Explaining heterogeneity in utility functions by individual differences in decision modes

Schunk, Daniel; Betsch, Cornelia

doi:10.1016/j.joep.2005.08.003

Cited by 86 publications

(74 citation statements)

References 37 publications

(35 reference statements)

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“…Investors who experienced more intense emotional reactions to gain and loss were poorer performers than those with more attenuated emotional responses. Schunk and Betsch (2006) found lower levels of emotional experience to be associated with higher levels of financial decision-making performance through greater risk neutrality.…”

mentioning

confidence: 87%

Emotion regulation and trader expertise: Heart rate variability on the trading floor.

Fenton-O’Creevy¹,

Lins²,

Vohra³

et al. 2012

Journal of Neuroscience, Psychology, and Economics

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We describe a psychophysiological study of the emotion regulation of investment bank traders. Building on work on the role of emotions in financial decision making, we examined the relationship between market conditions, trader experience, and emotion regulation while trading, as indexed by high-frequency heart rate variability (HF HRV). We found a significant inverse relationship between HF HRV and market volatility and a positive relationship between HF HRV and trader experience. We argue that this suggests that emotion regulation may be an important facet of trader expertise, and that learning effects demonstrated in financial markets may include improved emotion regulation as an important component of that learning. Our results also suggest the value of investigating the role of effective emotion regulation in a broader range of financial decision-making contexts.

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mentioning

confidence: 87%

Emotion regulation and trader expertise: Heart rate variability on the trading floor.

Fenton-O’Creevy¹,

Lins²,

Vohra³

et al. 2012

Journal of Neuroscience, Psychology, and Economics

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“…Empirical support for convex utility for losses was weaker. Fennema and van Assen (1998), Abdellaoui (2000), Etchart-Vincent (2004), Abdellaoui, Vossmann, and Weber (2005), and Schunk and Betsch (2006) found slightly convex utility for losses at the aggregate level (median power coefficients varied between 0.84 and 0.97). At the individual level, the most common pattern was convex utility for losses (between 24% and 47% of the subjects), but concave and linear utility functions were also common.…”

Section: Utility and Probability Weighting For Gains And Lossesmentioning

confidence: 98%

“…Fennema and van Assen (1998), Abdellaoui (2000), Abdellaoui, Vossmann, and Weber (2005), Schunk and Betsch (2006), and Abdellaoui, Barrios, and Wakker (2007) found that the utility for gains was concave both at the aggregate level (median power coefficients were generally between 0.77 and 0.91 with the exception of Fennema and van Assen (1998) who obtained median power coefficients of 0.21 and 0.39) and for the majority of their subjects. Empirical support for convex utility for losses was weaker.…”

Section: Utility and Probability Weighting For Gains And Lossesmentioning

confidence: 99%

A Tractable Method to Measure Utility and Loss Aversion under Prospect Theory

Abdellaoui¹,

Bleichrodt²,

l’Haridon³

2007

PsycEXTRA Dataset

105

171

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This paper provides an efficient method to measure utility under prospect theory, the most important descriptive theory of decision under uncertainty today. Our method is based on the elicitation of certainty equivalents for two-outcome prospects, a common way to measure utility. We applied our method in an experiment and found that most subjects were risk averse for gains and risk seeking for losses but had concave utility both for gains and for losses. This finding illustrates empirically that risk seeking and concave utility can coincide under prospect theory, a result that was derived theoretically by Chateauneuf and Cohen (1994). Utility was steeper for losses than for gains, which is consistent with loss aversion.Utility did not depend on the probability used in the elicitation, which offers support for prospect theory.

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“…We chose a random payment procedure, which has been successfully applied in numerous economic experiments (Camerer and Ho, 1994;Matthey, 2010;Armantier, 2006;Stahl and Haruvy, 2006;Kritikos and Bolle, 2001;Shunk and Betsch, 2006). A note of concern is that the behavior of subjects in random incentive schemes might be different in comparison to the situation where each participant is paid (Sefton, 1992).…”

Section: Payment Proceduresmentioning

confidence: 99%

Money Priming and Social Behavior of Natural Groups in Simple Bargaining and Dilemma Experiments

Michailova

Bühren

2017

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe examine the effects of money priming and solidarity on individual behavior in three simple experiments: dictator game, ultimatum game, and prisoner's dilemma. Our study comprises two money treatments and two neutral (control) treatments. Additionally, we control for the strength of social ties between experimental participants. Although our priming procedure is sufficient to remind people of the concept of money, it is not sufficient to induce systematically different behavior of the treatment groups compared to the control groups.Moreover, we do not find any significant differences between groups with strong vs. weak social ties. Since our findings contradict previous research, it calls for further investigation on the topic of how money priming influences economic behavior. JEL: C78, C9, D36PsycINFO: 3020Keywords: money priming; bargaining; dilemma; social behavior; natural groups; economic experiment Acknowledgements: We want to express our gratitude to Kathleen D. Vohs and Agata Gasiorowska for valuable comments. We thank Katharina Gangl for helping with manipulation check.

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Explaining heterogeneity in utility functions by individual differences in decision modes

Cited by 86 publications

References 37 publications

Emotion regulation and trader expertise: Heart rate variability on the trading floor.

Emotion regulation and trader expertise: Heart rate variability on the trading floor.

A Tractable Method to Measure Utility and Loss Aversion under Prospect Theory

Money Priming and Social Behavior of Natural Groups in Simple Bargaining and Dilemma Experiments

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