The role of individual personality type in subjective risk elicitation outcomes

Managing uncertainty is an unavoidable challenge in a variety of decision contexts. On many occasions, objective data are not available, necessitating the use of experts. However, research into procedures to elicit and aggregate information from experts is difficult to validate or test empirically. A controlled economic experiment was used to assess subjective probability elicitation accuracy resulting from three alternative elicitation procedures and two aggregation alternatives. The empirical results provide evidence of the impacts of elicitation techniques, distribution type, and personal characteristics such as risk preferences and personality type on subjective risk assessment accuracy. Our conclusion is that experimental approaches hold promise as a technique to assess the forecast accuracy of aggregated subjective probabilities in a variety of contexts.     

Experimental evidence on trading behavior,market efficiency and price formation in double auctions with unknown trading duration

The reasons for the highly efficient market outcomes observed under the double auction remain unclear. This paper presents a series of experimental financial markets designed to investigate the importance of unknown trading period duration on trading behavior and the convergence tendencies of such markets. Using panel data techniques the results support the conclusions that individuals generally display more aggressive trading strategies, trading earlier in a period, and that markets exhibit reduced levels of informational efficiency when unknown duration is present. Markets with imperfect information structures are also studied and, in a unique result, are associated with significantly slower rates of trade, as traders become more cautious over their trading strategies. Investigation of the price formation process provides evidence that the pricing error varies over time and the estimation of a fixed effects model provides unique support that learning effects and unknown trading period duration influence the price formation process. Future refinement of theoretical models of the price formation process or institutions of exchange should recognize the effect of unknown trading period duration on market behavior, along with potential learning effects. Copyright © 2005 John Wiley & Sons, Ltd.     

What You Don't Know Can Cost You: A Web-Based Experiment in Price Discrimination

This paper presents a Web-based experiential learning tool to assist instructors in conveying the central principles of price discrimination under asymmetric information. The game allows students to make monopoly-pricing decisions when the characteristics of individual consumers are not known. The Web-based approach allows for involvement by all students in the class and can be used in or out of class as a support for classroom lectures.     

Ethical Standards for Stockbrokers: Fiduciary or Suitability?

What are the ethical obligations of the sellers of financial products to their customers? Stockbrokers in the U.S. have a legal and ethical requirement to recommend only “suitable” investments to their customers. This is a fairly weak standard. Currently, there are proposals to raise the standard to a fiduciary one in which the recommendations would have to be in the best interests of the clients. Brokers sell solutions to financial problems. Similar to an auto mechanic or a doctor, the product often consists of both the professional advice and its implementation. There are numerous conflicts of interest between brokerage firms and their customers in that the products that pay the highest commissions may not be the best ones for the customers. The societal perspective adds complications, however. Society depends on modern financial markets to raise capital for productive enterprises and to spread risk. Issuers of financial products need distribution channels for their products just like the producers of any other products. Commissions create powerful incentives for the distribution channels, but at the same time produce conflicts of interest—a type of ethical pollution. Just as our society tolerates some pollution as a byproduct of other useful activities, it may be useful to tolerate some of these financial conflicts of interest. The nature of the relationship should govern the ethical standard. Those selling advice, regardless of how they label themselves, should adhere to a best-interest fiduciary standard. More limited relationships should be limited to the mandate involved in the relationship.     

Can Hand Washing Influence Hedonic Food Consumption?

The act of hand washing has been a routine part of hygienic practices across time and society. Aside from its physiological effects, hand washing has also been shown to symbolically cleanse individuals of their transgressions. However, most research demonstrating the metaphorical effect of hand washing has mainly been focused within the domain of morality. The objective of the current research is to explore the role of hand washing on consumption behavior, and more specifically, hedonic food consumption. Across two studies, this article establishes the role of hand washing after hedonic food consumption as well as prior to a hedonic food choice. In Study 1, washing one's hands after consumption of hedonic food decreased perceived guilt. In Study 2, washing one's hands prior to choice led to an increased likelihood of choosing a more hedonic (compared to less hedonic) food item. Thus, by washing one's hands, individuals are provided with a license to indulge in hedonic foods without the guilt that is commonly associated with such a choice. Several implications for consumer behavior research and the effects of hand washing on food decision making are discussed.     

Status inconsistency: an antecedent to bullying behaviour in groups

This paper draws on frameworks developed by the strategic international human resource management (HRM) literature to analyse human resource practices in foreign-invested enterprises in China and their affiliates. It argues that such strategies can be best understood in the context of global commodity chains. Drawing on data from a study of 27 China-based enterprises in two industries, garments and consumer electronics, it contests that strategy is a good determinant of HRM policies. Moreover, most of the enterprises are following cost reduction strategies but with certain quality levels, based on standardized mature products and production processes. Industry sector is also important, as is the institutional milieu of China.     

Enabling Innovation through Strategic Synergies

This paper empirically examines the effect that a market orientation (MO) and resource orientation (RO) have on three performance outcomes: financial performance, customer value, and innovation. Individually, the effect each orientation has on performance has been explored but with conflicting results. This study addresses a pertinent gap in the literature by providing insight into a relationship yet unexamined; the role of RO as a moderator of the MO and performance relationship. Although the existing literature considers the role of environmental phenomena as moderators on the MO and performance relationship, the role of alternate orientations has not been studied. While customer value and dynamic resources are needed to succeed, can they each assist the other to perform better? Specifically, does the ability to better develop, deploy, and alter dynamic resources help a firm to better provide customer value to improve performance? This paper is the first to our knowledge to integrate literature from the two paradigms to assess this. Results show that both orientations, when analyzed individually, have a significantly positive effect on all three‐performance outcomes: financial performance, customer value, and innovation. Thus, support for each of the first six hypotheses is provided. The moderated regression provided support for two of the three hypotheses pertaining to this component of the study. It was found that an RO significantly moderates the relationship of an MO with customer value and financial performance but is unable to exert any moderating effect on the MO and innovation relationship because of the dominant role of the RO. Thus, RO appeared superior in delivering innovative outcomes relative to MO. From this, implications, limitations, and recommendations are discussed.     

Derivatives traders’ reaction to mispricing in the underlying equity

This article examines trading behavior in the options market conditioned on mispricing in the underlying stock. We investigate the price equilibrium between the observed equity asset and the options-implied synthetic share as well as the relative divergence between the two prices. We find a consistently positive relation between the level of stock mispricing and violations of the upper-boundary condition using derivatives, along with an increase in price divergence. To control for the effect of shorting limitations on mispricing, we further examine prices during the short-sale ban in 2008. The results hold and in many instances are more significant during the ban period. Given the persistent disequilibria between the synthetic and observed stock prices, we argue the results are evidence of informed trading in the derivatives market.