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Behavioral Finance with Victor Ricciardi | VoiceAmerica™

Behavioral Finance with Victor Ricciardi | VoiceAmerica™ | Bounded Rationality and Beyond | Scoop.it
Our guest today, Victor Ricciardi, BBA, MBA, APC is an Assistant Professor of Financial Management at Goucher College in Baltimore, Maryland. The questions we will be discussing today are: What is Standard (Traditional) Finance?What is Modern Portfolio Theory? What is Behavioral Finance? What type of decision maker are you? What is the Psychology of Risk (Risk Perception)? What is the inverse relationship between perceived risk and expected return? What are the main topics that influence an investor’s perception and decision-making process (Heuristics, Overconfidence, Loss Aversion, Control Bias, Representativeness, Anchoring, Familiarity Bias, Worry, Gut Feelings)? What role did the “2008 Financial Crisis” have on risk-taking behavior?
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Bounded Rationality and Beyond
News on the effects of bounded rationality in economics and business, relationships and politics
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Daniel Kahneman: Entscheiden ohne Wahrnehmungsverzerrung - Wirtschaftspsychologie aktuell

Daniel Kahneman: Entscheiden ohne Wahrnehmungsverzerrung - Wirtschaftspsychologie aktuell | Bounded Rationality and Beyond | Scoop.it

Daniel Kahneman, Dan Lovallo und Olivier Sibony haben daher in der aktuellen Ausgabe des Harvard Businessmanager eine Checkliste zusammengestellt (S. 22-29), wie sich diese Wahrnehmungszerrungen vermeiden lassen. Diese Checkliste umfasst 12 Aktionen. Im Originalbeitrag werden diese Aktionen als Fragen formuliert und mit konkreten Fallbeispielen zu einer Preissenkungs-, Investitions- und Akquisitionsentscheidung illustriert.

Hier sollen die Aktionen in ihrer grundlegenden psychologischen Wirkrichtung kurz angerissen werden. Sie können von einer Führungskraft eingesetzt werden, die eine Entscheidungsvorlage ihres Arbeitsteams bewerten will.

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Partyism by Cass R. Sunstein :: SSRN

Partyism by Cass R. Sunstein :: SSRN | Bounded Rationality and Beyond | Scoop.it
Abstract:      
“Partyism” is a form of hostility and prejudice that operates across political lines. For example, some Republicans have an immediate aversive reaction to Democrats, and some Democrats have the same aversive reaction to Republicans, so much so that they would discriminate against them in hiring or promotion decisions, or in imposing punishment. If elected officials suffer from partyism – perhaps because their constituents do – they will devalue proposals from the opposing party and refuse to enter into agreements with its members, even if their independent assessment, freed from partyism, would be favorably disposed toward those proposals or agreements. In the United States, partyism has been rapidly growing, and it is quite pronounced – in some ways, more so than racism. It also has a series of adverse effects on governance itself, above all by making it difficult to enact desirable legislation and thus disrupting the system of separation of powers. Under circumstances of severe partyism, relatively broad delegations of authority to the executive branch, and a suitably receptive approach to the Chevron principle, have considerable appeal as ways of allowing significant social problems to be addressed. This conclusion bears on both domestic issues and foreign affairs.
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Der Insellappen

Der Insellappen | Bounded Rationality and Beyond | Scoop.it
Wer sich für den Insellappen – den Lobus insularis interessiert, muss ihn erst einmal finden: verdeckt vom Temporallappen und den Opercula – wörtlich den „Deckeln“ – des Frontal- und des Parietallappens ist er von außen nicht zu sehen. Johann Christian Reil (1759-1813) entdeckte ihn erst 1796. Nun ja, er beschrieb ihn erstmals 1796. Aber „Entdeckung“ passt so schön zu der Bezeichnung, die dem Lobus insularis im berühmten anatomischen Grundlagenwerk Gray´s Anatomy zuteil wurde: „The Island of Reil“.
Alessandro Cerboni's insight:

Sind neurowissenschaftliche Erkenntnisse hilfreich für die Forschung über Heuristiken?

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Frontiers | Adolescent and adult risk-taking in virtual social contexts | Developmental Psychology

There is a paucity of experimental data addressing how peers influence adolescent risk-taking. Here, we examined peer effects on risky decision-making in adults and adolescents using a virtual social context that enabled experimental control over the peer “interactions.” 40 adolescents (age 11–18) and 28 adults (age 20–38) completed a risk-taking (Wheel of Fortune) task under four conditions: in private; while being observed by (fictitious) peers; and after receiving ‘risky’ or ‘safe’ advice from the peers. For high-risk gambles (but not medium-risk or even gambles), adolescents made more risky decisions under peer observation than adults. Adolescents, but not adults, tended to resist ‘safe’ advice for high-risk gambles. Although both groups tended to follow ‘risky’ advice for high-risk gambles, adults did so more than adolescents. These findings highlight the importance of distinguishing between the effects of peer observation and peer advice on risky decision-making.
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Tracking the Unconscious Generation of Free Decisions Using UItra-High Field fMRI

Tracking the Unconscious Generation of Free Decisions Using UItra-High Field fMRI | Bounded Rationality and Beyond | Scoop.it
Abstract Recently, we demonstrated using functional magnetic resonance imaging (fMRI) that the outcome of free decisions can be decoded from brain activity several seconds before reaching conscious awareness. Activity patterns in anterior frontopolar cortex (BA 10) were temporally the first to carry intention-related information and thus a candidate region for the unconscious generation of free decisions. In the present study, the original paradigm was replicated and multivariate pattern classification was applied to functional images of frontopolar cortex, acquired using ultra-high field fMRI at 7 Tesla. Here, we show that predictive activity patterns recorded before a decision was made became increasingly stable with increasing temporal proximity to the time point of the conscious decision. Furthermore, detailed questionnaires exploring subjects' thoughts before and during the decision confirmed that decisions were made spontaneously and subjects were unaware of the evolution of their decision outcomes. These results give further evidence that FPC stands at the top of the prefrontal executive hierarchy in the unconscious generation of free decisions.
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What’s Wrong with Heterodox Economics Journals?

What’s Wrong with Heterodox Economics Journals? | Bounded Rationality and Beyond | Scoop.it
I just came across a very interesting bit of research, A Guide to Paradigmatic Self-Marginalization: Lessons for Post-Keynesian Economists by Leonhard Dobusch and Jakob Kapeller; you can find it here.

I realize this is not going to be of interest to many of our readers, as it is a sort of “inside the halls of academia” analysis. What the authors do is to look at the strategies of editors running the top orthodox and the top heterodox journals in economics. Actually it might be a bit unfair to label these strategies, as the authors do not mean to imply that editorial policy knowingly pursues the strategies. Instead, the article looks at the ex post results.

In a nutshell, what they find is that the articles published in orthodox journals do not cite the research published in heterodox journals. NO SURPRISE THERE! But they also find some startling self-defeating practices pursued by heterodox journals.


Let’s first deal with cross-citation between orthodox and heterodox articles, then turn to the problems with within heterodoxy.
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Videos - Behavioral Economics News

Videos - Behavioral Economics News | Bounded Rationality and Beyond | Scoop.it

Behavioral Economics News, by Gerhard Fehr - Videos: The latest news & empirical insights from Behavioral Economics for management, politics & life. Video Shared by Richard H Thaler

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Behavioral Science and Development Economics

Behavioral Science and Development Economics | Bounded Rationality and Beyond | Scoop.it
The World Bank recently launched its flagship ‘World Development Report,’ (WDR) and it’s surprising. As the guy who runs a Blog called “There are Free Lunches,” my immediate thought when seeing the report was: Aren’t the guys from the World Bank the ones who believe that people are rational self-interested agents, and that money is the solution to all the problems in the world? But soon I realized had been caught by the subtle but powerful forces of the availability heuristic, a mental shortcut people use when they have to make judgments under conditions of uncertainty. The heuristic entails basing judgments on scenarios that immediately come to mind, rather than on using all information appropriately. Thus, the ideas that immediately came to my mind when I thought about the World Bank were: money + loans + poor countries. Only when Varun Gauri, co-director of the report, told me they were “launching a new report that reviews exciting, early efforts to diagnose and solve psychological, cognitive, and social constraints to development economics and policy.”, I understood I had been fooled again by one of the many psychological and social shortcuts that, although evolutionary useful, nowadays bias our minds, govern our lives, and determine the faith of our societies and economies. In the following paragraphs we will be able to understand, through several examples picked from the WDR 2015, how small and low cost government interventions can tackle these biases and generate large development benefits.
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Decide which frequent flyer program is best for your city - Decision Science News

Decide which frequent flyer program is best for your city - Decision Science News | Bounded Rationality and Beyond | Scoop.it
We’ve posted in the past about which airline you should be loyal to, but we always felt guilty because we only showed results for the New York metro area and there are Decision Science News readers all over the USA (and all over the World too, though in most countries it’s an easy decision: go with the national airline).

Since then, we’ve learned about data for every flight in the USA that makes it pretty straightforward to generate for every US metro area the number of departures for each airline.

Try out the new tool here: Decide which frequent flyer program to by loyal to.

Just type in the name of your metro area in the search box and you’ll see the number of departures by airline for your area only. The data comprise every flight taken in the USA in 2013.
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Here’s The Curious Secret To Perfect Learning While You Are Distracted — PsyBlog

Here’s The Curious Secret To Perfect Learning While You Are Distracted — PsyBlog | Bounded Rationality and Beyond | Scoop.it

How to learn while distracted as if you were totally focused.
Learning with distractions can be just as efficient as total focus, as long as the distractions are still there during recall, a new study finds.
Although distractions have long been thought detrimental to learning, two new experiments have tested what happens when people are also distracted as they try to recall what they’ve learnt.

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acyon's curator insight, December 15, 8:40 AM

Comment bien apprendre même si on est dérangé lors de l'apprentissage ? 

Virginia-Victoria's curator insight, December 16, 12:07 PM

Experiments about how we learn (ofcourse, thous which are well-done) are always nice.
This experiment could give us another point of view about oruselves.
Really something curious.

 

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How Embodied Is Cognition?

E is the letter, if not the word, in today’s sciences of mind. E adjectives proliferate. Nowadays it is hard to avoid claims that cognition – perceiving, imagining, decision-making, planning – is best understood in E terms of some sort. The list of
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Five Economists Who Deserve Nobels

Five Economists Who Deserve Nobels | Bounded Rationality and Beyond | Scoop.it
Tomorrow,  Jean Tirole will officially receive his Nobel Prize in economics. He was a pretty obvious candidate for the prize, given the amazing breadth, influence and skill of his body of work. But who might win in the future? There are many perennial top candidates, but a few seem to stand out clearly in my mind.

Of course, this short list is heavily weighted toward the fields I know most about -- finance, behavioral economics and macroeconomics -- so I’m neglecting most of the top candidates in other fields such as labor, tax, trade and growth. For that bias I apologize. And with that apology out of the way, here is my mental list, in no particular order:
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Personality and Procedural Invariance: Effects on Bidding Behavior Across Induced Value Experimental Auction Mechanisms

Abstract: A growing literature exists on the design, implementation and evaluation of experimental auctions with a variety of non-market valuation applications. With behavioral economic models becoming more mainstreamed in the discipline, a natural question arises about how personality traits might affect bidding behavior in experimental auctions. To address this question, a series of induced-value experiments were carried out in the fall of 2012. Personality traits were measured in pre- and post-surveys aligning with the Midlife Development Inventory Analysis. Regression analysis determined the effects of personality traits on over- and under-bidding behaviors across four frequently used auction mechanism: the Becker-Degroot-Marschak, 2nd Price, Random Nth Price, and English auctions. Results indicate that only the BDM and Random Nth price auctions are significantly affected by personality profile. Specifically, openness, extraversion, and neuroticism are associated with overbidding behavior and agreeableness is associated with underbidding behaviors. 
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Can quantum probability provide a new direction for cognitive modeling

Can quantum probability provide a new direction for cognitive modeling?

 

Abstract: Classical (Bayesian) probability (CP) theory has led to an influential research tradition for modeling cognitive processes.

Cognitive scientists have been trained to work with CP principles for so long that it is hard even to imagine alternative ways to formalize probabilities. However, in physics, quantum probability (QP) theory has been the dominant probabilistic approach for nearly 100 years. Could QP theory provide us with any advantages in cognitive modeling as well? Note first that both CP and QP theory share the fundamental assumption that it is possible to model cognition on the basis of formal, probabilistic principles. But why consider a QP approach? The answers are that (1) there are many well-established empirical findings (e.g., from the influential Tversky, Kahneman research tradition) that are hard to reconcile with CP principles; and (2) these same findings have natural and straightforward explanations with quantum principles. In QP theory, probabilistic assessment is often strongly context- and orderdependent, individual states can be superposition states (that are impossible to associate with specific values), and composite systems can be entangled (they cannot be decomposed into their subsystems). All these characteristics appear perplexing from a classical perspective. However, our thesis is that they provide a more accurate and powerful account of certain cognitive processes. We first introduce QP theory and illustrate its application with psychological examples. We then review empirical findings that motivate the use of quantum theory in cognitive theory, but also discuss ways in which QP and CP theories converge. Finally, we consider the implications of a QP theory approach to cognition for human rationality.

http://mypage.iu.edu/~jbusemey/quantum/BBSQP2012.pdf

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UGA researchers identify decision-making center of brain | UGA Today

UGA researchers identify decision-making center of brain | UGA Today | Bounded Rationality and Beyond | Scoop.it

Athens, Ga. - Although choosing to do something because the perceived benefit outweighs the financial cost is something people do daily, little is known about what happens in the brain when a person makes these kinds of decisions. Studying how these cost-benefit decisions are made when choosing to consume alcohol, University of Georgia associate professor of psychology James MacKillop identified distinct profiles of brain activity that are present when making these decisions.

"We were interested in understanding how the brain makes decisions about drinking alcohol. Particularly, we wanted to clarify how the brain weighs the pros and cons of drinking," said MacKillop, who directs the Experimental and Clinical Psychopharmacology Laboratory in the UGA Franklin College of Arts and Sciences.

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Der Feind in meinem Kopf

Der Feind in meinem Kopf | Bounded Rationality and Beyond | Scoop.it
Am Massachusetts Institute of Technology untersuchen Wissenschaftler, was sich im Hirn ändert, wenn verfeindete Menschen sich näher kommen. Interventionen bei Konflikten sollen so künftig wissenschaftlich bewertet werden können.
Die Empathie gegenüber Menschen der gegnerischen Seite hält sich in Grenzen. Wo im Gehirn der Mangel an Mitgefühl verursacht wird, steht allerdings noch nicht fest.
Auch Vorurteile gegenüber der feindlichen Gruppe spielen in Konflikten eine Rolle. Sie werden offensichtlich im Precuneus, einem Teil des Parietallappens verarbeitet.
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Frontiers | How Predictable are “Spontaneous Decisions” and “Hidden Intentions”? Comparing Classification Results Based on Previous Responses with Multivariate Pattern Analysis of fMRI BOLD Signals...

In two replication studies we examined response bias and sequential dependencies in binary decisions. We applied a linear classifier (SVM) to predict spontaneous decisions as well as hidden intentions from responses in preceding trials and achieve similar prediction accuracies as multivariate pattern classification of voxel activities in frontopolar cortex. We discuss implications of our findings and suggest a simple way to improve analyses of fMRI BOLD signals to contain effects of sequential dependencies between trials.
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Frei oder nicht frei?

Frei oder nicht frei? | Bounded Rationality and Beyond | Scoop.it
Im Alltag glauben wir, uns meist völlig frei entscheiden zu können. Doch offenbar gehen neuronale Prozesse den bewussten Beschlüssen voraus und lassen uns scheinbar keine Wahl. Ist Willensfreiheit also nichts als eine schöne Illusion?

Philosophen haben verschiedene Kriterien herausgefiltert, die erfüllt sein müssen, damit man von Willensfreiheit sprechen könne. Zum einen das Prinzip des Anderskönnens: Die Person muss eine Wahl zwischen verschiedenen Alternativen haben und hätte sich auch anders entscheiden können. Zum zweiten das Prinzip der Urheberschaft: Die Person selbst muss die Wahl zwischen den Alternativen treffen können. Zum dritten wichtig sei das Prinzip der Autonomie: Die Wahl muss autonom und selbständig, also nicht unter Zwang erfolgen.

Nicht alle Philosophen und Naturwissenschaftler halten alle drei Kriterien für notwendig. Die philosophische Position des Kompatibilismus geht davon aus, dass Willensfreiheit und (naturwissenschaftlicher) Determinismus kompatibel sind. Sie verlangt von einer freien Entscheidung lediglich, dass sie von der Person selbst und autonom gefällt wird.

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How Hockey Got the Mumps - Cass R. Sunstein

How Hockey Got the Mumps - Cass R. Sunstein | Bounded Rationality and Beyond | Scoop.it
Over the past two months, the National Hockey League has experienced a baffling outbreak of mumps. Thirteen players are said to have it, and there's no telling when the outbreak will end. It is a story that seems to have stepped from the mid-20th century.

Before 1967, about 180,000 Americans had mumps every year. Sometimes the number was well over 200,000. While the illness is only rarely fatal, it is worse than unpleasant, producing fever, headache, fatigue and loss of appetite.

By 2012, the number of reported cases shrunk to 229. Mumps has hardly been wiped out, but in terms of public health, the improvement has been nothing short of spectacular.
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How Perfectionism Destroys Happiness

How Perfectionism Destroys Happiness | Bounded Rationality and Beyond | Scoop.it
If you want to never be happy or satisfied with your life, one great way to do that is to raise your expectations to an unrealistically high standard that can never possibly be met.

This is the essence of perfectionism. It’s the inability to be happy with something until it is perfect, without any flaws whatsoever. Of course, the problem with this mindset is that perfectionism is often an illusion.

Life rarely works out exactly the way we want, in any domain – whether it’s relationships, work, or goals.

And many times being more happy with your life requires that you let go of these expectations and learn to be more content with how things are, rather than how you picture they should be in an “ideal world.”

Many studies are beginning to show the many ways perfectionism can destroy your happiness.
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Start-up dei servizi : l'arte di partire bene e .... prima possibile

Start-up dei servizi : l'arte di partire bene e .... prima possibile | Bounded Rationality and Beyond | Scoop.it
Parliamoci chiaro. Se esiste una azione difficile e coraggiosa è quella di aprire una propria attività o impresa, cercando  di vendere il proprio prodotto o servizio alle persone. Se poi aggiungiamo la burocrazia italica, da sempre contraria alla libertà di impresa per retaggio culturale, la difficoltà si moltiplica e il coraggio viene spesso a mancare.

Dedico questo mio post ad una simpatica signora che mi ha chiesto un aiuto su come poter intraprendere una splendida mission che ha in mente nel campo alberghiero-svago.

Una start-up ha un unico grande problema: FARE SOLDI. Inutile nasconderselo. Se non si incassa e si raggiunge quello che in gergo tecnico si chiama break-even point,  prima o poi i soldi finiscono insieme ai sogni imprenditoriali. Occorre pertanto le persone che vi diano fiducia e paghino per il vostro prodotto.
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Taming Heuristics

Heuristics: 
Usually give reasonably good results quickly & easily 
Can fail unpredictably . Can also fail in predictable ways; these are the biases "hidden traps." Most of these heuristics can work well or can turn into harmful biases in any of the stages of problem solving, but the details differ depending on what stage of problem solving you are in. 
Similarly, most of the heuristics are used (and abused) by people of all cognitive styles, but again the details differ depending on what cognitive style you are using.

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Why We Kill: Violence as Socialization - YouTube

Acts of serious violence – often committed by seemingly average people – leave us only to ask “Why?” Culture, genetics, and low self-esteem are often cited, but growing evidence points to brutalization experienced in childhood, often at the hands of parents or peers. Ginger Rhodes and Richard Rhodes explore the work of criminologist Lonnie Athens, whose "violentization" model identifies a four-stage process by which almost any human being can be socialized into someone who will assault, rape, or murder. Their talk looks at the history of violence, questions the association of violence with mental illness, tests Athens’ theory on real-life cases, and makes an argument for early intervention.

Richard Rhodes is the author of twenty-five books including The Making of the Atomic Bomb, which won a Pulitzer Prize in Nonfiction, a National Book Award and a National Book Critics Circle Award; Dark Sun: The Making of the Hydrogen Bomb, which was shortlisted for a Pulitzer Prize in History; an investigation of the roots of private violence, Why They Kill; and, most recently, a narrative of the Spanish Civil War, That Fine Place. He has received numerous fellowships for research and writing, including grants from the Ford Foundation, the Guggenheim Foundation, the MacArthur Foundation and the Alfred P. Sloan Foundation. He has been a visiting scholar at Harvard and MIT and a host and correspondent for documentaries on American public television.
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Big Mac Hurting as Customers Get Pickier

Big Mac Hurting as Customers Get Pickier | Bounded Rationality and Beyond | Scoop.it
As sales continue to slide in the U.S., McDonald's plans to expand a test that lets people build their own burgers by tapping on a touchscreen to pick the bread, cheese and toppings they want. The company says it will bring the option to 2,000 of its more than 14,000 U.S. locations next year.

The "Create Your Taste" program is a departure for McDonald's, which was built to deliver food consistently, quickly and affordably. That model has come under pressure as people gravitate toward places like Chipotle, which lets people pick what goes on their bowls and burritos as they walk down a line.

According to industry executives and analysts, the ability to customize food orders is becoming more important, particularly among people in their 20s and 30s. McDonald's has already been trying to adjust by installing new kitchen prep tables that can hold more toppings and sauces.

The plans to offer greater customization come as McDonald's fights to boost declining sales and customer traffic. On Monday, it said U.S. sales fell 4.6 percent in November at established locations. The figure fell 4 percent in the unit that includes the Asia-Pacific region, where the company is fighting to recover from a food supplier scandal. Overall, global sales declined 2.2 percent for the month.

In the U.S., CEO Don Thompson has conceded the company hasn't done enough to keep up with shifting habits and that changes are in store.
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Limited Attention and Status Quo Bias

Abstract: We introduce and axiomatically characterize a model of status quo bias in which the status quo affects choices by both changing preferences and focusing attention. The resulting Limited Attention Status Quo Bias model can explain both the finding that status quo bias is more prevalent in larger choice sets and that the introduction of a status quo can change choices between non-status quo alternatives. Existing models of status quo bias are inconsistent with the former finding while models of decision avoidance are inconsistent with the latter. We report the results of laboratory experiments which show that both attention and preference channels are necessary to explain the impact of status quo on choice.
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