BEHAVIOURAL ECON FINAL

Chapter 6: Ethical Decision Making

Key Concepts in Deception

• Paltering: Truthful statements used to mislead.

• Lying by Commission: Actively stating untrue facts.

• Lying by Omission: Not correcting a false belief known to be mistaken.

• Study of 184 Harvard executives revealed:

  • 57% lie by omission often.

  • 52% engage in paltering.

  • 21% lie by commission.

Car Selling Experiment

• Objective: Evaluate deceptive strategies in car selling.

• Car Information:

  • Truth: Car failed to start twice last year.

  • Positive Spin: Car performs well in cold weather.

• Conditions:

  • Condition 1 (Lie by Commission): 80% chance of sale by claiming no problems.

  • Condition 2 (Paltering): 60% chance of sale using misleading positive statements.

• Results:

  • Paltering more effective (71% vs. 55%).

  • Paltering judged more ethical than lying by commission (4.05/7 vs. 2.21/7).

Property Negotiations

• Setup: Face-to-face negotiation between seller and buyer regarding property values.

• Conditions:

  • Truth Condition: Truthfully stating property is for commercial use.

  • Lie by Commission: Misleading as residential use.

  • Paltering: Focusing on past residential developments.

• Results:

  • Asking price lowest in lying condition (45m) and paltering (46m).

Ethical Judgments of Deception

• Negotiators perceive paltering as more ethical than lying by commission, due to the truthfulness focus of the deceiver.

• However, paltering can lead to negotiation impasses.

• People are better at detecting lies from familiar senders.

Moral Licensing

• Definition: Moral licensing occurs when one good deed leads to subsequent immoral behavior.

• Example: Community service leads to indulgence in luxury or self-interest.

• Related Theories:

  • Self-Perception Theory: Actions influence beliefs and later behaviors.

  • Cognitive Dissonance Theory: Discomfort arises when beliefs are inconsistent.

Cognitive Dissonance in Consumer Decisions

• Study Setup: Two groups imagining different scenarios of community service.

• Results: Those who imagined community service favored luxury purchases more than a control group.

Pro-social Behavior and Moral Decisions

• Moral Disengagement: Rationalizing unethical behavior through cognitive justification.

• Eight Strategies of Moral Disengagement:

  1. Moral Justification: Nobler reasons for unethical acts.

  2. Euphemistic Labelling: Softening language around harsh truths.

  3. Advantageous Comparison: Comparing one’s actions against more unethical behaviors.

  4. Displacement of Responsibility: Attributing actions to others.

  5. Diffusion of Responsibility: Spreading blame across a group.

  6. Distortion of Consequences: Minimizing perceived harm.

  7. Dehumanization: Viewing victims as less than human.

  8. Attribution of Blame: Blaming the victim.

Reducing Moral Disengagement

• Approaches:

  • Education on moral processes.

  • Organizational changes focusing on ethical behaviors.

  • Supportive environments in sports and education.

Chapter 7: Cultural Differences in Decision Making

• Cultural Psychology Influence: Classes increase awareness of stereotypes.

• WEIRD People: Findings tend to focus on Western, Educated, Industrialized, Rich, and Democratic societies.

• Cognitive Variations Across Societies: Studies show differences in perception based on cultural background (e.g., size of arrows perceived differently in Western vs. Kalahari groups).

Fairness and Cultural Variation

• Dictator Game Findings: Variations in outcomes based on market integration and religion's influence on fairness.

Decision Making Based on Predictive Behaviors

• **Cross-Cultural Differences:

  • Europeans lean towards personal attributions for behaviors.

  • Chinese tend to attribute behaviors to situational factors.

Chapter 8: Decision Making and Time

• Intertemporal Utility Function: Weighs present benefits against future costs, showing preference for immediate gratification.

• Exponential Discounting Limitations:

  1. Short run impatience contradicts constant impatience model.

  2. Preference reversals highlight inconsistent future choices.

  3. Demand for commitment reflects awareness of preference issues.

• Quasi-Hyperbolic Discounting: Addresses exponential discounting flaws, incorporates short-term preference biases.

Chapter 9: Group Decision Making

• Benefits and Drawbacks in Groups:

  • Functioning conflict (task-oriented) can improve decisions.

  • Dysfunctional conflict (emotion-based) detracts from decision outcomes.

• Consensus and Devil's Advocacy Methods: Utilized to enhance cognitive conflict leading to better decisions while avoiding affective conflict.

Chapter 10: Social Preferences and Manipulation

• Game Studies Illustrating Altruism vs. Self-Interest: Dictator and Ultimatum games show someone’s willingness to sacrifice personal gains for fairness in distribution highlights social preferences.

• Workplace Dynamics: Relative vs. Piece Rate payments showcase how workers react differently to incentive structures; social preferences affect effort in workplace productivity.

Influences on Social Preferences

• School Integration Model: Highlights how exposure to diverse economic backgrounds fosters prosocial behavior and reduces bias.

Chapter 6: Ethical Decision Making

Key Concepts in Deception

• Paltering: Using truthful statements intentionally to mislead or create a false impression without stating anything untrue outright. This tactic is often used in negotiations and can be socially acceptable in certain contexts.

• Lying by Commission: The act of actively stating false information or untrue facts. This is a more blatant form of deception that can severely damage trust when discovered.

• Lying by Omission: This involves failing to correct or disclose information that is crucial for understanding the truth, thereby allowing someone to maintain a false belief.

A study conducted with 184 Harvard executives revealed alarming statistics regarding deceptive practices in business:

• 57% reported that they lie by omission often.

• 52% admitted to engaging in paltering.

• 21% acknowledged they lie by commission.

Car Selling Experiment

Objective: To assess the effectiveness of various deceptive strategies in the automotive sales industry, specifically how different types of dishonesty affect consumer responses.

• Car Information: The truth was that the car had failed to start twice in the previous year, which is critical information for potential buyers.

• Positive Spin: Sellers claimed the car performs exceptionally well in cold weather, framing past issues in a light that underscores optimal performance.

• Conditions:

  • Condition 1 (Lie by Commission): Sales techniques that deny any problems were shown to have an 80% chance of resulting in a sale.

  • Condition 2 (Paltering): Using positive spins resulted in a 60% chance of sale.Results:Paltering emerged as the more effective strategy with a 71% success rate compared to lying by commission at 55%. Furthermore, paltering was perceived as more ethical (4.05/7) than lying by commission (2.21/7) based on participant evaluations.

Property Negotiations

Setup: Negotiation between a seller and a buyer concerning the value of a property, highlighting deceptive tactics employed to sway valuation.

• Conditions:

  • Truth Condition: The property was truthfully described as intended for commercial use.

  • Lie by Commission: The seller misrepresented the property as residential, misguiding the buyer regarding its potential uses.

  • Paltering: The seller emphasized the property's historic residential usage to appeal to the buyer's emotions rather than the current intent.Results:The findings indicated the lowest asking price for properties in the lying condition (45m) and close subsequent values for paltering (46m), showing that deceptive practices can lead to tangible financial outcomes.

Ethical Judgments of Deception

Negotiators often perceive paltering as more ethical than lying by commission due to the focus on truthfulness in the manner it is presented, even though paltering can lead to negotiation impasses when the truth eventually surfaces. Notably, people become adept at detecting lies from sources they recognize, likely due to familiarity influencing their interpretation of cues.

Moral Licensing

Definition: Moral licensing refers to a phenomenon where the accomplishment of a good deed instills a form of moral credit that individuals may feel allows them to partake in subsequent immoral behavior without guilt.

Example:

For instance, someone who engages in community service may feel entitled to indulge in self-serving behavior, reflecting a psychological tendency to rationalize less ethical choices post-positive actions.

Related Theories:

• Self-Perception Theory: Suggests that individuals form beliefs about themselves based on their actions, influencing future behaviors.

• Cognitive Dissonance Theory: Proposes that experiencing discomfort arises when one’s beliefs are in conflict with their actions or decisions.

Cognitive Dissonance in Consumer Decisions

Study Setup: Two groups were asked to envision different scenarios involving community service, examining their consumer behaviors afterward.Results: The findings showed that individuals who imagined performing community service expressed a greater inclination towards luxury purchases than those who did not envision such experiences, indicating how moral actions can affect economic behavior.

Pro-social Behavior and Moral Decisions

Moral Disengagement: This refers to justifying unethical behavior through cognitive rationalizations, allowing individuals to circumvent feelings of guilt and accountability for their actions.

Eight Strategies of Moral Disengagement:

1. Moral Justification: Providing noble reasons to justify unethical actions.

2. Euphemistic Labelling: Softening the language surrounding harmful acts (e.g., calling torture "enhanced interrogation").

3. Advantageous Comparison: Weighing one’s wrongful acts against more severe misdeeds to diminish personal culpability.

4. Displacement of Responsibility: Shifting the perception of accountability to others.

5. Diffusion of Responsibility: Sharing blame among a group to dilute individual accountability.

6. Distortion of Consequences: Minimizing the perceived damage or harm caused by one’s actions.

7. Dehumanization: Viewing victims of unethical acts as less than human, making it easier to justify harmful actions.

8. Attribution of Blame: Shifting the responsibility or blame for one’s own unethical behaviors onto the victim.

Reducing Moral Disengagement

Approaches:

• Implementing education focused on ethical processes.

• Organizational changes that emphasize ethical behaviors and accountability.

• Creating supportive environments within sports, education, and workplaces to foster ethical conduct.