This study expands theoretical understanding of organizational misconduct through qualitative analysis of widespread deceptive sales practices at a large U.S. life insurance company. Adopting a symbolic interactionist perspective, this research describes how a set of taken-for-granted interpretive frames located in the organization’s culture created a worldview through which deceptive sales practices were seen as normal, acceptable, routine operating procedure. The findings from this study extend and modify the dominant theoretical ‘pressure/opportunity’ model of organizational misconduct by proposing that the process engine (...) driving misconduct is not amorally rational organization members, but rather is organizational members acting on socially constructed views of the organization that normalize misconduct. (shrink)

We design a double-or-quits game to compare the speed of learning one’s specific ability with the speed of rising confidence as the task gets increasingly difficult. We find that people on average learn to be overconfident faster than they learn their true ability and we present an intuitive-Bayesian model of confidence which integrates confidence biases and learning. Uncertainty about one’s true ability to perform a task in isolation can be responsible for large and stable confidence biases, namely limited discrimination, the (...) hard–easy effect, the Dunning–Kruger effect, conservative learning from experience and the overprecision phenomenon if subjects act as Bayesian learners who rely only on sequentially perceived performance cues and contrarian illusory signals induced by doubt. Moreover, these biases are likely to persist since the Bayesian aggregation of past information consolidates the accumulation of errors and the perception of contrarian illusory signals generates conservatism and under-reaction to events. Taken together, these two features may explain why intuitive Bayesians make systematically wrong predictions of their own performance. (shrink)

The experience of emotion has a powerful influence on daily-life decision making. Following Plato’s description of emotion and reason as two horses pulling us in opposite directions, modern dual-system models of decision making endorse the antagonism between reason and emotion. Decision making is perceived as the competition between an emotion system that is automatic but prone to error and a reason system that is slow but rational. The reason system (in “the head”) reins in our impulses (from “the heart) and (...) overrides our snap judgments. However, from Darwin’s evolutionary perspective, emotion is adaptive, guiding us to make sound decisions in uncertainty. In this review, we provide a new model, called “The interactive influence model of emotion & cognition”, to elaborate the relationship of emotion and reason in decision making. Specifically, in our model, we identify factors that determine when emotions override reason and delineate the type of contexts in which emotions help or hurt decision making. We then illustrate how cognition modulates emotion and how they cooperate to affect decision making. (shrink)

Business Ethics: A European Review, EarlyView.

The philosophical–ethical literature and the public debate on autonomous vehicles have been obsessed with ethical issues related to crashing. In this article, these discussions, including more empirical investigations, will be critically assessed. It is argued that a related and more pressing issue is questions concerning safety. For example, what should we require from autonomous vehicles when it comes to safety? What do we mean by ‘safety’? How do we measure it? In response to these questions, the article will present a (...) foundation for a continued discussion on these issues and an argument for why discussions about safety should be prioritized over ethical concerns related to crashing. (shrink)

Being a formal and general as well as the most widely accepted approach to practical rationality, rational decision theory should be crucial for justifying rational morals. In particular, acting morally should also be rational in decision theoretic terms. After defending this thesis, in the critical part of the paper two strategies to develop morals following this insight are criticized: game theoretical ethics of cooperation and ethical intuitionism. The central structural objections to ethics of cooperation are that they too directly aim (...) at the rationality of moral action and that they to do not encompass moral values or a moral desirability function. The constructive half of the paper takes up these criticisms by developing a two-part strategy to bring rationality and morals in line. The first part is to define ‘moral desirability’. This is done, using multi-attribute utility theory, by equating several adequate components of an individual’s comprehensive utility function with the moral desirability function. The second part is to introduce mechanisms, institutions, in particular socially valid moral norms, that provide further motivation for acting in accordance with morals. (shrink)

In this paper an empirical theory about the nature of intention is sketched. After stressing the necessity of reckoning with intentions in philosophy of action a strategy for deciding empirically between competing theories of intention is exposed and applied for criticizing various philosophical theories of intention, among others that of Bratman. The hypothesis that intentions are optimality beliefs is defended on the basis of empirical decision theory. Present empirical decision theory however does not provide an empirically satisfying elaboration of the (...) desirability concepts used in these optimality beliefs. Based on process theories of deliberation two hypotheses for filling this gap are developed. (shrink)

Recent developmental models assume a higher tendency to take risks in mid-adolescence, while the empirical evidence for this assumption is rather mixed. Most of the studies applied quite different tasks to measure risk-taking behavior and used a narrow age range. The main goal of the present study was to examine risk-taking behavior in four task settings, the Treasure Hunting Task (THT) in a gain and a loss domain, the Balloon Analogue Risk Task (BART) and the STOPLIGHT task. These task settings (...) differ in affective task moderators, like descriptive vs. experienced outcomes, anticipation of gains vs. losses, static vs. dynamic risk presentation and time pressure vs. no-time pressure and were applied in a sample of 187 participants from age 9 to 18. Beneath age trends, we were interested in their association with individual differences in approach behavior, venturesomeness, impulsivity and empathy above age, gender and fluid intelligence. Our findings revealed that risk-taking behavior is only low to moderately correlated between the four task contexts, suggesting that they capture different aspects of risk-taking behavior. Accordingly, a mid-adolescent peak in risk-propensity was only found under time pressure in the STOPLIGHT that was associated with higher impulsivity and empathy. In contrast, risky decisions decreased with increasing age in task settings, in which losses were anticipated (THT Loss), and this was associated with higher cognitive abilities. We found no age differences when gains were anticipated, neither in a static (THT Gain) nor in a dynamic task setting (BART). These findings clearly suggest the need to consider affective task moderators, as well as individual differences in temperament and cognitive abilities, in actual models about adolescent development. (shrink)

The article analyzes and criticizes the political use of hive psychology proposed by Jonathan Haidt who appeals to the “nudges” of libertarian paternalism. The article introduces paternalism and discusses the nudge theory, and on the basis of that discussion examines the political use of hive psychology and holds that (i) nudges do not respect people as autonomous beings, and that (ii) hive politics are dangerous. Instead, a cosmopolitan perspective would be well worth pursuing.

In Pelota matches, bets are made between viewers through a middleman who receives 16% of the finally paid amount. In this paper, a description of the way bets are made and an explanation of the existence of those markets are presented. Taking betting markets as a simplified analogy for financial markets we have searched for the explanation in a world where both sides of the market are not different in believes and preferences. We find that for a bet to exist (...) when bettors are rank dependent expected utility maximizers, they have to be optimistic. Taking observations from actually made bets a preliminary analysis about the biases of those markets is presented. (shrink)

In recent years the resource-based view of the firm has made significant headway in explaining differences in interfirm performance. However, this perspective has not considered the social and ethical dimensions of organizational resources. This paper seeks to provide such an integration. Using Kuhn's three stage model of adaptive behavior, the resource worthiness of stakeholder management, business ethics, and issues management are explored. The paper concludes by drawing on prospect theory to understand the reasons for this conceptual lacuna.

Numerous retributivists hold that deserved punishment has intrinsic value. A number of puzzles regarding that claim are identified and discussed. An alternative, more Kantian account of intrinsic value is then identified and the ways in which legal punishment might be understood to cohere with it are explored. That account focuses on the various ways in which legal punishment might be persons-respecting. It is then argued that this Kantian account enables us to solve or evade the puzzles generated by the other (...) intrinsic value account. (shrink)

An economic man, i.e., the leading role in economic ethics, has been deeply investigated in our study considering a human being’s economic behavior and the hypotheses for an economic man in traditional economics based on M. Weber’s and S. N. Bulgakov’s Christian economic man. Among various channels to study business ethics and economic ethics, we chose the definition of an economic man given by Weber and Bulgakov to review a hypothesis about a rational economic man in economics and discussed L. (...) von Mises’s and A. Sen’s contentions for an economic man’s substantive freedom and innermost being. The issue deserved to be further investigated by scholars who concern business ethics and economic ethics consists in reconciling egotism and altruism commonly embedded in an economic man’s heart and boosting more altruistic economic men. (shrink)

This paper seeks to understand the transmission and reception of legal rules as a component of the regulatory compliance process. It adopts a frontline approach to regulatory compliance that traces the grassroot functioning of compliance processes from regulator, to compliance managers to individual employees. Through a multilevel and multi-sited ethnography of worker safety protection in Chinese construction industry, this paper shows that in the cases studied there is a fundamental disconnect in the transmission and reception of law from regulator to (...) organization and within the regulated organization. Yet at the same time, the paper finds that employees did comply with the law, and that thus compliance can exist without a full transmission and reception of legal rules into and within the regulated organization. By expanding the frontline approach to study regulation and compliance to look at the grassroots operation across three different frontlines, this study has been able to assess the legal assumptions inherent in existing regulatory compliance research. Not only does it find that compliance in these cases was not a top-down process and that we need to look at the grassroots operation inside organizations, it also shows that law does not always play a central role in regulatory compliance and that we need to reassess the implicit focus on law in regulatory compliance scholarship. (shrink)

This study analyzes the influence of behavioral foundation factors and corporate strategic behavior on the formulation of corporate dividend policy. We use the Logit model and the OLS model for estimating the empirical model. The year- and industry-fixed effects are controlled in the model. We consider the behavioral foundations in three dimensions-ambiguity aversions, risk aversion, and loss aversion. The results show firms with high ambiguity or high risk infrequently pay dividends but firms with loss-averse behavior tend to pay dividends. This (...) paper also provides evidence that a firms’ business strategy influences its corporate dividend policy. Aggressive firms inhibit the payout of dividends. In additional tests, we find the results remain unchanged in those firms with high corporate governance or high growth opportunities. (shrink)

In Rawls’ influential social contract approach to distributive justice, the fair income distribution is the one that an individual would choose behind a veil of ignorance. Harsanyi treated this situation as a decision under risk and arrived at utilitarianism using expected utility theory. This paper investigates the implications of applying cumulative prospect theory instead, which better describes behavior under risk. I find that the specific type of inequality in bottom-heavy right-skewed income distributions, which includes the log-normal income distribution, could be (...) perceived as desirable. This optimal inequality result contrasts the implications of other social welfare criteria. (shrink)

In a recent article, Machina (Am Econ Rev forthcoming, 2008) suggested choice problems in the spirit of Ellsberg (Q J Econ 75:643–669, 1961), which challenge tail-separability, an implication of Choquet expected utility (CEU), to a similar extent as the Ellsberg paradox challenged the sure-thing principle implied by subjective expected utility (SEU). We have tested choice behavior for bets on one of Machina’s choice problems, the reflection example. Our results indicate that tail-separability is violated by a large majority of subjects (over (...) 70% of the sample). These empirical findings complement the theoretical analysis of Machina (Am Econ Rev forthcoming, 2008) and, together, they confirm the need for new approaches in the analysis of ambiguity for decision making. (shrink)

Prospect theory is an alternative theory of choice under conditions of risk, and deviates from expected utility theory by positing that people evaluate choices with respect to gains and losses from a reference point. They tend to overweight losses with respect to comparable gains and engage in risk-averse behavior with respect to gains and risk-acceptant behavior with respect to losses. They also respond to probabilities in a non-linear manner. I begin with an overview of prospect theory and some of the (...) evidence upon which it is based, and then consider some of the implications of the theory for American politics, international relations, and the law. I end with a brief discussion of some of the conceptual and methodological problems confronting the application of prospect theory to the study of politics. (shrink)

The appliances people adopt, and the way they use them, can critically influence the sustainable energy transition. People are often attracted to appliances with many setting options that offer them more control. Yet, operating many setting options can have negative consequences for users and the management of sustainable energy systems, which may obstruct sustainability goals. We aim to study how to reduce the preference for many setting options without reducing the perceived attractiveness of the appliance. In line with our theorizing (...) we found that people opt for appliances with fewer setting options when they are asked to reflect on which options they would like to have from a list of possible setting options, while being equally satisfied with the appliance. In addition, we show that this is especially the case when asking people to select which setting options they would like an appliance to have, as this will feel like they gain options, rather than asking them which options they are willing to give up as this feels like losing options that their appliance could have. Our findings offer relatively easy and cost-efficient ways to decrease people’s desire for many setting options on appliances, decreasing stress on the user and the energy system, while ensuring satisfaction with and acceptance of the appliance. (shrink)

In Kőszegi and Rabin’s reference-dependent model of preferences, the chance of obtaining a better outcome can reduce an agent’s expected utility through an increase in the stochastic reference point. This means that individuals may prefer stochastically dominated lotteries. In this sense, hope, understood as a small probability of a better outcome, can be a curse. While Kőszegi and Rabin focus on a linear specification of the utility function, we show that this effect occurs more broadly. Using fairly plausible assumptions and (...) parameter values, we specify the conditions under which it occurs, as well as the type of lotteries in which this should be expected. We then show that while a simple subjective transformation of probability into weights of the reference point may in some cases mitigate the issue, in others, it can intensify it or even generate new ones. Finally, we extend the model by adding the individual’s current reference point to the stochastic reference point. We show that this modification can reconcile Kőszegi and Rabin’s model with the apparent empirical infrequency of stochastically dominated choices while maintaining its main qualitative results. (shrink)

Making decisions, as Peter Drucker put it, ‘is the specific executive task’.2 But the situations in which managers decide can differ sharply. Some involve risk, uncertainty or lack of predictability while others lack clear structure and present decision-makers with ambiguity in some form. And yet, in spite of much research, we still have no unified account to explain how managers make decisions let alone to help them decide effectively. Different research streams specialise in different aspects of judgement and decisionmaking (JDM) (...) and produce results which apply in different contexts. Some focus on decisions under risk, some on cases of uncertainty, some on different aspects of ambiguity. Some are objectivist and others interpretive, basing themselves on paradigms which are mutually exclusive. As a result, managers relying on any one of them when making decisions can get only partial help because no one paradigm covers every aspect of the issues on which they decide. This paper addresses the lack of a unified account. It offers a framework for comparing the different research approaches to JDM and their incommensurable paradigms. It describes the central role of metaphors, stories and formal models when managers make decisions. It adopts a neo-pragmatic perspective which treats all three as special forms of model rather than representatives of opposing paradigms. This in turn makes possible a unified account in which specific functions are assigned to each form of model in specific stages of decision-making; metaphors and stories represent the interpretive paradigm and formal models the objectivist paradigm. Finally, to shape future research, the paper derives five propositions about the use and impacts of metaphors, stories and formal models from an account of how they are actually used by managers making decisions. (shrink)

The ratio bias—according to which individuals prefer to bet on probabilities expressed as a ratio of large numbers to normatively equivalent or superior probabilities expressed as a ratio of small numbers—has recently gained momentum, with researchers especially in health economics emphasizing the policy importance of the phenomenon. Although the bias has been replicated several times, some doubts remain about its economic significance. Our two experiments show that the bias disappears once order effects are excluded, and once salient and dominant incentives (...) are provided. This holds true for both choice and valuation tasks. Also, adding context to the decision problem does not alter this finding. No ratio bias could be found in between-subject tests either, which leads us to the conclusion that the policy relevance of the phenomenon is doubtful at best. (shrink)

This study examines truthfulness through eight dimensions to explicate truth in health communication and explores the relationships between message truthfulness and message attributes and audience characteristics. A content analysis of 974 television antismoking ads from the Centers for Disease Control (CDC) reveals a high degree of truthfulness. Message truthfulness is related to thematic frames, emotion appeals, source, age, social role and smoking status, and positive framing of consequences. Ads targeted at teens/youth and smokers tend to have lower message truthfulness than (...) ads targeting older age groups and non-smokers. Ads with humor and fear appeals are found to be less truthful. (shrink)

This study examines how ambiguity in corporate objectives affects managers’ choice between opposing sustainability and short-term profit goals. We test this question with an experiment in which we vary whether environmental sustainability is included explicitly as a strategic objective that is used for managers’ performance evaluations. Findings show that managers increase biodegradable production and correspondingly decrease short-term profit when environmental sustainability performance is explicitly incorporated within the company’s strategic objectives. Also, managers in the implicit incorporation group are more likely to (...) decrease their biodegradable production when they learn that their counterparts within the firm have chosen to decrease biodegradable production in other product lines. Further, managers in the explicit incorporation group have greater trust in senior management, and that trust mediates the negative relationship between incorporation ambiguity and the level of biodegradable production. The theoretical and practical implications of this study are discussed. (shrink)

In his early experimental work with Suppes, Davidson adopted rationality assumptions, not as necessary constraints on interpretation, but as practical conceits in addressing methodological problems faced by experimenters studying decision making under uncertainty. Although the content of their theory has since been undermined, their methodological approach—a Galilean form of methodological rationalism—lives on in contemporary psychological research. This article draws on Max Weber’s verstehen to articulate an account of Galilean methodological rationalism; explains how anomalies faced by Davidson’s early experimental work gave (...) rise to his later, canonical claims about rationality and interpretation; and reclaims this Galilean framework for use in contemporary psychological research. (shrink)

is normative in the sense that it aims to make recommendations for improving human judgment; it aims to have a practical impact on morally and politically significant human decisions and actions; and it studies normative, rational judgment qua rational judgment. These nonstandard ways of understanding ACP as normative collectively suggest a new interpretation of the strong replacement thesis that does not call for replacing normative epistemic concepts, relations, and inquiries with descriptive, causal ones. Rather, it calls for recognizing that the (...) aims and normative inquiries of epistemology and normative psychology have become intermutual in nature. Key Words: Heuristics and biases • applied cognitive psychology • normative psychology • rationality • naturalized epistemology • Epistemics • Applied Naturalized Epistemology • strong replacement • strategic reliabilism • ameliorative psychology. (shrink)

This paper discusses the validity of nudges to tackle time-inconsistent behaviours. I show that libertarian paternalism is grounded on a peculiar model of personal identity, and that the argument according to which nudges may improve one’s self-assessed well-being can be seriously questioned. I show that time inconsistencies do not necessarily reveal that the decision maker is irrational: they can also be the result of discounting over the degree of psychological connectedness between our successive selves rather than over time. Time inconsistency (...) can call for paternalism if and only if we accept that an individual is characterised by stable “true” preferences over time-dependent outcomes, and that she is rationally required to make time-consistent choices. This model is descriptively and normatively questionable. I then argue that behavioural findings may still justify paternalistic interventions, but on a non-welfarist basis. (shrink)

This article examines the theoretical motivations underlying the conflicting beliefs in support of and against responsible investment and presents unique quantitative evidence to illustrate how such conflicting logics produce a curvilinear relationship between screening intensity and two measures of risk. First, I argue that, whereas limiting the investable universe by using RI screening criteria increases the risk specific to the portfolio, very high screening intensity can reduce this risk. This is due to the fact that information benefits enable fund managers (...) to be more selective, allowing them to select less risky firms. Second, by drawing on behavioral studies, I argue that this same curvilinear relationship occurs when examining the flow of money coming in and out of a fund. That is, high RI screening makes ethical investors “stickier” and less likely to pull money out of a fund because they are attracted to its ethical properties. I test my hypotheses using a data set of all known European RI screening equity mutual funds. I generally find strong support for both hypotheses. This has an important implication for investors: For high screening intensity and meaningful RI practices, RI is associated with a significant risk reduction. (shrink)

Humans face many game problems that are too large for the whole game tree to be used in their deliberations about action, and very little is understood about how they cope in such scenarios. However, when a human player’s chosen strategy is conditioned on her limited perspective of how the game might progress, then it should be possible to manipulate her into changing her planned move by mentioning a possible outcome of an alternative move. This paper demonstrates that human players (...) can be manipulated this way: in the game The Settlers of Catan, where negotiation is only a small part of what one must do to win the game thereby generating uncertainty about which outcomes to the negotiation are good and which are bad, the likelihood that a player accepts a trade offer that deviates from their declared preferred strategy is higher if it is accompanied by a description of what that trade offer can lead to. (shrink)

Debates about moral judgments have raised questions about the roles of reasoning, culture, and conflict. In response, the cognitive prototype model explains that over time, through training, and as a result of cognitive development, people construct notions of blameworthy and praiseworthy behavior by abstracting out salient properties that lead to an ideal representation of each. These properties are the primary features of moral prototypes and include social context interpretation, intentionality, consent, and outcomes. According to this model, when the properties are (...) uniform and coherent, they depict a promoral or immoral prototype, relative to the orientations of the properties. A promoral prototype is represented by an action that is supported by the culture, intentionally benevolent or other-regarding, consensual, and resulting in positive outcomes. An immoral prototype is an action that is condemned by the culture, intentionally malevolent or self-serving, lacking consent, and resulting in negative outcomes. It is hypothesized that moral prototypes will result in a high level of agreement and require effortless processing. Alternatively, when properties conflict or the situation deviates from the prototype, a nonprototype will result. It is hypothesized that nonprototypical situations will act as a source of moral disagreement and may require more effortful processing. (shrink)

This paper presents a very simple model in which situational cues associated with a particular consumption good compel an agent—who may have otherwise been “thinking about” something else—to consider the decision to consume that good. Within this framework, it is shown how an endowment effect and a present bias can arise through a common mechanism. The analysis points to a novel, contributing role for inattention in understanding both of these behavioral anomalies while also speaking to evidence that they are often (...) cue-induced. (shrink)

Elaborating on the notions that humans possess different modalities of decision-making and that these are often influenced by moral considerations, we conducted an experimental investigation of the Trolley Problem. We presented the participants with two standard scenarios (‹lever’ and ‹stranger’) either in the usual or in reversed order. We observe that responses to the lever scenario, which result from (moral) reasoning, are affected by our manipulation; whereas responses to the stranger scenario, triggered by moral emotions, are unaffected. Furthermore, when asked (...) to express general moral opinions on the themes of the Trolley Problem, about half of the participants reveal some inconsistency with the responses they had previously given. (shrink)

Although agreement on the positive sign of the relationship between corporate social and financial performance is observed in the literature, the mechanisms that constitute this relationship are not yet well-known. We address this issue by extending management’s stakeholder theory by adding insights from psychology’s prospect decision theory and sociology’s resource dependence theory. Empirically, we analyze an extensive panel dataset, including information on disaggregated measures of social performance for the S&P 500 in the 1997–2002 period. In so doing, we enrich the (...) extant literature by focusing on stakeholder heterogeneity, perceptional framing, and disaggregated measures of corporate social performance. (shrink)

Why does performing certain tasks cause the aversive experience of mental effort and concomitant deterioration in task performance? One explanation posits a physical resource that is depleted over time. We propose an alternative explanation that centers on mental representations of the costs and benefits associated with task performance. Specifically, certain computational mechanisms, especially those associated with executive function, can be deployed for only a limited number of simultaneous tasks at any given moment. Consequently, the deployment of these computational mechanisms carries (...) an opportunity cost – that is, the next-best use to which these systems might be put. We argue that the phenomenology of effort can be understood as the felt output of these cost/benefit computations. In turn, the subjective experience of effort motivates reduced deployment of these computational mechanisms in the service of the present task. These opportunity cost representations, then, together with other cost/benefit calculations, determine effort expended and, everything else equal, result in performance reductions. In making our case for this position, we review alternative explanations for both the phenomenology of effort associated with these tasks and for performance reductions over time. Likewise, we review the broad range of relevant empirical results from across sub-disciplines, especially psychology and neuroscience. We hope that our proposal will help to build links among the diverse fields that have been addressing similar questions from different perspectives, and we emphasize ways in which alternative models might be empirically distinguished. (shrink)