Associate Professor of Behavioral Decision Making at the University of Leeds Business School

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Risky Decision Making: Testing for Violations of Transitivity Predicted by an Editing Mechanism

Published in Judgment and Decision Making, 2016

Transitivity is the assumption that if a person prefers A to B and B to C, then that person should prefer A to C. This article explores a paradigm in which Birnbaum, Patton and Lott (1999) thought people might be systematically intransitive. Many undergraduates choose C=($96,. 85; $90,. 05; $12,. 10) over A=($96,. 9; $14,. 05; $12,. 05), violating dominance. Perhaps people would detect dominance in simpler choices, such as A versus B=($96,. 9; $12,. 10) and B versus C, and yet continue to violate it in the choice between A and C, which would violate transitivity. In this study we apply a true and error model to test intransitive preferences predicted by a partially effective editing mechanism. The results replicated previous findings quite well; however, the true and error model indicated that very few, if any, participants exhibited true intransitive preferences. In addition, violations of stochastic dominance showed a strong and systematic decrease in prevalence over time and violated response independence, thus violating key assumptions of standard random preference models for analysis of transitivity.

TEMAP2. R: True and Error Model Analysis Program in R

Published in Judgment & Decision Making, 2018

True and Error Theory (TET) provides a method to separate the variability of behavior into components due to changing true policy and to random error. TET is a testable theory that can serve as a statistical model, allowing one to evaluate substantive theories as nested, special cases. TET is more accurate descriptively and has theoretical advantages over previous approaches. This paper presents a freely available computer program in R that can be used to fit and evaluate both TET and substantive theories that are special cases of it. The program performs Monte Carlo simulations to generate distributions of test statistics and bootstrapping to provide confidence intervals on parameter estimates. Use of the program is illustrated by a reanalysis of previously published data testing whether what appeared to be violations of Expected Utility (EU) theory (Allais paradoxes) by previous methods might actually be consistent with EU theory.

Causal peer effects in police misconduct

Published in Nature Human Behaviour, 2019

We estimate causal peer effects in police misconduct using data from about 35,000 officers and staff from London’s Metropolitan Police Service for the period 2011–2014. We use instrumental variable techniques and exploit the variation in peer misconduct that results when officers switch peer groups. We find that a 10% increase in prior peer misconduct increases an officer’s later misconduct by 8%. As the police are empowered to enforce the law and protect individual liberties, integrity and fairness in policing are essential for establishing and maintaining legitimacy and public consent. Understanding the antecedents of misconduct will help to develop interventions that reduce misconduct.

The Red, the Black, and the Plastic: Paying Down Credit Card Debt for Hotels Not Sofas

Published in Management Science, 2019

Using transaction data from a sample of 1.8 million credit card accounts, we provide the first field test of a major prediction of Prelec and Loewenstein’s (1998) theory of mental accounting: that consumers will pay off expenditure on transient forms of consumption more quickly than expenditure on durables. According to the theory, this is because the pain of paying can be offset by the future anticipated pleasure of consumption only when money is spent on consumption that endures over time. Consistent with this prediction, we found that repayment of debt incurred for non-durable goods is an absolute 10% more likely than repayment of debt incurred for durable goods. The strength of this relationship is comparable to an increment in 15 percentage points in the credit card APR. Our results have managerial implications not only for the structuring of financial transactions (e.g., that credit card customers should be given the option of paying off specific purchases), but more general implications for exploiting variations in the pain of paying in incentive schemes aimed at customers and employees.

Inequality and Social Rank: Income Increases Buy More Life Satisfaction in More Equal Countries

Published in Personality and Social Psychology Bulletin, 2020

How do income and income inequality combine to influence subjective well-being? We examined the relation between income and life satisfaction in different societies, and found large effects of income inequality within a society on the relationship between individuals’ incomes and their life satisfaction. The income—satisfaction gradient is steeper in countries with more equal income distributions, such that the positive effect of a 10% increase in income on life satisfaction is more than twice as large in a country with low income inequality as it is in a country with high income inequality. These findings are predicted by an income rank hypothesis according to which life satisfaction is derived from social rank. A fixed increment in income confers a greater increment in social position in a more equal society. Income inequality may influence people’s preferences, such that people’s life satisfaction is determined more strongly by their income in unequal societies.

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