Max H. Bazerman

Preference Reversals between Joint and Separate Evaluations of Options: A Review and Theoretical Analysis

Arguably, all judgments and decisions are made in 1 (or some combination) of 2 basic evaluation modes-joint evaluation mode (JE), in which multiple options are presented simultaneously and evaluated comparatively, or separate evaluation mode (SE), in which options are presented in isolation and evaluated separately. This article reviews recent literature showing that people evaluated options differently and exhibit reversals of preferences for options between JE and SE. The authors propose an explanation for the JE/SE reversal based on a principle called the evaluability hypothesis. The hypothesis posits that it is more diffecult to evaluate the desirability of values on some attributes than on others and that, compared with easy-to-evaluate attributes, difficult-to-evaluate attributes have a greater impact in JE than in SE.

Integrative bargaining in a competitive market

Abstract The behavioral decision theory literature was used to identify the determinants of negotiation success in an integrative bargaining, free-market exercise. This study provides a novel methodology for studying negotiation. Specifically, buyers and sellers were allowed to engage in negotiations with as many competitors as possible in a fixed time period. The results suggest that integrative bargaining behavior increases and the market converges toward a Nash equilibrium as negotiators gain experience. In addition, the results suggest that (1) positively framed negotiators (“What will be my net profit from the transaction?”) complete more transactions than negatively framed negotiators (“What will be my expenses on this transaction?”), (2) negotiators who are given moderately difficult profit constraints in order to be allowed to complete a transaction achieve more profitable transactions than negotiators without such constraints, and (3) both framing and the existence of constraints affect the total profitability of the negotiator.

The Effects of Framing and Negotiator Overconfidence on Bargaining Behaviors and Outcomes

Two systematic biases—the framing of conflict and negotiator overconfidence—are suggested as possible influences on negotiator behaviors. To investigate these biases, 100 subjects were asked to negotiate a five-issue contract under controlled conditions. Results indicated that (1) a positive frame led to more concessionary behaviors and successful performances than a negative frame and (2) realistically confident subjects exhibited more concessionary behaviors and successful performances than subjects who were overconfident. Implications of the results of this study for third-party intervention and the training of negotiators are discussed.

Goals Gone Wild: The Systematic Side Effects of Overprescribing Goal Setting

Executive Overview Goal setting is one of the most replicated and influential paradigms in the management literature. Hundreds of studies conducted in numerous countries and contexts have consistently demonstrated that setting specific, challenging goals can powerfully drive behavior and boost performance. Advocates of goal setting have had a substantial impact on research, management education, and management practice. In this article, we argue that the beneficial effects of goal setting have been overstated and that systematic harm caused by goal setting has been largely ignored. We identify specific side effects associated with goal setting, including a narrow focus that neglects nongoal areas, distorted risk preferences, a rise in unethical behavior, inhibited learning, corrosion of organizational culture, and reduced intrinsic motivation. Rather than dispensing goal setting as a benign, over-the-counter treatment for motivation, managers and scholars need to conceptualize goal setting as a prescripti...

`A matter of trust':: Effects of communication on the efficiency and distribution of outcomes

Abstract In two studies of bilateral bargaining with asymmetric information, we show that the communication medium in which the bargaining takes place, affects the efficiency and distribution of outcomes. The results reflect different degrees of truth-telling and trust across the media. We present a conceptualization of how the effects of communication media can be incorporated into behavioral decision research and game theoretic models of bargaining.

Dishonest Deed, Clear Conscience: When Cheating Leads to Moral Disengagement and Motivated Forgetting

People routinely engage in dishonest acts without feeling guilty about their behavior. When and why does this occur? Across four studies, people justified their dishonest deeds through moral disengagement and exhibited motivated forgetting of information that might otherwise limit their dishonesty. Using hypothetical scenarios (Studies 1 and 2) and real tasks involving the opportunity to cheat (Studies 3 and 4), the authors find that one’s own dishonest behavior increased moral disengagement and motivated forgetting of moral rules. Such changes did not occur in the case of honest behavior or consideration of the dishonest behavior of others. In addition, increasing moral saliency by having participants read or sign an honor code significantly reduced unethical behavior and prevented subsequent moral disengagement. Although dishonest behavior motivated moral leniency and led to forgetting of moral rules, honest behavior motivated moral stringency and diligent recollection of moral rules.

I Won the Auction But Don't Want the Prize

The “winners curse” occurs in competitive situations when a successful buyer finds that he or she has paid too much for a commodity of uncertain value. This study provides an experimental demonstration of the winners curse, and identifies factors that affect the existence and magnitude of this bidding abnormality. In an auction setting, two factors are shown to affect the incidence and magnitude of the winners curse: (1) the degree of uncertainty concerning the value of the item up for bid and (2) the number of competing bidders. Increasing either factor will increase the range of value estimates and bids, making it more likely that the winning bidder will overestimate the true value of the commodity and thus overbid.

Escalation of commitment in individual and group decision making

Abstract Previous research ( cf. B. M. Staw, Academy of Management Review, 1981, 6, 577–587) has found that when managers are given negative feedback on an initial individual investment decision, they allocate more additional funds to that investment if they, rather than another member of their organization, made the initial allocation decision. Justification is thought to underlie this phenomenon. This study explored commitment in group and individual decisions and examined the plausibility of dissonance processes as the mediator of escalation of commitment. One hundred eighty-three individuals participated in a role-playing exercise in which personal responsibility for an initial decision was manipulated for groups and individuals. As expected, escalation of commitment occurred for both groups and individuals. In support of a dissonance explanation, dissonance processes did vary as a function of the personal responsibility manipulation, and individual variation in dissonance responses accounted for a substantial portion of variance in allocation behavior beyond that accounted for by the experimental manipulations. The results concerning dissonance processes suggest a number of ways in which escalation can be reduced in individuals and groups.

How Can Decision Making Be Improved

The optimal moment to address the question of how to improve human decision making has arrived. Thanks to 50 years of research by judgment and decision-making scholars, psychologists have developed a detailed picture of the ways in which human judgment is bounded. This article argues that the time has come to focus attention on the search for strategies that will improve bounded judgment because decision-making errors are costly and are growing more costly, decision makers are receptive, and academic insights are sure to follow from research on improvement. In addition to calling for research on improvement strategies, this article organizes the existing literature pertaining to improvement strategies and highlights promising directions for future research.

Ethical leadership and the psychology of decision making

Executives today face many difficult, potentially explosive situations in which they must make decisions that can help or harm their firms, themselves, and others. How can they improve the ethical quality of their decisions? How can they ensure that their decisions will not backfire? The authors discuss three types of theories - theories about the world, theories about other people, and theories about ourselves - that will help executives understand how they make the judgments on which they base their decisions. By understanding those theories, they can learn how to make better, more ethical decisions.