Decision Making

This Research Programme is dedicated to the interdisciplinary study of normative, descriptive, and prescriptive theories of decision. Its members include psychologists, economists, organizational researchers, decision analysts, and other decision researchers, investigating the processes by which intuition, reasoning, emotion and social interaction produce beliefs, judgments, and choices. They use a combination of theoretical and experimental methods by drawing on cognitive and social psychology, economics, law, sociology, statistics, and other disciplines to understand how individuals and groups make decisions. Applications of relevant theory to medicine, law, consumer behaviour, business, public choice, and public economics, and experimental studies of judgements and decisions in those fields.

 RESEARCH AREAS:

 Identity, personal attitudes and money

Law & Economics/Law&Psychology

Climate change

Study of social interaction mechanisms from a dynamical viewpoint


RESEARCH AREAS:

 

Identity, personal attitudes and money

Publications

·           Sacchi, S., & Stanca, L. (2014). Asymmetric perception of gains vs non-losses and losses vs non-gains: The causal role of regulatory focus. Journal of Behavioral Decision Making, 27, 48-56.

ABSTRACT

Recent studies show that, while losses loom larger than equivalent non-gains, gains loom larger than equivalent non-losses. This finding has been interpreted within the framework of regulatory focus theory. In this study, we highlight the importance of considering the motivational focus independently of the framing and the valence of outcome, thus exploring the causal effect of regulatory focus on the asymmetric perception of gains versus non-losses and losses versus non-gains. In two studies, we examine the perceived effects of either actual or hypothetical changes in monetary wealth, while orthogonally manipulating framing, valence, and regulatory focus. We find a significant interaction between the three factors. The gain versus non-loss asymmetry in perceived satisfaction is stronger in promotion focus, whereas the loss versus non-gain asymmetry in perceived dissatisfaction is stronger in prevention focus. The results suggest that the effects of incentives framed in terms of (non)gains and (non)losses depend on their congruence with the individual’s motivational state.

 

·         Riva, P., Sacchi, S., & Brambilla, M (in press). Humanizing Machines: Anthropomorphization of Slot Machines Increases Gambling. Journal of Experimental Psychology: Applied, 21, 313-325.

ABSTRACT

Do people gamble more on slot machines if they think that they are playing against humanlike minds rather than mathematical algorithms? Research has shown that people have a strong cognitive tendency to imbue humanlike mental states to nonhuman entities (i.e., anthropomorphism). The present research tested whether anthropomorphizing slot machines would increase gambling. Four studies manipulated slot machine anthropomorphization and found that exposing people to an anthropomorphized description of a slot machine increased gambling behavior and reduced gambling outcomes. Such findings emerged using tasks that focused on gambling behavior (Studies 1 to 3) as well as in experimental paradigms that included gambling outcomes (Studies 2 to 4). We found that gambling outcomes decrease because participants primed with the anthropomorphic slot machine gambled more (Study 4). Furthermore, we found that high-arousal positive emotions (e.g., feeling excited) played a role in the effect of anthropomorphism on gambling behavior (Studies 3 and 4). Our research indicates that the psychological process of gambling-machine anthropomorphism can be advantageous for the gaming industry; however, this may come at great expense for gamblers' (and their families') economic resources and psychological well-being. © 2015 American Psychological Association.

 

·        Law & Economics/Law&Psychology

Publications

·         Lewisch P., Ottone S., Ponzano F., (2015), Third-Party Punishment under Judicial Review: An Economic Experiment on the Effects of a Two-Tier Punishment System, Review of Law and Economics, 11, 209-230.

ABSTRACT

This paper analyses, by means of an economic experiment, the impact of a vertical review on third-party punishment. Whereas the existing empirical literature has studied, under many different aspects, third-party costly punishment as such, it has not addressed the impact of a second instance(competent to over-rule punishment decisions by the first punisher) on the incidence and amount of such first-instance punishment and the underlying unwanted behaviour (stealing). In this paper, we apply experimental methodology that allows us to construct in the lab the counterfactual context for a direct institutional comparison that we cannot find in real life. In particular, we examine first of all, whether and how the presence of a second verticalpunishment layer (i.e. of a second-instance) affects the amount of punishment imposed in the first instance. Secondly, we check whether the presence of a second level of punishment has a deterrent effect on the underlying (undesired) behaviour. Finally, we examine the level of satisfaction of the victims in all scenarios. In our experiments, we find that the introduction of a second (vertical) tier of punishment increases (i) the level of punishment provided for in the first instance, (ii) deterrence with regard to the underlying behaviour (i.e. a reduction in the number of theftsbeing committed), and also (iii) the level of satisfaction for victims. Real-world applications of this study are plentiful, including the organisation of courts and the appeals process as a whole. Our evidence confirms that the presence of an instance(a second tier of legal decision making) is, other things equal, likely to generate beneficial effects.

 

·                Ottone S., Ponzano F., Zarri L., (2015), Power to the People? An Experimental Analysis of Bottom-Up Accountability of Third-Party Institutions, Journal of Law, Economics and Organization, 31, 347-382

ABSTRACT

This article provides an experimental investigation of third parties’ sanctioning behavior, in order to understand whether public officials (e.g., judges, politicians, or regulators), when deciding about top-down interventions aimed at punishing wrongdoers, are sensitive to bottom-up pressure on the part of ordinary citizens, who are the major victims of wrongdoers’ behavior. We set up a novel five-treatment design and compare situations where a wrongdoer acts under: (1) no third-party punishment; (2) non-accountable third-party punishment; and (3) accountable third-party punishment. We show that when citizens are active and make their voice heard, public officials sanction wrongdoing significantly more. Our experimental finding complements previous empirical work based on field data and suggests that when third-party institutions are held accountable, their propensity to fight misconduct is higher, other things equal. We view this result as good news with regard to domains where it implies that pro-consumer policies will be more likely (e.g., regulatory policies). The risk of pandering by elected officials and the danger of poorly informed decisions by the citizens are the flip side of the argument.

 

 

Climate change

Publications

·      Sacchi, S., Riva, P., & Aceto, A. (2016). Myopic about climate change: Cognitive style, psychological distance and environmentalism. Journal of Experimental Social Psychology. 65, 68-73

 ABSTRACT

Recent literature shows a negative relation between psychological distance of climate change and pro-environmental behavioral intentions: when climate change is perceived as a distant phenomenon in time and space, people are less prone to worry and, thus, to act. The present study explored under which conditions psychological distance proved to be effective on ecological attitudes. More specifically the research explored the interaction between climate change psychological distance and individual's cognitive style (holistic vs. analytic) on pro-environmental attitudes. Across two studies, the results consistently showed that psychological distance is strongly related to environmental concerns when individuals adopt an analytic cognitive style. By contrast, when individuals are in a holistic mindset, psychological distance proved to be less effective on ecological attitudes and behavioral intentions. Taken together, our findings have relevant practical implications for environmental politics and communication strategies.

 

·      Grasso, M. & Sacchi, S. (2015). Impure procedural justice in climate governance systems. Environmental Values, 24, 777-798.

ABSTRACT

Climate change governance is extremely challenging because of both the intrinsic difficulty of the issues at stake and the plurality of values and worldviews. For these reasons, the ethical concerns that characterise climate change should also be meaningfully addressed through a specific version of procedural justice. Accordingly, in this article we adopt an impure notion of procedural justice. On this theoretical basis, we define relevant fairness criteria and contextualise them for climate governance systems. Then, we empirically justify fairness criteria against a critical and divisive element for the future governance of the Green Climate Fund, i.e., the no-objection procedure. The article concludes with some considerations prompted by the analysis.

 

·      Sacchi, S., Riva, P., Brambilla, M., & Grasso, M. (2014). Moral reasoning and climate change mitigation: The deontological reaction towards the market-based approach. Journal of Environmental Psychology, 38, 252-261.

ABSTRACT

The research investigated the relation between the individual's deontological stance about environment and the attitude toward a market-based approach to climate change mitigation. We introduced people to the cap-and-trade program which is expected both to reduce the environmental risk and maximize economic benefits. Study 1 showed that the stronger the deontological mandate people held toward nature, the more likely they were to refuse the cap-and-trade mitigation program regardless of its effectiveness. In Study 2 and in Study 3, a similar win-win scenario was adopted to explore whether deontology and consequentialism consist of mutually exclusive orientations. Our results revealed that the deontological approach per se did not preclude the use of the cost-benefit analysis and that consequentialism moderated the relationship between deontology and the attitude toward the cap-and-trade program. Taken together, our findings have relevant practical implications for environmental politics and contribute to theoretical insights into moral reasoning.

 

 

Study of social interaction mechanisms from a dynamical viewpoint

Publications

 

·           Naimzada, M. Pireddu, (2014), Chaotic social interaction via endogenous reactivity, Journal of Difference Equations and Applications

ABSTRACT

We propose a framework to analyse the dynamical process of decision and opinion formation of two economic homogeneous and boundedly rational agents that interact and learn from each other over time. The decisional process described in our model is an adaptive adjustment mechanism in which two agents take into account the difference between their own opinion and the opinion of the other agent. The smaller that difference, the larger the weight given to the comparison of the opinions. We assume that if the distance between the two opinions is larger than a given threshold, then there is no interaction and the agents do not change their opinion anymore. Introducing an auxiliary variable describing the distance between the opinions, we obtain a one-dimensional map for which we investigate, mainly via analytical tools, the stability of the steady states, their bifurcations, as well as the existence of chaotic dynamics and multistability phenomena.

 

·      Naimzada, M. Pireddu, (2014), Adaptive decision dynamics: Bifurcations, multistability and chaos, Applied Mathematics and Computation, 239, 375–390.

ABSTRACT

In this paper we propose a model describing the dynamical process of decision and opinion formation of two economic homogeneous interacting and boundedly rational agents. The decisional process represented in our model is given by an adaptive adjustment mechanism in which two agents take into account the difference between their own opinion and the opinion of the other agent. The smaller that difference, the larger the weight given to the comparison of the opinions. By means of an auxiliary variable describing the distance between the opinions, we obtain a one-dimensional dynamical system for which we investigate, via analytical and numerical tools, the stability of the unique steady state, its bifurcations, as well as the existence of a globally absorbing interval and of chaotic dynamics. We also investigate multistability phenomena, i.e., the presence of coexisting attractors. Finally, we relax the assumption of homogeneity between agents and we show that there is a strong correspondence between the dynamic behaviors in the scenarios with and without homogeneity.

 

 

·           Naimzada, M. Pireddu, (2015), Real and financial interacting markets: A behavioral macro-model, Chaos, Solitons and Fractals 77, 111–131.

ABSTRACT

In the present paper we propose a model in which the real side of the economy, described via a Keynesian good market approach, interacts with the stock market with heterogeneous speculators, i.e., optimistic and pessimistic fundamentalists, that respectively overestimate and underestimate the reference value due to a belief bias. Agents may switch between optimism and pessimism according to which behavior is more profitable. To the best of our knowledge, this is the first contribution considering both real and financial interacting markets and an evolutionary selection process for which ananalytical study is performed. Indeed, employing analytical and numerical tools, we detect the mechanisms and the channels through which the stability of the isolated real and financial sectors leads to instability for the two interacting markets. In order to perform such analysis, we introduce the “interaction degree approach”, which allows us to study the complete three-dimensional system by decomposing it into two subsystems, i.e., the isolated financial and real markets, easier to analyze, that are then linked through a parameter describing the interaction degree between the two markets. We derive the stability conditions both for the isolated markets and for the whole system with interacting markets. Next, we show how to apply the interaction degree approach to our model. Among the various scenarios we are led to analyze, the most interesting one is that in which the isolated markets are stable, but their interaction is destabilizing. We choose such setting to give an economic interpretation of the model and to explain the rationale for the emergence of boom and bust cycles. Finally, we add stochastic noises to the optimists and pessimists demands and show how the model is able to reproduce the stylized facts for the real output data in the US.

 

·      F. Cavalli, A. Naimzada, M. Pireddu, (2015), Emergence of complex social behaviors from the canonical consumption model, Mind & Society

ABSTRACT

We study complex phenomena arising from a simple optimal choice consumer model, starting from the classical framework in Benhabib and Day (Rev Econ Stud 48(3):459–471, 1981). We introduce elements of increasing complexity (dynamic adjustment processes, nonlinear social interdependence, agents heterogeneity, agents local interaction) and we investigate their effects on the resulting social behaviors. The dynamics introduce the dependence of current preferences on past consumers actions. A non-monotone updating preference function allows us to obtain a threshold effect, according to which the agents adopt a bandwagon/snob behavior if the preferences are below/above a certain saturation level. We consider homogeneous and heterogeneous agents and we introduce local/global interaction when they are spatially distributed. We show through simulations several phenomena which are absent in the classical model and which reproduce significant social behaviors, such as path dependence, coexistence of different periodic and chaotic attractors, emergence of spatial patterns.

 

·           F. Cavalli, A. Naimzada, M. Pireddu, (2016), A family of models for Schelling binary choices, Physica A: Statistical Mechanics and its Applications 444, 276–296.

ABSTRACT

We introduce and study a family of discrete-time dynamical systems to model binary choices based on the framework proposed by Schelling in 1973. The model we propose uses a gradient-like adjustment mechanism by means of a family of smooth maps and allows understanding and analytically studying the phenomena qualitatively described by Schelling. In particular, we investigate existence of steady states and their relation to the equilibria of the static model studied by Schelling, and we analyze local stability, linking several examples and considerations provided by Schelling with bifurcation theory. We provide examples to confirm the theoretical results and to numerically investigate the possible destabilizations, as well as the emergence of coexisting attractors. We show the existence of chaos for a particular example.

 

·      Naimzada, M. Pireddu, (2016), Endogenous evolution of heterogeneous consumers preferences: multistability and coexistence between groups, Economics Letters 142, 22–26.

ABSTRACT

We propose an exchange economy evolutionary model with agents heterogeneous in the structure of preferences. Assuming that the share updating mechanism is non-monotone in the calorie intake, we find multistability phenomena involving equilibria characterized by the coexistence of heterogeneous agents.

 

·           Naimzada, M. Pireddu, (2016), A positional game for an overlapping generation economy, Journal of Difference Equations and Applications  

ABSTRACT

We develop a model with intra-generational consumption externalities, based on the overlapping generation model by Diamond (1965). More specifically, we consider a two-period lived overlapping generation economy, assuming that the utility of each consumer depends also on the average consumption level by the consumers in the same generation. We suppose that such level is not taken as a parameter by agents, who behave strategically. We characterize the consumption and saving choices for the two periods in the Nash equilibrium path and we determine a dynamic equation for capital accumulation. For the associated dynamical system, we find a unique positive steady state for capital and we investigate how its position, as well as that of the steady states for consumption in both periods, change with respect to variations in the degree of interaction in the two periods. We finally compare the steady states for capital with and without social interaction.