...Neuroeconomics: Why Economics Needs Brains* Colin F. Camerer California Institute of Technology, Pasadena, CA 91125, USA camerer@hss.caltech.edu George Loewenstein Carnegie-Mellon University, Pittsburgh, PA 15213, USA gl20@andrew.cmu.edu Drazen Prelec MIT, Cambridge, MA 02139, USA dprelec@mit.edu Abstract Neuroeconomics uses knowledge about brain mechanisms to inform economic theory. It opens up the ‘‘black box’’ of the brain, much as organizational economics opened up the theory of the firm. Neuroscientists use many tools—including brain imaging, behavior of patients with brain damage, animal behavior and recording single neuron activity. The key insight for economics is that the brain is composed of multiple systems which interact. Controlled systems (‘‘executive function’’) interrupt automatic ones. Brain evidence complicates standard assumptions about basic preference, to include homeostasis and other kinds of state-dependence, and shows emotional activation in ambiguous choice and strategic interaction. Keywords: Behavioral economics; neuroscience; neuroeconomics; brain imaging JEL classification: C91; D81 I. Introduction In a strict sense, all economic activity must involve the human brain. Yet, economics has achieved much success with a program that sidestepped the * We thank participants at the Russell Sage Foundation-sponsored conference on Neurobehavioral Economics (May 1997) at Carnegie-Mellon, the Princeton workshop on Neural Economics (December...
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... PSYCHOLOGICAL FOUNDATIONS OF DYNAMIC CAPABILITIES: REFLEXION AND REFLECTION IN STRATEGIC MANAGEMENT Abstract In recent years, there has been a move to identify the behavioral foundations underpinning the evolutionary and economic fitness of the enterprise. Indeed, the dynamic capabilities project now occupies center stage in the field of strategic management. Yet the accounts developed thus far—like much of the field’s theory and research more generally—are predicated upon a cold cognition logic that downplays the significance of emotional/affective and nonconscious cognitive processes for strategic adaptation. In this article, we rectify this imbalance by drawing upon contemporary advances in social cognitive neuroscience and neuroeconomics to develop a series of countervailing insights and new prescriptions for the development of dynamic capabilities. Using Teece’s (2007) influential framework to organize and illustrate our arguments, we demonstrate how the fundamental capabilities of sensing, seizing, and transforming each require firms to harness the cognitive and emotional capacities of individuals and groups to blend effortful forms of analysis with the skilled utilization of less deliberative, intuitive processes. Introduction Over the past two decades, a growing body of work has sought to incorporate the insights of human psychology to refine understanding of a wide variety of topics in strategic management, from the evolution of competitive industry structures...
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...Behavioural Finance - Erin McCall Who Wants To Be A Millionaire? Deal Or No Deal? WHO WANTS TO BE A MILLIONAIRE? 1) The risk averse investor would accept the safety level of $500,000 because they would refuse to accept any risk. The risk neutral investor would have been indifferent had the expected payout for both options been equal however, given that the expected payout for the guess is higher than that of the sure thing the risk neutral investor would choose to guess. The risk lover investor would always choose the option pertaining to the most risk and therefor choose to guess. 2) The expected value of the guess is $15 million [(0.5 x 30M) + (0.5 x 0)]. However, the actual outcome will either be $30 million or $0. 3) The average person would choose the safe $10 million because their marginal utility after that point begins to decrease. $10 million is far higher than the average American’s income of roughly $51,000 , implying that most people would recognize that $10,000,000 is a life changing amount and not be willing to risk it for $30,000,000. The individuals who choose not to risk the guaranteed $10,000,000 are most likely female , an older adult , married and in a low to moderate-income profession. Females are inherently more risk averse than men, making them more inclined to take the sure thing rather than risking it. Older adults must consider their sources of income after retirement as well as potential medical considerations when determining...
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...Question 1: (A) EEG, PET, and FMRI are tools that help in measuring brain activity. It is important to ask how good these tools are when measuring brain activity based on timing and location. Temporal resolution is a measure of the timing or how quickly and accurately can these tools pick on brain activity. Temporal resolution includes the smallest neural activity in the brain that can be detected. Spatial resolution is a measure of where the neural activity, with precision, is located. So how good is the graphic display or how well is the image. (B) EGG is a really good measure of timing; it can pick up when the electrical impulses happen relatively quickly. It is related as the best temporal resolution measure from all the tools; however, it is a poor measure of mentioning where the impulses happen. It is ranked as the worst from all the three in terms of spatial resolution. FMRI is the best measure in term of spatial resolution. It can detect a spatial range from mm to cm. In terms of temporal it is the second best, it can detect neural activity within almost two seconds and with technological improvements it is getting faster and faster. (C) FRMI would be better to measure the brain activation in the limbic system. FMRI essentially uses the same technology as the MRI but it more function. Brain activity can be measure through the blood flow. FMRI tells us essentially tells us what is happening in out brain while we are making our decisions. It will have a good read...
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...The Marketplace of Perceptions Like all revolutions in thought, this one began with anomalies, strange facts, odd observations that the prevailing wisdom could not explain. Casino gamblers, for instance, are willing to keep betting even while expecting to lose. People say they want to save for retirement, eat better, start exercising, quit smoking—and they mean it—but they do no such things. Victims who feel they’ve been treated poorly exact their revenge, though doing so hurts their own interests. Such perverse facts are a direct a≠ront to the standard model of the human actor— Economic Man—that classical and neoclassical economics have used as a foundation for decades, if not centuries. Economic Man makes logical, rational, self-interested decisions that weigh costs against benefits and maximize value and profit to himself. Economic Man is an intelligent, analytic, selfish creature who has perfect self-regulation in pursuit of his future goals and is unswayed by bodily states and feelings. And Economic Man is a marvelously convenient pawn for building academic theories. But Economic Man has one fatal flaw: he does not exist. When we turn to actual human beings, we find, instead of robot-like logic, all manner of irrational, self-sabotaging, and even 50 March - Apr il 2006 Behavioral economics explains why we procrastinate, buy, borrow, and grab chocolate on the spur of the moment. by Craig Lambert Portraits by Stu Rosner altruistic behavior. This is such a routine observation...
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...Motivation in the workplace: using the right financial reward system in Indonesian public sector INTRODUCTION Indonesia is one the most populous nation in the world, which happen to sit in one the most dynamic region between Australia and Asian industrial countries like Japan, China and South Korea. With Asia and Australia nearby, Indonesia is trying to leverage its strategic position by building its economic capacity. As commonly seen in developing country, Indonesia’s public sector is seen as inadequately equipped to bolster development in Indonesia. As a way to increase its economic development, Indonesian government decided to initiate bureaucratic reform for its public employee. This bureaucratic reform is intended to improve public service, which is plagued by corruption (Wihantoro et al. 2015). It is expected that the improvement of public sector could lead to better service and good governance which in turn would improve people’s satisfaction. Despite the effort by the government of Indonesia, public service in Indonesian remains mediocre at best and there are still a lot of room for improvement in Indonesian public sector. Traditionally the pay structure for civil servant in Indonesia is using membership-based and seniority based rewards, which does not lend itself well into motivating high performing employee. The bureaucratic reform then introduced the concept of job status-based rewards combined with seniority-based rewards in which civil servant still received...
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...The Fluidity of Neuroscience Gender Norms & Racial Bias in the Study of the Modern "Neuroscience" Neuroscience is the scientific study of the nervous system. Traditionally, neuroscience has been seen as a branch of biology. However, it is currently an interdisciplinary science that collaborates with other fields such as chemistry, computer science, engineering, linguistics, mathematics, medicine and allied disciplines, philosophy, physics, and psychology. The term neurobiology is usually used interchangeably with the term neuroscience, although the former refers specifically to the biology of the nervous system, whereas the latter refers to the entire science of the nervous system. The scope of neuroscience has broadened to include different approaches used to study the molecular, cellular, developmental, structural, functional, evolutionary, computational, and medical aspects of the nervous system. The techniques used by neuroscientists have also expanded enormously, from molecular and cellular studies of individual nerve cells to imaging of sensory and motor tasks in the brain. Recent theoretical advances in neuroscience have also been aided by the study of neural networks. Given the increasing number of scientists who study the nervous system, several prominent neuroscience organizations have been formed to provide a forum to all neuroscientists and educators. For example, the International Brain Research Organization was founded in 1960, the International Society...
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...60 Academy of Management Perspectives February A R T I C L E S Leadership and Neuroscience: Can We Revolutionize the Way That Inspirational Leaders Are Identified and Developed? by David A. Waldman, Pierre A. Balthazard, and Suzanne J. Peterson Executive Overview Recent advances in the field of neuroscience can significantly add to our understanding of leadership and its development. Specifically, we are interested in what neuroscience can tell us about inspirational leadership. Based on our findings, we discuss how future research in leadership can be combined with neuroscience, as well as potential neurofeedback interventions for the purpose of leadership development. We also consider ethical implications and applications to management-related areas beyond leadership. L eadership development is a multibillion-dollar industry, with in-house as well as external consulting groups offering leadership development techniques and programs for their clients. The efficacy of traditional leadership development methods, however, has recently been called into question (Haines, 2009), with many researchers recognizing the need to go beyond traditional leadership assessment methods, which typically involve evaluating leader behaviors and qualities through some sort of survey process through which followers or peers rate a leader’s effectiveness. In particular, recent advances in neuroscience are expanding our understanding of behavior and learning...
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...Marketing ethics is the area of applied ethics which deals with the moral principles behind the operation and regulation of marketing. Some areas of marketing ethics (ethics of advertising and promotion) overlap with media ethics. Contents 1 Fundamental issues in the ethics of marketing 1.1 Frameworks of analysis for marketing Possible frameworks 1.2 Power-based analysis 1.3 Is marketing inherently evil? 2 Specific issues in marketing ethics 2.1 Market research 2.2 Market audience 2.3 Pricing ethics 2.4 Ethics in advertising and promotion 2.4.1 Content 2.4.2 Delivery channels 2.4.3 Deceptive Advertising and Ethics 2.5 The use of ethics as a marketing tactic 2.6 Neuromarketing ethics 2.7 Marketing strategy 2.8 Further issues in marketing ethics 3 Regulation and enforcement 4 See also 5 References 6 Bibliography 7 External links Fundamental issues in the ethics of marketing[edit] Frameworks of analysis for marketing Possible frameworks[edit] Value-oriented framework, analyzing ethical problems on the basis of the values which they infringe (e.g. honesty, autonomy, privacy, transparency). An example of such an approach is the AMA Statement of Ethics.[1] Stakeholder-oriented framework, analyzing ethical problems on the basis of whom they affect (e.g. consumers, competitors, society as a whole). Process-oriented framework, analyzing ethical problems in terms of the categories used by marketing specialists (e.g. research, price, promotion, placement). None...
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...Thinking, Fast and Slow Daniel Kahneman FSG © 2011 512 pages [@] getab.li/15856 Book: Rating 8 6 Importance 9 Innovation 8 Style Focus Take-Aways • When you think, your mind uses two cognitive systems. • “System 1” works easily and automatically and doesn't take much effort; it makes quick judgments based on familiar patterns. • “System 2” takes more effort; it requires intense focus and operates methodically. • These two systems interact continually, but not always smoothly. • People like to make simple stories out of complex reality. They seek causes in random events, consider rare incidents likely and overweight the import of their experiences. Leadership & Management Strategy Sales & Marketing Finance Human Resources IT, Production & Logistics Career & Self-Development Small Business Economics & Politics Industries Global Business • “Hindsight bias” causes you to distort reality by realigning your memories of events to jibe with new information. • “Loss aversion” and the “endowment effect” impact how you estimate value and risk. • Your “two selves” appraise your life experiences differently. • Your “experiencing self” lives your life; your “remembering self” evaluates your experiences, draws lessons from them and decides your future. • These two contrasting systems and selves disprove economic theories that say that people act rationally. Concepts & Trends To purchase personal subscriptions or corporate...
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...New Trends in Marketing Strategies Thesis: In our age, in order to have a strong place in market ; specialist and brands have improved various strategies as neuromarketing, internet marketing and real time marketing. I. Neuromarketing A. Understanding consumer brain 1. Using reward system 2. Addressing emotions B. Analysing consumer brain 1. Electroencephalography (EEG) 2. Magnetoencephalography (MEG) 3. Functional Magnetic Resonance Imaging (fMRI) II. Internet Marketing A.Convenience of online business 1.Online advertising 2.Online shopping and customer services B.Devolopment of business using internet 1.Global and partial opportunities of Internet 2.Market research and analysis III. Real Time Marketing A. Personalization 1. Understanding customers 2. Increasing customer loyalty B. Responsiveness 1. Tapping into the moment 2. Having low cost 3. Opening for creativity Human is a social being that have to earn money to survive. For make money, there are two things: purchasing and selling. Since World War I, people try to find a solution for “What/how should I sale?”. Knowing this questions’ answers means identify the consumer and make profit. The main purpose in here is increase the sales. Hence, firms do various works in the cause of attracting consumer. In World War times, questions generate...
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...Introduction A t this point in our social history we are experiencing trends in marketing and consumerism that no cultural phenomena in antiquity has prepared us for. Each day between the hours of waking and sleeping we are exposed to 3000 – 5000 marketing messages across every shape and flavour of media mankind has been able to devise in good conscience (Story 2007). Every niche, of every segment, of every market, for every product, has a multitude of competitors vying for space of mind, seeking to differentiate, remind, inform, or persuade themselves into our lives and shopping trollies (Copley 2004). This clutter, consternation, and competition has taken the humble consumer transaction to be something more akin to game theory, and contemporary marketing strategy has become a battle of minds and wills (Lee, Broderick, and Chamberlain 2007). Each new generation of consumer finds themselves delivered deeper into an environment of increasing media and message saturation. But, with every generational cycle a further sophistication in the adaptive discretionary filtering system is created in order for these individuals to preserve some degree of highly guarded ‘psychic space’, and as such ‘marketing professionals are keenly aware of the obstacles posed by both information-processing limitations and viewer opposition’ (Rumbo 2002). ‘The multiplicity of advertising mes¬sages to which each consumer is exposed dictates that advertisers place a lofty premium on the much-coveted...
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...CHAPTER 1 The importance of understanding consumer behaviour CHAPTER CONTENTS Introduction Defining Consumer Behaviour Consumer Behaviour in Context Consumer Behaviour and the Marketing Mix Consumers and Relationship Marketing Consumers and Marketing Planning Antecedents of Consumer Behaviour Neuroscience Psychology Sociology Summary Key points Review questions Case study revisited: Pizza Case study: Center Parcs Further reading References LEARNING OBJECTIVES After reading this chapter you should be able to: Explain how the study of consumer behaviour has evolved. Show how consumer behaviour relates to marketing decision-making. Explain why relationships are harder to establish in business-to-consumer situations than in business-to-business situations. Describe the scope and nature of psychology and sociology. Describe the scope and nature of anthropology. Describe the relationship of economics with the study of consumer behaviour. Explain the role of exchange in improving people’s welfare. Explain how the terms ‘luxury’ and ‘necessity’ relate to consumer behaviour. Introduction Customer Someone who makes the decision to buy a product 01-Blythe-Ch-01-Part-1.indd 3 Every day we buy things. We exchange our money for goods and services, for our own use and for the use of our families: we choose things we think will meet our needs on a day-to-day basis, and we occasionally make buying decisions which will affect our lives for ...
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...暨 南 大 学 本科生课程论文 Organizational Commitment of Employees in Chinese Telecommunications Enterprises : Base on Related Factors Analysis 学 院： 经济学院 学 系： 经济系 专 业： 经济学（投资经济方向） 课程名称： 发展经济学 学生姓名：贺语濛 冯稚颖 司易凡 邹文敏 王芸 江宇川 向湘齐黄鑫海 蔡欣然 招慧青 指导教师： 丁岚 2013年 1 月 6 日 Abstract Use empirical analysis to discuss the relationship between organizational commitment, turnover rate and other relate variables. Survey data, collected from an enterprise of Chinese communication, structuring a multiple linear model including 4 kind of variables including direct economic return, indirect economic return, personal factors and work burden to estimate the parameter about organizational commitment of Chinese communication enterprises’ employees. Discuss and suggest the results of the function and offer some advices to manager of the enterprises. In contemporary society, human resource has played an important role in enterprises management. With the change of ethos and mode of thought in enterprises and individuals, employee loyalty becomes a significant tool to measure whether the management of firms is successful and brilliant. Today an individual's career is no longer tied to a single organization, as career changes and job mobility have become phenomena(Rousseau,1998) which means two-way choice, including employees and enterprises not only have...
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...1 EFFICIENT MARKETS HYPOTHESIS Andrew W. Lo To appear in L. Blume and S. Durlauf, The New Palgrave: A Dictionary of Economics, Second Edition, 2007. New York: Palgrave McMillan. The efficient markets hypothesis (EMH) maintains that market prices fully reflect all available information. Developed independently by Paul A. Samuelson and Eugene F. Fama in the 1960s, this idea has been applied extensively to theoretical models and empirical studies of financial securities prices, generating considerable controversy as well as fundamental insights into the price-discovery process. The most enduring critique comes from psychologists and behavioural economists who argue that the EMH is based on counterfactual assumptions regarding human behaviour, that is, rationality. Recent advances in evolutionary psychology and the cognitive neurosciences may be able to reconcile the EMH with behavioural anomalies. There is an old joke, widely told among economists, about an economist strolling down the street with a companion. They come upon a $100 bill lying on the ground, and as the companion reaches down to pick it up, the economist says, ‘Don’t bother – if it were a genuine $100 bill, someone would have already picked it up’. This humorous example of economic logic gone awry is a fairly accurate rendition of the efficient markets hypothesis (EMH), one of the most hotly contested propositions in all the social sciences. It is disarmingly simple to state, has far-reaching consequences...
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