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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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Nudging e Salute: un binomio possibile?

Abstract: Il termine inglese nudging viene tradotto in italiano con la locuzione “spinta gentile”. Esso indica un’azione svolta dallo Stato diretta ad incentivare (o disincentivare) comportamenti individuali ritenuti benefici (o nocivi) per il soggetto stesso che li compie. L’ipotesi teorica che sta alla base di tale pratica è che le scelte che il consumatore può compiere non rispondano sempre ai postulati di razionalità propri della teoria neoclassica del consumatore. Si ipotizza l’esistenza di due tipi di consumatore l’Homo Economicus, definito anche “Econ”, che è in grado di compiere scelte che rispettano i postulati propri della teoria neoclassica del consumatore e l’Homo Sapiens, o “Human”, che compie errori sistematici nell’effettuare le proprie scelte. In questo paper, dopo aver esposto i tratti principali del nudging, si analizzano in modo critico gli aspetti teorici e leimplicazioni di policy di tale teoria.
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Individual perceptions of local crime risk

Abstract: We provide evidence that perceptions of crime risk are severely biased for many years after a move to a new neighborhood. Based on four successive waves of a large crime survey, matched with administrative records on household relocations, we find that the longer an individual lives in a neighborhood, the higher their perception of the crime rate in the neighborhood. This finding holds irrespective of whether the move is from a relatively low-crime to a relatively high-crime area or vice versa. We find that avoidance behavior adjusts in line with the observed changes in beliefs.
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Accounting for Context: Separating Monetary and Social Incentives

Abstract: This paper proposes a simple framework to model social preferences in a game theoretic framework which explicitly separates economic incentives from social (context) effects. It is argued that such a perspective makes it easier to analyse contextual effects. Moreover, the framework is used to exemplify both theoretically and empirically how contextual variables such as social norms can worsen a social dilemma or possibly make it disappear. The empirical results of a randomised controlled classroom experiment show that women are more responsive to such contextual effects and that social agreements can also worsen economic inefficiencies
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Exploring brain activity in neuroeconomics

ABSTRACT: Neuroeconomics uses various methodologies to study the neural underpinning of economic decision-making. The goal of the present article is to briefly introduce the most frequently used methods. The main functioning, properties and features, including advantages and limits, of Positron Emission Tomography (PET), functional Magnetic Resonance Imaging (fMRI), Electroencephalography (EEG), Magnetoencephalography (MEG), and Transcranial Stimulation (TMS and tDCS) will be discussed.
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Emotions-at-risk: An experimental investigation into emotions, option prices and risk perception

Abstract: This paper experimentally investigates how emotions are associated with option prices and risk perception. Using a binary lottery, we find evidence that the emotion 'surprise' plays a significant role in the negative correlation between lottery returns and estimates of the price of a put option. Our findings shed new light on various existing theories on emotions and affect. We find gratitude, admiration, and joy to be positively associated with risk perception, although the affect heuristic predicts a negative association. In contrast with the predictions of the appraisal tendency framework (ATF), we document a negative correlation between option price and surprise for lottery winners. Finally, the results show that the option price is not associated with risk perception as commonly used in psychology.
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Ask Ariely: On Honoring Housework, BE to Business, and Laundering Linens

Ask Ariely: On Honoring Housework, BE to Business, and Laundering Linens | Bounded Rationality and Beyond | Scoop.it
Here's my Q&A column from the WSJ this week — and if you have any questions for me, you can tweet them to @danariely with the hashtag #askariely, post a comment on my Ask Ariely Facebook page, or email them to AskAriely@wsj.com. ______________________________________________________ Many women don’t feel recognized for all the work they do at home. When their husbands come home late from the…
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Dal marketing politico alla politica. - Luigi D'Elia

Dal marketing politico alla politica.  - Luigi D'Elia | Bounded Rationality and Beyond | Scoop.it

<<Là dove il mondo reale si cambia in semplici immagini, le semplici immagini diventano degli esseri reali, e le motivazioni efficienti di un comportamento ipnotico>> e più avanti aggiunge: <<Più (lo spettatore) contempla, meno vive; più accetta di riconoscersi nelle immagini dominanti del bisogno, meno comprende la propria esistenza e il proprio desiderio>>

Non c’è alcun motivo per affermare che un blog non debba essere inscritto nella logica della spettacolarizzazione della politica intesa debordianamente come sublimazione di una merce. Non c’è ragione che un blog debba essere differente, migliore, più democratico. No, non ci sono ragioni per affermarlo. Per moltissimi versi il web è casomai l’evoluzione più alta di tale spettacolarizzazione: un ambiente elettivo dove ognuno fa e diventa spettacolo

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BIT Policy School: How to Build Capabilities in Public Service, Drawing on Behavioural Insights | The Behavioural Insights Team

BIT Policy School: How to Build Capabilities in Public Service, Drawing on Behavioural Insights | The Behavioural Insights Team | Bounded Rationality and Beyond | Scoop.it

Last week, we completed another BIT Policy School. Based on a concept that our Managing Director, Owain Service, devised with Cabinet Office colleagues when BIT was still part of the government, BIT Policy School isn't a normal training course.

It's an intensive, 3 day programme that takes participants through a real life behavioural insights policy problem.

Participants are set the challenge of solving the problem, drawing on BIT's methodology. But there are various elements of BIT Policy School that make it particularly engaging and challenging. And many of these elements are themselves good examples of how we draw on ideas from behavioural science to shape how we do things differently from other organisations. 

First of all, it's a competition. Participants are split in to teams. And the teams compete against each other to come up with the best solution.  

Second, the judges are individuals that the participants respect and want to impress. In this case Edward Troup (Second Permanent Secretary of HMRC, was joined by David Halpern, our CEO, to determine which team won. This means that BIT Policy School builds towards the final event of the programme: the final pitch to the senior panel, at which the judging is done.

Third, the training is delivered by people who actually use behavioural insights and have helped develop BIT's methodologies. For too long, government training has been delivered by external consultants with little knowledge of real life policymaking. This is not the case during BIT Policy School.

Fourth, we run BIT Policy School in partnership with the organisation that sets the challenge that participants tackle. This helps to ensure that the organisation itself participates fully in the programme, helping to organise front-line visits and workshops with experts. And very often the organisation takes the ideas that have been generated and implements them. 

We think that the 'Policy School' approach, which many UK government departments are now using for their own training programmes, is a great way of engaging staff and building capabilities. We'd love to hear from you if you think so too!

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Dark Matter of the Mind » IAI TV

Dark Matter of the Mind » IAI TV | Bounded Rationality and Beyond | Scoop.it

Dark Matter of the Mind All scientists believe evolution is responsible for how humans are the way we are. But evolutionary theory alone cannot explain the diversity of our behaviour. 

Who are we? How did we get to be this way? These are two of the greatest questions facing our species. The answers are still emerging after decades of field research in linguistics and anthropology, evolutionary theory, psychology, and neuroscience. But one thing is clear. Humans act, think, and exist according to the parameters of the dark matter of their minds – the things that they do not know that they know – their "unknown knowns" to shamelessly appropriate the words of Donald Rumsfeld.

All scientists believe that at some level evolution is responsible for how we humans got to be the way we are. But evolutionary theory alone is not enough. While superficially, humans are alike in many ways, at the same time, we are a varied species, with enormous differences separating individuals even within the same cultures, shaped in profound ways by our life experiences.

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Nasal Spray Effective Treatment For Memory Loss and Alzheimer’s, Study Finds — PsyBlog

Nasal Spray Effective Treatment For Memory Loss and Alzheimer’s, Study Finds — PsyBlog | Bounded Rationality and Beyond | Scoop.it

Memory loss and Alzheimer’s treated with a nasal spray over 21 days.

An insulin nasal spray can improve cognitive function in those with Alzheimer’s disease and normal age-related memory problems, new research finds.

The pilot study, published in the Journal of Alzheimer’s Disease, involved 60 adults who had normal age-related memory problems or mild to moderate Alzheimer’s (Claxton et al., 2015).

Over 21 days, two groups received different doses of insulin detemir: a synthetic, long-acting version of the natural hormone.

A comparison group received a placebo.

 

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Nudging and Uncertainty (Abstract)

Nudging and Uncertainty (Abstract) | Bounded Rationality and Beyond | Scoop.it

In three respects, behaviorally informed governance faces much deeper uncertainty than traditional intervention. The first source of uncertainty is theoretical. Many empirically well-established behavioral effects are still not well understood. The second source of uncertainty is empirical. Despite the richness of many experimental literatures, many effects are still disputed. It is always up to debate whether lab evidence extrapolates to the phenomena in the field one wants to understand. The third source of uncertainty is heterogeneity. Hardly any behavioral effect is uniform.

The substantial additional uncertainty poses a practical problem. Behaviorally informed intervention may be pointless since analysis or prediction have gone wrong. Frequently, the behaviorally informed definition of the governance problem is far from consented. Moreover since so many behavioral effects are still so little understood, one has a hard time making reliable predictions about the possible effect of some intervention, let alone about the comparative assessment of competing interventions.

There are ways out, but they are normatively problematic. A first strategy is uncoupling explanation and prediction. Much like Facebook or Google, government may collect and analyze massive databases to detect robust cue patterns. A second strategy even does away with consent on problem definition. Government just tries out interventions, and maintains the ones that stir up least resistance.

 
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Individual perceptions of local crime risk

Abstract: We provide evidence that perceptions of crime risk are severely biased for many years after a move to a new neighborhood. Based on four successive waves of a large crime survey, matched with administrative records on household relocations, we find that the longer an individual lives in a neighborhood, the higher their perception of the crime rate in the neighborhood. This finding holds irrespective of whether the move is from a relatively low-crime to a relatively high-crime area or vice versa. We find that avoidance behavior adjusts in line with the observed changes in beliefs. 
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Economists: cheaters with altruistic instincts

Abstract: Based on an experiment conducted with undergraduate students from three different majors (business economics, psychology and engineering), we study the relationship between honesty and altruism. We asked participants to toss a coin with a black and a white side. Participants won a chocolate if they reported the white outcome, whereas no gift was given if they reported black. It was done privately, so they could decide whether or not to cheat. Reporting the prize-losing side (that is, being honest when losing) could result in 3 effects, depending on the 3 conditions run: (i) no penalty, (ii) paying a penalty, or (iii) paying a penalty with an altruistic end (a donation to a non-profit organization). The amount of penalty was decided by each participant and the payment was also done in private. Although we cannot detect dishonesty on an individual level, we use statistical inference to determine cheating behavior. We find suggestive evidence that economics is significantly the most dishonest major when no penalty is involved. With economists in the lead, the results also indicate that all majors cheat if a penalty is requested. Surprisingly, when altruism plays a role, economists tend to have the most altruistic behavior, followed by psychologists. However, altruism does not reduce engineers' propensity to lie. No significant differences are found regarding gender. 
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Nudging: la ‘spinta gentile’ del Grande Fratello

Nudging: la ‘spinta gentile’ del Grande Fratello | Bounded Rationality and Beyond | Scoop.it
La 'spinta gentile' del 'nudging' è considerata una moda e, in effetti, lo è perché il suo scopo è orientare gusti ed esigenze globali verso un modello non scelto direttamente e consapevolmente dal singolo individuo. Chi è al potere tenta di disciplinare una società sempre più globalizzata, confusa e complessa praticando il nudging per suggerire-imporre un indirizzamento delle nostre decisioni. Una forma d'ipnosi, di subdolo intervento a dispetto del nostro libero arbitrio, supportato dai maggiori social network e motori di ricerca (Facebook, Google, Twitter, Whatsapp, Instagram) che sanno tutto di noi, i nostri gusti, i pensieri, i comportamenti e la nostra intera vita tracciata su Internet.
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Narrative and deliberative instauration: The use of narrative as process and artefact in the social construction of institutions

Abstract: Patient Safety is a global institution in the field largely assumed to have emerged following the publication of To Err Is Human by the Institute of Medicine in 1999. In this paper we demonstrate that Patient Safety has been constructed as an institution separately in the practice of anaesthesia since 1954 and in hospitalised care since 1964. The publication of To Err was, in fact, only one of a number of later field configuring events. We use Bruner's (1991) theory of narrative to frame the institution building process which we term deliberative instauration in recognition of the historic literature on the subject. We further link the process of institution building to Vygotsky's theory of social mediation and the use of artefacts in relation to the object of intended action. We conclude that a narrative can be understood as both an artefact and a process used in the social construction of institutions by professional psychological collectives (in this case physicians).
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Improving voluntary public good provision by a non-governmental, endogenous matching mechanism

Abstract: Social norms can help to foster cooperation and to overcome the free-rider problem in private provision of public goods. This paper focuses on the enforcement of social norms by a selfintroduced punishment and reward scheme. We analyse if subjects achieve to implement a normenforcement mechanism at their own expense by applying the theory of non-governmental normenforcement by Buchholz et al. (2014) in a laboratory experiment. Based on their theory without central authority and endogenously determined enforcement mechanism, we implement a twostage public good game: At the first stage subjects determine the strength of penalty/reward on their own and in the second stage they decide on their contributions to the public good. We find that the mechanism by Buchholz et al. (2014) leads to a higher public good contribution than without the use of any mechanism. Only in a few cases groups end up with a zero enforcement mechanism. This result indicates that subjects are apparently willing to contribute funds for implementing an enforcement mechanism. Moreover, higher enforcement parameters lead to higher public good contributions in the second stage, although too high enforcement parameters lead to unreachable theoretical optima. 
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Decision making in uncertain times: what can cognitive and decision sciences say about or learn from economic crises?

Economic crises bring to the fore deep issues for the economic profession and their models. Given that cognitive science shares with economics many theoretical frameworks and research tools designed to understand decision-making behavior, should.  

 

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Bargaining with a residual claimant: ... - Maastricht University

Abstract: We experimentally investigate a bargaining environment in which players negotiate over a xed payment to one player, while the other player receives the residual from a random pie realization after subtracting the xed payment. Contrary to the intuition that risk exposure is detrimental, we show that residual claimants are able to extract a risk premium, which is increasing in risk exposure. In some cases the premium is so high that it is advantageous to bargain over a risky pie rather than a risk-less pie. Contrary to theory, the comparatively less risk averse residual claimants benet the most. Moreover, bargaining frictions increase as risk increases, and we document more frequent disagreements as risk increases. When given the chance to choose a less or more risky distribution over which to bargain, residual claimants tend to choose the more risky distribution only when there is the possibility of an equal-split ex-post. Our results suggest that theoretical bargaining models require some separation between the determinants of bargaining power and fair compensation for risk exposure.
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Nobel laureate Daniel Kahneman - Premortem to eliminate thinking biases. - YouTube

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Jocelyn Stoller's curator insight, January 15, 1:40 PM

good lick with that

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Neuroeconomia. Quando tra il tuo cervello e quello di un cocainomane non passa alcuna differenza. - Luigi D'Elia

Neuroeconomia. Quando tra il tuo cervello e quello di un cocainomane non passa alcuna differenza. - Luigi D'Elia | Bounded Rationality and Beyond | Scoop.it

È da un po’ tempo ormai che vado pensando che economia e psicologia stiano ormai convergendo verso un‘unica scienza, se non altro perché alcune aree di punta di entrambe le discipline si occupano non a caso più o meno delle stesse tematiche. Se vuoi capire come funziona il comportamento economico e i suoi processi decisionali, ben al di là delle teorie economiche classiche, chiedi pure ad alcuni psicologi; e se vuoi capire la cifra esistenziale del soggetto contemporaneo e le sue più profonde determinazioni motivazionali, chiedi pure ad alcuni economisti.

La Neuroeconomia non è altro che la conferma finale di questa mia bizzarra (ma poi neanche tanto) idea. Di cosa si tratta? Chiedo aiuto al Prof. Matteo Motterlini (Università San Raffaele di Milano), il quale da alcuni anni è efficace ricercatore nonché divulgatore di questa nuova scienza di confine:

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Do Psychological Fallacies Influence Trading in Financial Markets? Evidence from the Foreign Exchange Market

Research in both economics and psychology suggests that, when agents predict the next value of a random series, they frequently exhibit two types of biases, which are called the gambler’s fallacy (GF) and the hot hand fallacy (HHF). The gambler’s fallacy is to expect a negative correlation in a process which is in fact random. The hot hands fallacy is more or less the opposite of this – to believe that another heads is more likely after a run of heads. The evidence for these fallacies comes largely from situations where they are not punished (lotteries, casinos and laboratory experiments with random returns). In many real-world situations, such as in financial markets, succumbing to fallacies is costly, which gives an incentive to overcome them. The present study is based on high-frequency data from a market-maker in the foreign exchange market. Trading behaviour is only partly explained by the rational exploitation of past patterns in the data, but there is also evidence of the gambler’s fallacy: a tendency to sell the dollar after it has risen persistently or strongly.   
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UZH - Foundations of Human Social Behavior - Einführung in die Neuroökonomie und Soziale Neurowissenschaften

Veranstaltungsinhalt

Diese Lehrveranstaltung gibt eine Einführung in die neuen Fachgebiete "Neuroökonomie" und "Soziale Neurowissenschaften". Teil 1 (vier Sitzungen) informiert über die Grundlagen, die man benötigt, um die Ergebnisse der Neuroökonomie und der Sozialen Neurowissenschaften zu verstehen und zu interpretieren. Neurowissenschaftliche Methoden (fMRT, EEG, TMS usw.) werden vorgestellt und ihre jeweiligen Vor- und Nachteile erklärt; zudem wird ein Überblick über relevante Gehirnstrukturen gegeben. Teil 2 (fünf Sitzungen) behandelt die neurowissenschaftlichen Grundlagen der Belohnungsmodelle (Konzept des erwarteten Nutzens, Prospect Theory usw.), der Entscheidungsfindung, des Risikos, der Heuristik und der Verzerrungen. Teil 3 (fünf Sitzungen) konzentriert sich auf das "soziale Gehirn", d.h. wie wir die Gefühle und Motivationen anderer verstehen, wann und warum wir anderen vertrauen und die phylogenetischen und entwicklungspsychologischen Grundlagen des Sozialverhaltens und der sozialen Präferenzen, und zwar auf der Basis von Untersuchungen über nichtmenschliche Primaten und Kinder. Der letzte Veranstaltungsabschnitt fasst die Lehrveranstaltung zusammen mit einer Besprechung der Möglichkeiten und Gefahren der Forschung und Befunde der Neuroökonomie und der Sozialen Neurowissenschaften.

 
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People prefer fair, but does the brain?

People prefer fair, but does the brain? | Bounded Rationality and Beyond | Scoop.it
Whether for oneself or for others, fairness is preferred by people, but the brain network changes depending on who is actually benefiting. "In previous studies," explains the lead investigator, "we found the same tendency to reject unfair offers regardless of whether the decision involved the subjects themselves or a third party. Brain imaging, however, suggested that the brain was working differently in the two situations."
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Panel 1: Risk, Choice and Autonomy – Behavioral Economics and Choice Architectures

Panel 1: Risk, Choice and Autonomy – Behavioral Economics and Choice Architectures | Bounded Rationality and Beyond | Scoop.it
Choice Architecture in Democracies: Exploring the Legitimacy of NudgingConference, Humboldt-University Berlin, Jan 12-14th 2015

Is “nudging” – as outlined by Cass Sunstein and Richard H. Thaler in their controversial concept of libertarian paternalism – a modern and efficient tool of governance or a dangerous attack on freedom and individual autonomy? Legal, economic and other experts will discuss the political, ethical and constitutional ramifications of nudging in a two-day conference at Berlin, beginning with a public lecture delivered by Cass Sunstein.

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