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How Does Language Affect Decision-Making in Social Interactions and Decision Biases?

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Abstract

This paper investigates how communication in a particular language affects decision-making in social interactions and risk preferences. We test two competing hypotheses: the cognitive accessibility hypothesis, and the expectation-based hypothesis. The cognitive accessibility hypothesis argues that communication in a particular language will activate the underlying cultural frame and affect behavior. The expectation-based hypothesis argues that different languages will induce different expectations regarding the choices of others and affect behavior. We test these two hypotheses using an extensive range of behaviors in a set of incentivized experiments with bilingual subjects in Chinese and English. We find that the subjects are more prosocial in strategic interaction games (trust games) when the experiments are conducted in Chinese. However, no treatment effects are observed in the individual choice games on social preference. The results are more in line with the expectation-based hypothesis.

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I. Are there uncertainties that are not risks? 643. — II. Uncertainties that are not risks, 647. — III. Why are some uncertainties not risks? — 656.
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Languages differ widely in the ways they encode time. I test the hypothesis that languages that grammatically associate the future and the present, foster future-oriented behavior. This prediction arises naturally when well-documented effects of language structure are merged with models of intertemporal choice. Empirically, I find that speakers of such languages: save more, retire with more wealth, smoke less, practice safer sex, and are less obese. This holds both across countries and within countries when comparing demographically similar native households. The evidence does not support the most obvious forms of common causation. I discuss implications for theories of intertemporal choice.
Article
This research explores whether there are systematic cross-national differences in choice-inferred risk preferences between Americans and Chinese. Study 1 found(a) that the Chinese were signi®cantly more risk seeking than the Americans, yet(b) that both nationals predicted exactly the opposite Ð that the Americans wouldbe more risk seeking. Study 2 compared Americans' and Chinese risk preferences in investment, medical and academic decisions, and found that Chinese were more risk seeking than Americans only in the investment domain and not in the other domains. These results are explained in terms of a cushion hypothesis, which suggests people in a collectivist society, such as China, are more likely to receive fnancial help if they are in need (i.e. they could be cushioned if they fell), and consequently, they are less risk averse than those in an individualistic society such as the USA.
Article
When does a common group identity improve efficiency in coordination games? To answer this question, we propose a group-contingent social preference model and derive conditions under which social identity changes equilibrium selection. We test our predictions in the minimum-effort game in the laboratory under parameter configurations which lead to an inefficient low-effort equilibrium for subjects with no group identity. For those with a salient group identity, consistent with our theory, we find that learning leads to ingroup coordination to the efficient high-effort equilibrium. Additionally, our theoretical framework reconciles findings from a number of coordination game experiments. (JEL C71, C91, D71)
Article
Would you make the same decisions in a foreign language as you would in your native tongue? It may be intuitive that people would make the same choices regardless of the language they are using, or that the difficulty of using a foreign language would make decisions less systematic. We discovered, however, that the opposite is true: Using a foreign language reduces decision-making biases. Four experiments show that the framing effect disappears when choices are presented in a foreign tongue. Whereas people were risk averse for gains and risk seeking for losses when choices were presented in their native tongue, they were not influenced by this framing manipulation in a foreign language. Two additional experiments show that using a foreign language reduces loss aversion, increasing the acceptance of both hypothetical and real bets with positive expected value. We propose that these effects arise because a foreign language provides greater cognitive and emotional distance than a native tongue does.
Article
The purpose of this paper is to describe a test involving five different approaches to estimating the demand for a public good. The test was conducted in a setting which permitted a real collective choice and in which each subject was committed to actual payments when relevant. The results indicate that the well-known risk for misrepresentation of preferences in this context may have been exaggerated. The test would seem to encourage further work in the field of experimental economics.
Article
Some current utility models presume that people are concerned with their relative standing in a reference group. Yet how widespread is this influence? Are some types of people more susceptible to it than others are? Using simple binary decisions and self-reported happiness, we investigate both the prevalence of “difference aversion” and whether happiness levels influence the taste for social comparisons. Our decision tasks distinguish between a person’s desire to achieve the social optimum, equality, or advantageous relative standing. Most people appear to disregard relative payoffs, instead typically making choices resulting in higher social payoffs. While we do not find a strong general correlation between happiness and concern for relative payoffs, we do observe that a willingness to lower another person’s payoff below one’s own (competitive preferences) may be correlated with unhappiness.
Article
We designed an experiment to study trust and reciprocity in an investment setting. This design controls for alternative explanations of behavior including repeat game reputation effects, contractual precommitments, and punishment threats. Observed decisions suggest that reciprocity exists as a basic element of human behavior and that this is accounted for in the trust extended to an anonymous counterpart. A second treatment, social history, identifies conditions which strengthen the relationship between trust and reciprocity.
Article
Research in economics and psychology has established that informal non-monetary sanctions, particularly expressions of negative emotion or disapproval, can enforce fair economic exchange. Scholars, however, are only beginning to understand the reasons non-monetary sanctions affect economic outcomes. Here we provide evidence that a preference for avoiding written expression of disapproval, or negative emotion, plays an important role in promoting fair decision making. We study one-shot Dictator games where one subject has the right to determine a division of an amount of money between herself and her receiver. In relation to the standard game, we find significantly fewer earning-maximizing decisions when receivers can react to offers with ex post written messages. We further find that credible threats of monetary sanctions, while economically inefficient, are significantly more effective than written messages in deterring selfishness. Our data provide new perspectives on the role of communication in promoting economic efficiency in social environments, and support economic theories of decision incorporating psychological factors such as guilt, shame, and self-deception.
Article
Social dilemmas appear in two basic forms: the public goods problem (in which the individual must decide whether to contribute to a common resource) and the commons dilemma (in which the individual must decide whether to take from a common resource). The two forms of choice dilemma are equivalent in terms of outcomes, but because they involve different decision frames, they are not psychologically equivalent. In this research, framing effects on decisions involving use of a common resource pool were explored in a 2 × 2 × 2 (Public Goods vs. Commons Dilemma Task Structure × Small vs. Large Group Size × Individualistic vs. Collective Social Identity) experiment. That the two versions of the decision task were not psychologically equivalent was evidenced both by a main effect of task structure and by interactions involving task structure, group size, and social identity. Overall, subjects kept more of the common resource for themselves under the public goods version of the task than under the commons dilemma frame. Furthermore, under the commons dilemma structure, group size had no effect on choice behavior, but in the public goods version individuals in large groups kept more than did individuals in small groups. Lastly, as the resource pool was depleted, the social identity manipulation had opposite effects for large groups under commons dilemma and public goods frames.
Article
Social identities prescribe behaviors for people. We identify the marginal behavioral effect of these norms on discount rates and risk aversion by measuring how laboratory subjects' choices change when an aspect of social identity is made salient. When we make ethnic identity salient to Asian-American subjects, they make more patient choices. When we make racial identity salient to black subjects, non-immigrant blacks (but not immigrant blacks) make more patient choices. Making gender identity salient has no effect on intertemporal or risk choices.
Article
Departures from self-interest in economic experiments have recently inspired models of “social preferences.” We design a range of simple experimental games that test these theories more directly than existing experiments. Our experiments show that subjects are more concerned with increasing social welfare—sacrificing to increase the payoffs for all recipients, especially low-payoff recipients—than with reducing differences in payoffs (as supposed in recent models). Subjects are also motivated by reciprocity: they withdraw willingness to sacrifice to achieve a fair outcome when others are themselves unwilling to sacrifice, and sometimes punish unfair behavior.
Article
Corruption in the public sector erodes tax compliance and leads to higher tax evasion. Moreover, corrupt public officials abuse their public power to extort bribes from the private agents. In both types of interaction with the public sector, the private agents are bound to face uncertainty with respect to their disposable incomes. To analyse effects of this uncertainty, a stochastic dynamic growth model with the public sector is examined. It is shown that deterministic excessive red tape and corruption deteriorate the growth potential through income redistribution and public sector inefficiencies. Most importantly, it is demonstrated that the increase in corruption via higher uncertainty exerts adverse effects on capital accumulation, thus leading to lower growth rates.
Article
The financial crisis of 2008, which started with an initially well-defined epicenter focused on mortgage backed securities (MBS), has been cascading into a global economic recession, whose increasing severity and uncertain duration has led and is continuing to lead to massive losses and damage for billions of people. Heavy central bank interventions and government spending programs have been launched worldwide and especially in the USA and Europe, with the hope to unfreeze credit and boltster consumption. Here, we present evidence and articulate a general framework that allows one to diagnose the fundamental cause of the unfolding financial and economic crisis: the accumulation of several bubbles and their interplay and mutual reinforcement has led to an illusion of a ``perpetual money machine'' allowing financial institutions to extract wealth from an unsustainable artificial process. Taking stock of this diagnostic, we conclude that many of the interventions to address the so-called liquidity crisis and to encourage more consumption are ill-advised and even dangerous, given that precautionary reserves were not accumulated in the ``good times'' but that huge liabilities were. The most ``interesting'' present times constitute unique opportunities but also great challenges, for which we offer a few recommendations.
Article
Children in households reporting the receipt of free or reduced price school meals through the National School Lunch Program (NSLP) are more likely to have negative health outcomes than eligible nonparticipants. Assessing the causal effects of the program is made difficult, however, by the presence of endogenous selection into the program and systematic misreporting of participation status. Using data from the National Health and Nutrition Examination Survey (NHANES), we extend and apply partial identification methods to account for these two identification problems in a single unifying framework. Similar to a regression discontinuity design, we introduce a new way to conceptualize the monotone instrumental variable (MIV) assumption using eligibility criteria as monotone instruments. Under relatively weak assumptions, we find evidence that receipt of free and reduced price lunches through the NSLP improves the health outcomes of children.
  • K K Li
K.K. Li / Journal of Economic Psychology 61 (2017) 15-28
  • M P Lewis
  • G F Simons
  • C D Fennig
Lewis, M. P., Simons, G. F., & Fennig, C. D. (2009). Ethnologue: Languages of the world (Vol. 9) TX: SIL international Dallas.
A two-person dilemma. Readings in games and information
  • A W Tucker
Tucker, A. W. (1950). A two-person dilemma. Readings in games and information. Wiley-Blackwell.
The pure theory of public expenditure
  • M Ross
  • W Q E Xun
  • A E Wilson
Ross, M., Xun, W. Q. E., & Wilson, A. E. (2002). Language and the bicultural self. Personality and Social Psychology Bulletin, 28(8), 1040. Samuelson, P. A. (1954). The pure theory of public expenditure. The Review of Economics and Statistics, 387-389.