PhD Lunch Seminars Amsterdam

Stephan Jagau (University of Amsterdam)
Wednesday, 8 June 2016

Psychologists talk about a choice shift when individuals advocate a risky (safe) decision when acting as part of a group even though they would prefer a safe (risky) alternative decision when acting as individuals. Research in psychology and economics has produced a mass of evidence on this puzzling phenomenon, all the while not coming up with a satisfactory explanation for choice shifts in terms of individual behavior. We suspect a desire of individuals to conform to the perceived ‘default behavior’ or ‘behavioral norm’ in the group to be part of the explanation. Eliaz et al. ’s (2006)  [ERR] recently proposed model of choice shifts also predicts a drift towards ‘default behaviors’. However, their theory operates entirely on individual risk preferences.
We bring ERR’s model to the lab in a setting where the ‘default choices’ in decision problems are orthogonal to a ‘behavioral norm’ related to majority preferences among group members. Evidence for the pattern predicted by ERR’s model is limited at best, while our results lend strong support to the conformity mechanism: Individuals display a strong tendency to adapt their decisions to the majority preferences in their group – largely independent of the default choices on the examined decision problems. Remarkably, the pattern seems to be augmented when a subject’s decision has externalities on other group members’ payoffs – suggesting that the tendency of individuals to shift towards the majority choice might partially be driven by other-regarding preferences. (Joint with Theo Offerman)