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Social and Economic Factors in Decision Making under Uncertainty: Five Essays in Behavioral Economics
Linköping University, Department of Management and Engineering, Economics. Linköping University, Faculty of Arts and Sciences.
2017 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

The objective of this thesis is to improve the understanding of human behavior that goes beyond monetary rewards. In particular, it investigates social influences in individual’s decision making in situations that involve coordination, competition, and deciding for others. Further, it compares how monetary and social outcomes are perceived. The common theme of all studies is uncertainty. The first four essays study individual decisions that have uncertain consequences, be it due to the actions of others or chance. The last essay, in turn, uses the advances in research on decision making under uncertainty to predict behavior in riskless choices.

The first essay, Fairness Versus Efficiency: How Procedural Fairness Concerns Affect Coordination, investigates whether preferences for fair rules undermine the efficiency of coordination mechanisms that put some individuals at a disadvantage. The results from a laboratory experiment show that the existence of coordination mechanisms, such as action recommendations, increases efficiency, even if one party is strongly disadvantaged by the mechanism. Further, it is demonstrated that while individuals’ behavior does not depend on the fairness of the coordination mechanism, their beliefs about people’s behavior do.

The second essay, Dishonesty and Competition. Evidence from a stiff competition environment, explores whether and how the possibility to behave dishonestly affects the willingness to compete and who the winner is in a competition between similarly skilled individuals. We do not find differences in competition entry between competitions in which dishonesty is possible and in which it is not. However, we find that due to the heterogeneity in propensity to behave dishonestly, around 20% of winners are not the best-performing individuals. This implies that the efficient allocation of resources cannot be ensured in a stiff competition in which behavior is unmonitored.

The third essay, Tracing Risky Decision Making for Oneself and Others: The Role of Intuition and Deliberation, explores how individuals make choices under risk for themselves and on behalf of other people. The findings demonstrate that while there are no differences in preferences for taking risks when deciding for oneself  and for others, individuals have greater decision error when choosing for other individuals. The differences in the decision error can be partly attributed to the differences in information processing; individuals employ more deliberative cognitive processing when deciding for themselves than when deciding for others. Conducting more information processing when deciding for others is related to the reduction in decision error.

The fourth essay, The Effect of Decision Fatigue on Surgeons’ Clinical Decision Making, investigates how mental depletion, caused by a long session of decision making, affects surgeon’s decision to operate. Exploiting a natural experiment, we find that surgeons are less likely to schedule an operation for patients who have appointment late during the work shift than for patients who have appointment at the beginning of the work shift. Understanding how the quality of medical decisions depends on when the patient is seen is important for achieving both efficiency and fairness in health care, where long shifts are popular.

The fifth essay, Preferences for Outcome Editing in Monetary and Social Contexts, compares whether individuals use the same rules for mental representation of monetary outcomes (e.g., purchases, expenses) as for social outcomes (e.g., having nice time with friends). Outcome editing is an operation in mental accounting that determines whether individuals prefer to first combine multiple outcomes before their evaluation (integration) or evaluate each outcome separately (segregation). I find that the majority of individuals express different preferences for outcome editing in the monetary context than in the social context. Further, while the results on the editing of monetary outcomes are consistent with theoretical predictions, no existing model can explain the editing of social outcomes.

Place, publisher, year, edition, pages
Linköping: Linköping University Electronic Press, 2017. , p. 16
Series
Linköping Studies in Arts and Science, ISSN 0282-9800 ; 727
Keyword [en]
behavioral economics, experimental economics, social factors, coordination, competition, deciding for others, mental accounting
National Category
Economics
Identifiers
URN: urn:nbn:se:liu:diva-143035DOI: 10.3384/diss.diva-143035ISBN: 9789176854211 (print)OAI: oai:DiVA.org:liu-143035DiVA, id: diva2:1157768
Public defence
2017-12-14, ACAS, A-huset, Campus Valla, Linköping, 10:15 (English)
Opponent
Supervisors
Available from: 2017-11-16 Created: 2017-11-16 Last updated: 2017-11-20Bibliographically approved
List of papers
1. Fairness versus efficiency: how procedural fairness concerns affect coordination
Open this publication in new window or tab >>Fairness versus efficiency: how procedural fairness concerns affect coordination
2017 (English)In: Experimental Economics, ISSN 1386-4157, E-ISSN 1573-6938Article in journal (Refereed) Published
Abstract [en]

We investigate in a laboratory experiment whether procedural fairness concerns affect how well individuals are able to solve a coordination problem in a two-player Volunteer’s Dilemma. Subjects receive external action recommendations, either to volunteer or to abstain from it, in order to facilitate coordination and improve efficiency. We manipulate the fairness of the recommendation procedure by varying the probabilities of receiving the disadvantageous recommendation to volunteer between players. We find evidence that while recommendations improve overall efficiency regardless of their implications for expected payoffs, there are behavioural asymmetries depending on the recommendation: advantageous recommendations are followed less frequently than disadvantageous ones and beliefs about others’ actions are more pessimistic in the treatment with recommendations inducing unequal expected payoffs.

Place, publisher, year, edition, pages
Springer, 2017
Keyword
Coordination, Correlated Equilibrium, Recommendations, Procedural fairness, Volunteer's Dilemma, Experiment
National Category
Economics
Identifiers
urn:nbn:se:liu:diva-140644 (URN)10.1007/s10683-017-9540-5 (DOI)
Funder
Swedish Research Council Formas
Available from: 2017-09-20 Created: 2017-09-20 Last updated: 2017-11-17Bibliographically approved

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