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16

I know 2 explanations to such seemingly irrational behaviour in cognitive science. Both of them don't really justify the usage of the simple reward-maximizing model in economics. Rule Rationality versus Act Rationality Act Rationality is the notion that every decision an agent makes is made in order to maximize his utility. Rule Rationality is the notion ...


9

@OfriRaviv provided a great answer, but I thought I'd add a third alternative I am aware of for completeness. The Tversky & Shafir result is only a violation of classical probability. This approach to probability usually goes unquestioned (since people often assume classical logic is the only reasonable logic), but could be put under scientific ...


8

If that same effect is happening with the "99% fat free" labeling, consumers would over-perceive the amount of fat I think you are misunderstanding the desired effect here. I don't see how "99% fat free" would lead to the impression that a product contains a lot of fat. My read is, "This is 99% fat free! That's really good!" as opposed to "1% fat" which ...


6

I've found Neighbors as Negatives: Relative Earnings and Well-Being by E.F.P. Luttmer (2005), although I'm not sure it's the right one. I've heard about your study as well, but I thought it was older than 2005. You can read the study I linked and look up the references. There are quite a lot that touch the same subject.


5

The experiment you are referring to is usually called the ultimatum game, and was first experimentally tested by Güth, Schmittberger, and Schwarze in 1982 [1]. [1] Güth, Werner, Rolf Schmittberger, and Bernd Schwarze. "An experimental analysis of ultimatum bargaining." Journal of Economic Behavior & Organization 3.4 (1982): 367-388. PDF


4

This is just an elaboration on my comment that Sanford et al (2002) might be relevant to the question. If you don't have access Tony Sanford indicates that "To obtain a copy of any of these papers, please email." The study reports three experiments. In experiment 2 they found experimentally that there was a preference for the "% fat free" format. ...


4

Partial answer: Douglas Hofstadter has written quite a lot about this from a more philosophical approach. His style isn't for everyone, I think it's introduced well in this chapter ('Ant Fugue'). For more applied work from the same, you might look at Mitchell and Hofstadter's CopyCat model of analogies (described briefly here, as well as on wikipedia). ...


4

If you're looking for a simple game, for example to teach the holdout problem to students just beginning game theory, you could do worse than start with a general prisoner's dilemma (PD) game. The 30-second explanation is that it only makes (rational) sense for one player to act if the other person is acting as well. The holdout problem is a motivation for ...


4

The aspects of incentives which you are interested in are studied by psychologists as well. I recommend Carol Dweck's work. One of her popular books is Mindset.


3

Bystander Effect The Bystander Effect could be your answer. The more people, the less personal responsibility. Person gets assaulted and mugged on a crowded street in broad daylight, nobody calls the cops. Software bugs slow company productivity almost to a halt, many employees, nobody reports the problem. Tragedy of the Commons The tragedy of the ...


3

This is quite a broad question, and the feasibility of any answer will depend on the time and resources available for performing a demonstration, assuming the objective isn't just to present a summary of existing research. A relatively simple principle to demonstrate in a risk management context would be the framing effect, whereby the emphasis on gain or ...


2

I am not sure I understand the refill example, and I do not have any empirical study in mind, but here is a classical fictitious example drawn from Mas-Collel, Winsthon and Green, Microeconomics, which might be relevant to your question. The example is slightly fetched but I think it's good to get the idea. Suppose you want to choose a color to paint your ...


2

This is pretty close to being a classic example of a framing effect (wikipedia), originally described in the literature by Tversky & Kahneman (1986). In essence, our subjective valuation of a choice or outcome isn't invariant, as economic theory says it should be, but instead is influenced by contextual effects, such as riskiness, and if the outcome is ...


2

Grabner-Kräuter et al (2003) suggest that Lack of trust is one of the most frequently cited reasons for consumers not purchasing from Internet vendors. References Grabner-Kräuter, S., & Kaluscha, E. A. (2003). Empirical research in on-line trust: a review and critical assessment. International Journal of Human-Computer Studies, 58(6), 783-812. ...


1

Yes and no. The Tversky and Kahneman work was done in the late 70s before the advent of modern media and social networking. In isolation without presure from grieving mothers events can so be analyzed and responded to proportionately but in today's world single events with large amount of emotionally charged coverage from those affected first hand stimulates ...



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