Identifying Heuristic Choice Rules in the Swedish Premium Pension Scheme

We analyze choices of a randomly selected sample of 10,999 citizens in the Swedish premium pension scheme. The aim is to identify the presence of various heuristic choice rules commonly observed in human decision making. Evidence suggests the prevalence of a default bias, the use of a diversification heuristic, extremeness aversion, a home bias, and the use of a 1/n heuristic. In some cases, cognitive simplification or wishful thinking may underlie the use of these heuristics. In other cases, their use seems to be consistent with recommendations provided by the responsible authority.     

Delegation to a possibly ignorant agent

In a delegation problem, an uninformed principal delegates decision‐making powers to a biased and possibly ignorant agent. The principal cannot use monetary payments but can restrict the set of the agent's choices. I show that in the general case, the principal may offer a disconnected set of choices. In a setting with arbitrary bias the uncertainty principle holds—the principal benefits as the likelihood that the agent is informed increases. When the bias is constant, I show that the ally principle holds—the principal benefits as the bias becomes smaller. Finally, when the likelihood of the agent being informed is determined by the agent's effort, then for small biases the principal benefits from limiting the agent's choice. When the agent is sufficiently biased, the principal gives more choice to the agent, so as to to improve incentives for information acquisition.     

The National Economic Summit: Authority,Persuasion and Exchange*

The National Economic Summit can be viewed as a symptom of the extensive use of authority in the Australian economy and equally an expression of the limitations of what can be achieved with centralized authority. An examination of the documentation left by the summit provides an opportunity to assess the implications of policy choices which use persuasion and authority rather than market disciplines.     

Reputation versus information: The delegation policy when the principal has reputational concerns

We analyze the delegation policy when the principal has reputational concerns. Both the principal and the agent can be either good or biased; the good players prefer the correct decision, while the biased ones prefer a high action even though it may be wrong. An evaluator who forms the principal's reputation may or may not be able to observe who makes the decision. When the evaluator cannot observe the allocation of authority, the principal shares the credit and blame with the agent. Although delegation can improve the quality of decision making because the agent has better information, it may also hurt the good principal's reputation because the high action may be taken by the biased agent while the blame will be shared when it is wrong. Thus, the good principal has a tendency to keep too much authority to maintain her reputation. By contrast, when the evaluator can observe the allocation of authority, delegation becomes a signaling device for the good type of principal to differentiate herself from the biased one. This results in an excessive allocation of authority toward the agent.     

Preventing bank panics: The role of the regulator's preferences

How do the preferences of a banking authority affect its decision making in periods of distress and thus financial stability? We study this question in a version of Diamond and Dybvig (1983) with a monopolistic bank and a time-consistent policy response by a banking authority. We show that limited commitment on the part of the banking authority may induce fragility but the banking authority's incentives are also an important determining factor in the degree of financial stability. In particular, under a simple suspension scheme, delegating a banking authority who places sufficient weight on a banker's welfare acts as a commitment device and prevents runs, in analogy with how a Rogoff (1985) “conservative” central banker helps reduce inflation bias. In contrast, once interventions take the form of payment rescheduling, the scope for the bank's susceptibility to a panic increases should the banking authority put more weight on monopoly rents. Identifying such an aspect of vulnerability suggests that appointing a banking authority whose objective function deviates from that of depositors may have unintended consequences.     

Influential listeners: An experiment on persuasion bias in social networks

This paper presents an experimental investigation of persuasion bias, a form of bounded rationality whereby agents communicating through a social network are unable to account for repetitions in the information they receive. We find that, after repeated communication within a social network, social influence depends not only on being listened to by many others, but also on listening to many others. We show that persuasion bias can be viewed as an extreme case of a generalized boundedly rational updating rule in which agents receive more or less attention depending on how many other agents they listen to. The results indicate that behavior in the experiment is consistent with an updating rule according to which agents' social influence is proportional to their indegree.     

Social Learning from Private Experiences: The Dynamics of the Selection Problem

I analyse social interactions that stem from the successive endeavours of new cohorts of heterogeneous decision makers to learn from the experiences of past cohorts. A dynamic process of information accumulation and decision making occurs as the members of each cohort observe the experiences of earlier ones, and then make choices that yield experiences observable by future cohorts. Decision makers face the selection problem as they seek to learn from observation of past actions and outcomes, while not observing the counterfactual outcomes that would have occurred had other actions been chosen. Assuming that all cohorts face the same outcome distributions, I show that social learning is a process of sequential reduction in ambiguity. The specific nature of this process, and its terminal state, depend critically on how decision makers make choices under ambiguity. I use the problem of learning about innovations to illustrate.     

Who follows the crowd—Groups or individuals?

In games of social learning individuals tend to give too much weight to their own private information relative to the information that is conveyed by the choices of others (Weizsäcker, 2010). In this paper we investigate differences between individuals and small groups as decision makers in information cascade situations. In line with results from social psychology as well as results on Bayesian decision making (Charness et al., 2006) we find that groups behave more rationally than individuals. Groups, in particular, are able to abandon their own private signals more often than individuals when it is rational to do so. Our results indicate that the intellective part of the decision task contributes slightly more to the superior performance of groups than the judgmental part. Our findings have potential implications for the design of decision making processes in organisations, finance and other economic settings.     

政府竞争、财政压力及其调节作用研究*——以地方政府财政支出偏向为视角

本文以政府间事权与支出责任划分改革为出发点，基于2009—2017年地级市层面的面板数据，运用系统GMM估计方法审视财政压力、政府竞争与地方政府民生支出偏向之间的相关关系。实证分析结果表明，相较于政府竞争而言，财政压力才是降低地方政府民生支出偏向的主要原因。财政压力对政府竞争具有调节作用，政府竞争对民生支出偏向的反向作用程度显著依赖于财政压力。具体而言，政府竞争对教育、医疗卫生、社会保障与就业支出偏向不具有直接效应，但在财政压力的调节作用下显著影响上述三项支出。本文进一步发现，经济发展水平越低，政府竞争与民生支出偏向之间的相关关系越不显著；地方政府在执行多任务导向型的中央决策时，具有较为明显的自我选择倾向。     

The role of identity and authority from anarchy to order: Insights from modeling the trajectory of dueling in Europe

The economics literature usually assumes order in terms of a Weberian state with monopoly over the means of violence. In this paper, we study historical situations in which such an order is absent and violent conflict namely duel of honor is an institution. Anarchy or the absence of state rules in managing violence does not imply the absence of private rules and arrangements (such as codes of dueling). Our focus is on the possible ways that a Weberian order can emerge from anarchy. We endeavor to capture this transition by introducing a computational model in which a simulated agent represents a social individual who considers both economic and political factors and interacts with other individuals as well as institutions to make a decision. We then use the trajectory of dueling in England, France, and Germany to validate our approach. The paper demonstrates how a complex, aggregative historical process over three centuries may be consistently explained on the basis of rational choices among heterogeneous agents conditioned by their group identity and State authority.     

Strategic instruments: legal structure and political games in administrative law

This article presents models of strategic behavior by agenciesand courts where the ability to manipulate the instruments ofdecision making, rather than merely selecting policy choices,allows actors to insulate their policy choices from higher levelreview. The theory is based on the notion that decision instruments(for example, rulemaking and adjudication for agencies, statutoryinterpretation and reasoning process review for courts) posedifferential costs and payoffs for both the initiating and reviewingactors, each of whom have resource constraints. Because theinitiating actor has the choice among instruments to make adecision (and to which a higher level reviewing actor is tied),the initiating actor can manipulate decision costs in a strategicfashion (choosing high-cost instruments to discourage higherlevel review, in particular). This article adds new insightinto how judges and agencies engage in strategic decision making.     

The impact of social identity on trust in China: experimental evidence from cross-group comparisons

Social identity tends to bias decision making in favour of in-group members with whom one shares a common social membership. This article investigates the trust behaviour of mainland Chinese when interacting with nonmainlanders in a two-party decision-making situation. Our experimental results reveal that, relative to their Hong Kong brethren who tend to be insensitive to their potential partner’s background of origin, the decisions of mainland Chinese are significantly impacted by sharing a common background. This suggests mistrust may limit the effectiveness of China’s policy of promoting international cooperation.     

Social Structure in Economic Theory

This paper investigates the factors that drive ruler decision making under democracy. By dividing politicians’ actions into two distinct domains and exploring their compositions, we construct a fuller and more realistic picture of politician decision making. In the non-discretionary domain, the politician’s actions are clearly limited by voter desires; in the discretionary domain the politician is free to make choices as he chooses without voter repercussions. Standard neoclassical models of political behavior suggest that when votes don’t matter, monetary income drives ruler behavior. While monetary pursuit may explain some ruler decisions, it leaves many other observed choices unexplained. Our non-discretionary/discretionary dichotomy highlights the up-to-now neglected role that psychic income plays in explaining otherwise unexplained ruler decisions. The case studies considered support this view.     

Bounded interpersonal inferences and decision making

Summary. Individual decision making is based on predictions about other players' choices as well as on valuations of reactions to predictions. In this sense, a player has a prediction-decision criterion for decision making. We develop a theory of prediction-decision criteria, which enables us to capture new phenomena on individual decision making in games. The decision making situation is described in the epistemic logic GL of shallow depths. There, each player considers his and other players' decision making down to some shallow depths. It is a point of our theory to investigate inferential complexities of interpersonal introspections. In particular, we can discuss a minimal epistemic inferential structure for prediction-decision making. We will find parallel structures in decision making and prediction making, which is called an inner parallelism. The climax of the paper is the consideration of inner parallelisms of prediction-decision making. Received: August 31, 2000; revised version: April 9, 2001     

An experimental study of persuasion bias and social influence in networks

In many areas of social life, individuals receive information about a particular issue of interest from multiple sources. When these sources are connected through a network, then proper aggregation of this information by an individual involves taking into account the structure of this network. The inability to aggregate properly may lead to various types of distortions. In our experiment, four agents all want to find out the value of a particular parameter unknown to all. Agents receive private signals about the parameter and can communicate their estimates of the parameter repeatedly through a network, the structure of which is known by all players. We present results from experiments with three different networks. We find that the information of agents who have more outgoing links in a network gets more weight in the information aggregation of the other agents than under optimal updating. Our results are consistent with the model of “persuasion bias” of DeMarzo et al. (2013. Q. J. Econ., 909) and at odds with an alternative heuristic according to which the most influential agents are those with more incoming links.     

The limits of policy: Public acceptance and the reform of science and technology governance

The adoption of a variety of new regulatory approaches and concepts, decision making processes and educational frames over the last three decades can be interpreted as an attempt to improve social acceptability of the process of science and technology governance. However, as argued in this paper, neither the introduction of non-standard scientific methodology and precautionary policy, nor participatory decision making, nor increased scientific-technological education are likely to significantly improve social acceptance of science and technology governance. Such reforms may shift the focus of ongoing policy debates, but do not lead to closure. In consequence, more research is needed on the complex relationship between acceptance, trust, information and participation, the implications of non-standard methodology in regulatory decision making, as well as the different interpretations that stakeholders may give to key regulatory concepts.     

Higher-order risk preferences in social settings

We study prudence and temperance (next to risk aversion) in social settings. Previous experimental studies have shown that these higher-order risk preferences affect the choices of individuals deciding privately on lotteries that only affect their own payoff. Yet, many risky and financially relevant decisions are made in the social settings of households or organizations. We elicit higher-order risk preferences of individuals and systematically vary how an individual’s decision is made (alone or while communicating with a partner) and who is affected by the decision (only the individual or the partner as well). In doing so, we can isolate the effects of other-regarding concerns and communication on choices. Our results reveal that the majority of choices are risk averse, prudent, and temperate across social settings. We also observe that individuals are influenced significantly by the preferences of a partner when they are able to communicate and choices are payoff-relevant for both of them.     

市场分割条件下的混合所有制经济竞争模型与规制策略

通过构建市场分割条件下的混合所有制经济竞争模型,本文对全国性国有企业在中国改革发展过程中的作用提供了新的解释。全国性国有企业在参与区域竞争的过程中,具备一种区域整合的功能:它面向全体市场的决策与分别面向各区域市场的决策等价,全社会总剩余最大化目标也可以分解为各区域社会剩余最大化的子目标之和,在其效率较高的情况下,将迫使地方企业改进成本或者退出市场,而只有当地方企业有足够高的效率的时候,全国性国有企业才会选择退出策略。国有企业事实上可以作为一种内部规制工具对市场分割的负面效应进行一定程度的制衡,在明确规制规则的条件下,我们可以通过动态调整企业目标函数以实现整体市场福利的最大化。     

How to win a decision in a confederation

This paper deals with collective decision making within a group of independent states. The right to choose the public policy is delegated from the central authority to one of the states through a bidding procedure among the group state members. We identify the following tradeoff: competition among states yields higher transfers to the central authority, but the outcome tends to be less efficient than what it is when states negotiate prior to the decision making process. We extend and illustrate the model by means of a public good game involving several heterogeneous states.     

权威分配和信息传递

在成员间有利益冲突的情况下,授权是激励组织中成员释放其私人信息的一个重要方式。本文考察了在对多人授权时,权威分配的方式对于信息释放的影响。本文考虑了两种分配方案的影响。其一是所有的成员在形式上有同等的权威(委员会);其二是,某一个成员有全部的决策权威(科层制)。委员会的决策规则虽然在形式上是平等的,但在实质上却可能偏向于某个成员。科层制则在形式上就完全偏向于它的领导。本文表明,权威的集中分配放大了利益冲突的影响。并且,权威分配的形式上的偏向有支配性的作用:它压倒了利益冲突以及实质偏向的影响。