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bus.dec.lec.20 - Values and Affective Reasoning Business...

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1 Values and Affective Reasoning Business Decisions SOC 138/ECO 149
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2 The “Squishy” Side of Decision Making We have tended to focus on monetary questions, easily calculable risks, etc. Business decisions in the real world have messier elements E.g., do I accept that promotion and risk losing my marriage, or do I stay put and risk looking like an underachiever? To understand these decisions, we need a better sense of how to factor in complex values Where emotional factors are strong, models based on affective reasoning may be of use
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3 Value Elicitation A basic assumption with which we have worked: people have well-formed preferences, and we can (in principle) elicit them Non-trivial problem in reality As we saw with plasticity, how we respond can be very context dependent Especially hard where visceral factors are involved (Loewenstein) No general solution, although this is a topic of intense ongoing research
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4 Example: Willingness to Pay and Embedding Effects An important value elicitation problem: how much are diffuse, non-market goods worth? Example: saving the whales One approach: assess what members of the population would be willing to pay (WTP) to preserve the good Sounds good, but problems have arisen Embedding effects: almost no change in WTP as problem size increases for (e.g.) birds in oil ponds, wetlands in NJ, wildlife refuges, etc. Stated WTP predicted by attitude towards problem, but not sensitive to cost of the solution – responses are not economic in nature ?
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5 Affective Reasoning Much of our focus has been on choice models (and their failings) Another perspective: affective reasoning We form impressions of people, situations, behaviors, etc. based on enculturation and experience We produce behaviors in accordance with our impressions, as determined by a fixed set of rules
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