Double Reference Points: the Effects of Social and Financial Reference Points on Decisions Under Risk

The existing literature is inconsistent about how social comparison affects risk attitudes. We propose a framework where the total utility is composed of the social and financial utilities. The financial utility is consistent with prospect theory (i.e., an S‐shaped utility function with a financial reference point), whereas the social utility is affected by both social and financial reference points. Therefore, social risk attitudes are determined by interaction between gains/losses in both social and financial contexts. On the basis of safety‐first principle, we propose that when experiencing financial gains, individuals tend to seek upside potential and take social risks (i.e., a convex social utility function). In contrast, when facing financial losses, people would be more risk seeking in social gains but more risk averse in social losses to maximize security (i.e., an inverse S‐shaped utility function). We also propose that the relative importance of financial and social utilities depends on the saliency of the reference points and size of stakes. Studies 1 and 2 showed that individuals were risk seeking in both social gains and losses with social reference points alone. Studies 3 and 4 demonstrated that when both financial and social reference points were salient, participants were risk averse in both social gains and losses when facing financial gains, but risk seeking in social gains and risk averse in social losses when facing financial losses. The hypotheses derived from the theoretical framework were in general supported by our experiments. Copyright © 2015 John Wiley & Sons, Ltd.     

Making decisions about now and later: Development of future-oriented self-control

This study explored factors underlying preschoolers’ ability to make future-oriented choices. In a delay-of-gratification choice task, quantity and visibility of the reward was systematically varied. Participants included 90 typically developing children aged 2–4 years. Children made more choices to delay gratification as the quantity of the reward increased from 1 to 4 stickers, but covering the reward did not have an effect. The study extends previous findings on delay of gratification choice tasks in suggesting a developmental pattern beginning with an early appearing “hot” motivational system. Having children think about the present self versus the future self presumably activates a second “cool” representational system. Age differences in the development of this system and its integration with the motivational system may be at the heart of the “U” shaped function observed in the present work, one in which simpler abilities underlying self-control develop in parallel and integrate to produce more complex behaviour. The study thus contributes to our understanding of the development of future-oriented self-control, a milestone central to socialization and the definition of the self.     

Waiting for a treat. Studying behaviors related to self-regulation in 18- and 24-month-olds

The ability to delay gratification – conceived as an early expression of self-regulation – develops in the second half of the second year of life. We used inductive methodology to identify different behaviors and set of behaviors performed by children while waiting for a treat. We asked which sets are more effective when it comes to successfully delaying gratification and how all observed sets change during toddler age. 130 children were tested twice – at 18 and at 24 months – using a Snack Delay Task. We observed 20 different behaviors and distinguished 4 sets of behaviors. The most important and effective set for delaying gratification in 18 and in 24 month olds was the set called Attention and Movements. We concluded that growth in the ability to delay gratification resulted from increased ability to overcome temptation by using an active strategy mainly based on attention.     

A multidimensional framework for financial–economic decisions

Most financial–economic decisions are made consciously, with a clear and constant drive to ‘good’, ‘better’ or even ‘optimal’ decisions. Nevertheless, many decisions in practice do not earn these qualifications, despite the availability of financial economic theory, decision sciences and ample resources. We plea for the development of a multidimensional framework to support financial economic decision processes. Our aim is to achieve a better integration of available theory and decision technologies. We sketch (a) what the framework should look like, (b) what elements of the framework already exist and which not, and (c) how the MCDA community can co‐operate in its development. Copyright © 2003 John Wiley & Sons, Ltd.     

Do we make decisions for other people based on our predictions of their preferences? evidence from financial and medical scenarios involving risk

Abstract

The ways in which the decisions we make for others differ from the ones we make for ourselves has received much attention in the literature, although less is known about their relationship to our predictions of the recipient’s preferences. The latter question is of particular importance given real-world occurrences of surrogate decision-making which require surrogates to consider the recipient’s preferences. We conducted three experiments which explore this relationship in the medical and financial domains. Although there were mean discrepancies between surrogate predictions and choices, we identified a predictive relationship between the two. Moreover, when participants took high risks for themselves, it seems that they were not willing to do so for others, even when they believed that the recipient’s preferences were similar to their own. We discuss these findings relative to current theories and real-world instances of surrogate decision-making.     

The international financial crisis and the north‐south dialogue

The author describes several origins of current international financial problems. Shortcomings of current solutions are analyzed, and solutions which the author thinks are more appropriate are presented.