Samenvatting
Summary articles Behavioural Decision Making
This document is a summary of all the articles for the course Behavioural Decision Making that are important for the exam.
[Meer zien]Voorbeeld 4 van de 59 pagina's
Voorbeeld 4 van de 59 pagina's
In winkelwagengesponsord bericht van onze partner
1 beoordeling
Door: thaliakleinepier • 3 jaar geleden
Voorbeeld van de inhoud
Behavioural Decision MakingLecture 1: From economic man to behavioural (economics)
decision making
Research paper 1: Effort for Payment – A Tale of Two Markets
The standard model of labour is one in which individuals trade their time and energy in
return of monetary rewards. Building on Fiske’s relational theory, we propose that there are
two types of markets that determine relationships between effort and payment:
- Monetary.
- Social.
It is important to know how to motivate participants so they exert the maximum effort in
their tasks. We propose that the relationship between compensation and effort hinges on
the distinction between two kinds of markets: monetary markets and social markets, which
are characterized not only by the type of good or service exchanged but also by the form of
compensation offered.
In this article James Heyman and Dan Ariely focusses on situations in which payment is
independent of effort by examining the relationship between forms of compensation (cash
vs. tokens), the level of payment (no, low, and medium), and the resulting effort expended.
The foundation of their proposal is Fiske’s relational theory. Fiske’s model posits four basic
types of social relationships: communal sharing (CS), authority ranking (AR), equality
matching (EM), and market pricing (MP). High levels of cooperation and “we-ness” earmark
CS relationships. AR relationships are recognized by their clear superior-subordinate
relationships. For example, in the work environment, there is no question as to who is the
boss (the one giving orders) and who is the peon (the one doing menial tasks). EM
relationships lie somewhere between CS and AR relationships – they are very structured but
exhibit equality. In EM relationships, everybody receives the same rewards, and reciprocity is
monitored to ensure that the scales never get too far out of balance. Finally, MP
relationships generally involve ongoing cost-benefit analysis, and participants’ payments for
their labour are based on a wage rate that reflects the amount and quality of the work
performed.
From the perspective of labour, we can divide Fiske’s four types of social relationships into
two general categories: one based on economic exchanges (=MP) and one based on social
exchanges (=CS, AR, and EM). In money-market relationships, effort will be exerted
according to reciprocity (=that performance will be lowest when there is no payment, higher
exchange for low payment, and still higher in exchange for medium payment), and the
amount of compensation directly influences individuals’ level of effort. In social-market
relationships, effort is shaped by altruism (=results in a level of performance that is high,
1
,constant, and insensitive to payment level), the amount of compensation is irrelevant, and
individuals work as hard as they can regardless of payment.
They formulated the following hypotheses:
Hypothesis 1: The relationship between compensation level and effort will be
different in social versus money markets.
Hypothesis 1a: In money-market relationships, effort will increase with payment
level.
Hypothesis 1b: In social-market relationships, effort will be at a high level and
insensitive to payment level.
Hypothesis 1c: Effort in exchange for no payment can be higher than effort in
exchange for low monetary payment.
Hypothesis 2: Including both monetary payments and signals of social exchanges will
cause individuals to perceive an exchange as a money-market
exchange, and the pattern predicted by Hypothesis 1a will follow.
Experiment 1:
Experiment 1 tested the hypothesis via a survey in which respondents were asked to rate
how likely other students would be to help load a sofa into a van in return for various levels
and forms of payment. The payment form was cash, candy, or “monetized candy” (i.e. the
payment was candy and the cost of the candy was mentioned). This was a hypothetical
situation, because it was a survey. They did not have to actually load the sofa into a van.
Low payment: $0.50 in cash or it’s candy equivalent
Medium payment: $5.00 in cash or it’s candy equivalent
Control condition: no payment
The results supported all the hypotheses. The results supported the distinction between
money and social markets (hypothesis 1) by documenting a higher predicted level of
compliance when no payment was offered than when low monetary payment was offered,
and by documenting a higher level of predicted compliance when a low level of candy was
offered than when a low monetary payment was offered. The results also showed that
monetizing candy resulted in a predicted willingness to help that resembled predicted
willingness to help in the cash condition (hypothesis 2).
Experiment 2:
Experiment 2 tested participants actual effort under a variety of payment levels and across
monetary and candy forms of payment. In this case they asked respondents to repeatedly
drag a computerized ball to a specified location on the screen. Pretesting and post-
2
,experiment debriefing showed that the implementation continues in the grandest tradition
of tasks that participants view as being utterly uninteresting and without any redeeming
value. It is important to note that the participants were not told the market price of the
candy.
Low payment: $0.10 in cash or five Jelly Bellies in the candy condition (the
market price of the candy wasn’t told).
Medium payment: $4.00 in cash or a half-pound of Jelly Bellies in the candy
condition (the market price of the candy wasn’t told).
Control condition: no payment
The results supported the distinction between money and social markets. The results of
Experiment 2 reinforce those of Experiment 1 by demonstrating that the decrease in
performance from no-payment to low-payment conditions is found in monetary exchanges,
but not in gift exchanges.
Experiment 3:
Experiment 3 was designed to replicate the part of Experiment 1 that was not tested with
real effort in Experiment 2: the contrast among no payment, cash, and monetized candy.
That is, in addition to testing for the effect of no payment, Experiment 3 tested hypothesis
2. Experiment 3 was designed to test a domain of effort that required mental rather than
physical effort. The task was to solve a series of puzzles, each consisting of 12 numbers; a
puzzle was solved by selecting a subset of the numbers that added up to 100. At the bottom
of the screen was a button labelled “I give up”; participants were told to push this button if
they wanted to quit the experiment. The first four puzzles were quite easy, the fifth puzzle
did not have a solution, and the dependent measure was the length of time that participants
spent trying to solve it. It is important to note that participants in the monetized-candy
condition were told the market price of the candy when informed about their reward.
Low payment: $0.50 in cash or a candy bar (the market price of the candy was
told).
Medium payment: $5.00 in cash or a Godiva chocolate box (the market price of the
candy was told).
Control condition: no payment
The results supported the basic hypotheses. These results replicated the results of the cash
conditions from Experiments 1 and 2. More important, the similarity of the results between
the cash and monetized-candy conditions suggest that the existence or saliency of monetary
compensation can act as a strong signal invoking norms of money markets instead of social-
3
, market relations. Thus, when an individual is faced with signals from both the money market
and the social market, the countervailing forces seem to favour money-market relations.
Conclusion:
Labour markets can be categorized into two types: monetary and social. Money markets are
characterized by a monotonic relationship between payment and effort. In social markets,
effort is largely independent of compensation levels. The results of the experiments support
the two-markets perspectives: When payments were given in the form of gifts (candy) or
when payments were not mentioned, effort seemed to stem from altruistic motives and was
largely insensitive to the magnitude of the payment. Finally, in mixed markets (payment was
in the form of gifts but cost was also mentioned), the mere mention of monetary payment
was sufficient to switch the perceived relationship from a social-market relationship to a
money-market relationship. That is, money itself can be a cue to the type of exchange that
individuals consider themselves to be in, which in turn influences their propensity to exert
effort. Rewards can decrease motivation and attitudes, alter self-perception, increase over
justification, and turn feelings of competence into feelings of being controlled.
One possible implication of the current result is that social rewards do not easily undermine
intrinsic motivation. A second implication is that the social aspects of reward are fragile and
a social reward can easily be made into a non-social extrinsic reward by merely mentioning
monetary circumstances or perhaps just promoting comparisons to other tasks or other
individuals’ reward levels.
Research paper 2: Thirty years of prospect theory in economics:
a review and assessment
Prospect theory is a model of decision making under risk. The most obvious places to look
for applications are areas such as finance and insurance where attitudes to risk play a central
role. Over the past five years, prospect theory’s implication for the cross section of average
returns have received significant empirical support:
(1) First, several papers using a variety of techniques to measure skewness, have confirmed
the basic prediction that more positively skewed stocks will have lower average returns.
(2) Second, several papers have argued that the skewness prediction from prospect theory
can shed light on other empirical patterns. For example, a well-known puzzle is that the long-
term average return of stocks that conduct an initial public offering is below of that a control
group of stocks – stocks of a firm that are similar to the issuing firms on important
dimensions, but that happened not to do an offering. One interesting property of returns on
initial public offerings stocks, however, is that they are highly positively skewed: most of
these stocks don’t perform particularly well, but some, like Google, or Microsoft, do
incredibly well. As such, prospect theory says that stocks that do an offering says that stocks
that do an offering should have lower average returns. Consistent with this hypothesis,
4
Voordelen van het kopen van samenvattingen bij Stuvia op een rij:
Verzekerd van kwaliteit door reviews
Stuvia-klanten hebben meer dan 700.000 samenvattingen beoordeeld. Zo weet je zeker dat je de beste documenten koopt!
Snel en makkelijk kopen
Je betaalt supersnel en eenmalig met iDeal, creditcard of Stuvia-tegoed voor de samenvatting. Zonder lidmaatschap.
Focus op de essentie
Samenvattingen worden geschreven voor en door anderen. Daarom zijn de samenvattingen altijd betrouwbaar en actueel. Zo kom je snel tot de kern!
Veelgestelde vragen
Wat krijg ik als ik dit document koop?
Je krijgt een PDF, die direct beschikbaar is na je aankoop. Het gekochte document is altijd, overal en oneindig toegankelijk via je profiel.
Tevredenheidsgarantie: hoe werkt dat?
Onze tevredenheidsgarantie zorgt ervoor dat je altijd een studiedocument vindt dat goed bij je past. Je vult een formulier in en onze klantenservice regelt de rest.
Van wie koop ik deze samenvatting?
Stuvia is een marktplaats, je koop dit document dus niet van ons, maar van verkoper marleencilie. Stuvia faciliteert de betaling aan de verkoper.
Zit ik meteen vast aan een abonnement?
Nee, je koopt alleen deze samenvatting voor €5,99. Je zit daarna nergens aan vast.
Is Stuvia te vertrouwen?
4,6 sterren op Google & Trustpilot (+1000 reviews)
Afgelopen 30 dagen zijn er 59325 samenvattingen verkocht
Opgericht in 2010, al 14 jaar dé plek om samenvattingen te kopen