Using the emergent friendship network of an incoming cohort of students in an M.B.A. program, we examined the role of extraversion in shaping social networks. Extraversion has two important implications for the emergence of network ties: a popularity effect, in which extraverts accumulate more friends than introverts do, and a homophily effect, in which the more similar are two people's levels of extraversion, the more likely they are to become friends. These effects result in a systematic network extraversion bias, in which people's social networks will tend to be overpopulated with extraverts and underpopulated with introverts. Moreover, the most extraverted people have the greatest network extraversion bias, and the most introverted people have the least network extraversion bias. Our finding that social networks were systematically misrepresentative of the broader social environment raises questions about whether there is a societal bias toward believing other people are more extraverted than they actually are and whether introverts are better socially calibrated than extraverts.
Some environments constrain the information that managers and decision makers can observe. We examine judgment in censored environments where a constraint, the censorship point, systematically distorts the observed sample. Random instances beyond the censorship point are observed at the censorship point, whereas uncensored instances are observed at their true value. Many important managerial decisions occur in censored environments, such as inventory, risk taking, and employee evaluation decisions. In this research, we demonstrate a censorship bias—individuals tend to rely too heavily on the observed censored sample, biasing their belief about the underlying population. We further show that the censorship bias is exacerbated for higher degrees of censorship, higher variance in the population, and higher variability in the censorship points. In four studies, we find evidence of the censorship bias across the domains of demand estimation and sequential risk taking. The bias causes individuals to make costly decisions and behave in an overly risk-averse manner. This paper was accepted by Teck Ho, judgment and decision making.
We explore how decision makers perceive and assess the level of risk in interdependent settings. In a series of five experiments, we examine how individuals set expectations for their own project investments when their success is contingent on the success of multiple, independent partners. We find that individuals are subjectively more confident and optimistic in an interdependent venture when its chances of success are presented as separate probabilities for each component and that this optimism is exacerbated by a greater number of critical partners, leading to (1) the inflation of project valuations, (2) the addition of excessive partners to a project, and (3) overinvestment of effort in the development of one’s own component within an interdependent venture. We examine these dynamics in settings of risky choice (with exogenously given probabilities) and in an economic coordination game (with the ambiguity of agency and strategic risk). We conduct our study with a wide range of participant samples ranging from undergraduates to senior executives. Collectively, our findings hold important implications for the ways in which individuals, organizations, and policymakers should approach and assess their innovation choices in ecosystem settings.
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