Caterina Cruciani

Sense making and information in an agent-based model of cooperation

This paper studies the profile of cooperation emerging in a context in which agents may choose to join one of two groups or stay on their own, in a world where similarity across peers matters. In particular, we investigate the role of heterogeneity in individual contributions, of the level of information and of in-group processes of convergence in values (sense making) in fostering higher levels of cooperation, assessed through higher participation rates to groups. Starting from the result that more heterogeneity reduces participation, we show that increasing the level of information available to subjects and activating sense-making dynamics are able to support higher cooperation levels, which, however, come at the cost of increased radicalization of agent types within group.

Behavioural Financial Advisory Practice

This chapter addresses how behavioural finance has translated the findings of behavioural sciences regarding human decision-making into financial advisory practices.

Does Sharing Values Lead to Cooperation? A Similarity-Based Investigation

Understanding what motivates and fosters collective actions has major implications in the regulation and design of public policies, in the governance and management of organizations and has long attracted the interests of scholars and practitioners in economics and business. If trust and reciprocity certainly qualify as possible drivers of collective actions in some specific environments, as the uncertainty regarding the interaction structure increases, they are not likely to be able to explain the emergence of stable interacting groups. This paper deals with how groups of agents emerge in a dynamic contest characterized by lack of formal structure and uncertainty regarding the possible individual outcomes. Through the development of a stylized agent-based model we aim to show how similarity in values can be a successful driver for cooperation. A second-version of the model, where memory of past interactions has a role, introduces further dynamics and is able to create successful and relatively stable groups. The model nicely tries some stylized facts and sheds some light on potential avenues for the resolution of social dilemmas, such as contribution to public goods, addressing the role of perceived similarity in nurturing the cooperative process.

Different Views on Economic Rationality: Affect and Emotions

This chapter suggests that the heuristic behaviour that may lead to biases in financial decision-making is not necessarily due to irrationality, but has sound evolutionary roots developed in a time where investments and yields were not a concern, but survival was.

Financial Advisory: Basic Roles and Functions

This chapter looks at the different roles that advisors play in the client–advisor relationship. Looking at empirical data, the first section of this chapter shows that the main goal of financial advisory—improving financial returns—is not effectively pursued.

Understanding Investor Behaviour

This chapter introduces the behavioural underpinnings of decision-making under risk, reviewing the literature from cognitive psychology and economics in order to provide a more empirically founded picture of the investor’s mind. The chapter addresses the two stages of decision-making—information collection and processing, and the actual process of choice—showing behavioural regularities and identifying patterns of behaviour that may be detrimental to financial decision-making. Cruciani reviews the role of heuristics and the resulting biases, spanning from representativeness to overconfidence and discusses their implications in financial context. This chapter also provides an overview of the implications of a seminal behavioural model, prospect theory, and details how related concepts like loss aversion, framing effect, mental accounting impact asset allocation.

Financial Advisory: Normative Developments and Incentives

This chapter explicitly addresses the role of compensation structures in financial advisory practices in order to understand how the current and planned normative requirements interact with the features of the fiduciary relationship between clients and advisors.

Trust and financial literacy: An experimental investigation

The recent economic crisis still lingering in Europe has deeply affected the way individuals look at the investment market. Understanding the trust processes underlying the decision to invest with financial intermediaries is of particular importance both at managerial (product development and advertisement) and at normative level (how intermediaries are regulated). This paper investigates through an online experiment whether discrepancies in the financial literacy of investors and brokers can be used to explain the decision to trust - thus, to invest in the financial market. The results show that trust is affected by the information disclosure in somewhat unexpected ways.