quantitative electroencephalogram (qEEG) profiles of leader self-complexity, and tested their separate effects on the adaptive decision-making of 103 military leaders. Results demonstrated that both measures accounted for unique variance in external ratings of adaptive decision-making. We discuss how these findings provide a deeper understanding of the latent and dynamic mechanisms that underpin leaders' self-complexity and their adaptability.
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The Truth, the Whole Truth, and Nothing but the Truth: A Multiple Country Test of an Oath Script
Fredrik Carlsson et al.
Journal of Economic Behavior & Organization, May 2013, Pages 105-121
Abstract:
Hypothetical bias is one of the main issues bedeviling the field of nonmarket valuation. The general criticism is that survey responses reflect how people would like to behave, rather than how they actually behave. In our study of climate change and carbon emissions reductions, based on the increasing bulk of evidence from psychology and economics regarding the effects of making promises, we investigate the effect of an oath script in a contingent valuation survey. The survey was conducted in Sweden and China, and its results indicate that an oath script has significant effects on respondent behavior in answering willingness-to-pay (WTP) questions. In both countries, the shares of zero WTP responses and extremely high WTP responses decrease when an oath script is used, resulting in lower variance. Furthermore, the conditional WTP decreases in the Chinese but not in the Swedish sample. We also find that the effect of the oath script is not generally dependent on respondent characteristics, and the few differences we observe vary with the countries.
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Creating Truth-Telling Incentives with the Bayesian Truth Serum
Ray Weaver & Drazen Prelec
Journal of Marketing Research, forthcoming
Abstract:
The Bayesian truth serum (BTS) is a survey scoring method that creates truth-telling incentives for respondents answering multiple-choice questions about intrinsically private matters, such as opinions, tastes, and behavior. The authors test BTS in several studies, primarily using recognition questionnaires that present items such as brand names and scientific terms. One-third of the items were nonexistent foils. The BTS mechanism, which mathematically rewards "surprisingly common" answers, both rewarded truth telling, by heavily penalizing foil recognition, and induced truth telling, in that participants who were paid according to their BTS scores claimed to recognize fewer foils than control groups, even when given competing incentives to exaggerate. Survey takers who received BTS-based payments without explanation became less likely to recognize foils as they progressed through the survey, suggesting that they learned to respond to BTS incentives despite the absence of guidance. The mechanism also outperformed the solemn oath, a competing truth-inducement mechanism. Finally, when applied to judgments about contributing to a public good, BTS eliminated the bias common in contingent valuation elicitations.