Lecture 11: Maximization and Greed Flashcards
hyperchoice
a situation where having too many options to choose from leads to feeling overwhelmed, indecision, or dissatisfaction
homo economicus
responsible for oversaturated markets with too many options
- when we are fully informed we are supposed to know what to do
Barry Schwartz
tyranny of choice vs freedom of choice
- difficult of too much choice increases the possibility of regret
choice overload
Draeger’s supermarket
- 250 varieties of mustard
- 75 varieties of olive oil
- > 300 varieties of jam
Iyengar & Lepper
- variety of 6 or variety of 24 jams on stand
- variety of 6 or variety of 30 godiva chocolate
maximizers
try new things/varieties until they find the best
- achieve better objective outcomes but experience these as worse subjectively
satsificers
find something that is good enough and continue to choose it
- if encountered with a better good than the one chosen, the scale of acceptability enables one to reject a formerly chosen good for a higher ranked one
- moves in the direction of maximization without having it as a deliberate goal
maximization/satsificing (and regret) scale
- when i watch TV, i channel surf, often scanning through the available options even while attempting to watch one program
- when shopping, i have a hard time finding clothing that i really love
- no matter what i do, i have the highest standards for myself
- i never settle for second best
maximization correlation (scale development)
- r (happiness) = -
- r (satsifaction) = -
- r (regret) = +
- r (depression) = +
maximization correlation (consumer context)
- r (regret) = +
- r (happiness) = -
- r (social comparison) = +
regret and ultimatum game
- regret low offers (if not accepted)
- feedback on minimal acceptable offer -> anticipate regret over high offers -> lower offers
the axiom of greed (axiom of maximization)
if A contains more of one good than B, and at least as much as B of all other goods, A will be preferred over B
economists and greed
argue that greed is good
- good for economic growth and development
- leads to increased employment, wealth, and well-being
evolutionary theorists and greed
argue that greed is good
- essential for human well-fare
- facilitates self-preservation: evolutionary advantages when resources are scarce
working hypothesis of greed
greed is the experience of desiring to acquire more and the dissatisfaction of never having enough
- it is associated with goals of materialism and feelings of envy and it may lead to self-interested behavior and tunnel vision
greed & harm to others
greey may lead to harm others
- bi-product
assessing greediness
the dispositional greed scale (DGS)
dispositional greed scale (DGS)
- i always want more
- actually i am kind of greedy
- one can never have too much money
- as soon as i have acquired something, i start to think about the next thing i want
- it doesn’t matter how much i have, i’m never completely satisfied
- my life motto is “more is better”
- i can’t imagine having too many things
greed over time
greed is more or less stable over time
who are the greedy
younger people tend to be greedier
- cohort effect?
development of greed
- scarcity hypothesis
- luxury hypothesis
scarcity hypothesis
growing up poor you are more greedy than growing up rich
- additionally greedier if you have siblings
luxury hypothesis
growing up rich you are more greedy
- children without siblings are greedier due to not having to share with siblings when younger
- supported by studies from China, NL and USA
greed for men vs women
on average men are slightly more greedy than women
- < 35 women are more greedy than men
- > 35 men are more greedy than women
greed with political orientation
right-wing slightly more greedy than left-wing
what do the greedy do
- harvesting dilemma
- dictator and ultimatum game
- financial behavior
harvesting dilemma
timber company sharing 200 hectares of forest with 3 other companies
- can harvest from 0-10 hectares a year for it to regrow
- over 5 is greedy
- less than 5 leaves money
dictator game
how do you divide $10 between yourself and someone else?
- the more greedy, the more money kept to themselves
ultimatum game
- the greedier they are, the less they give to others
- the greedier they are, the less likely to accept low offers
financial behavior
- greedy people generate more income
- greedy people spend more money
- greedy people save less money
- greedy people have higher debt
John Stuart Mill
important principles for understanding economic behavior
- pursuit of wealth
- aversion to labor
John Maynard Keynes
prediction in 1930 for 2030 (the good life)
- people will work 15 hours per week, as the result of increasing technological developments and higher earning rates
- in reality, GDP per capita increased more than predicted
- working hours decreased less than predicted
why are we not living the ‘good life’
- people work too hard and die rich
- people earn too much
- people like their work and want to leave money for kids
overearning paradigm (Hsee et al.)
people earn more chocolates than they eat
- greedy people over earn more than others
social comparison
maximizers more likely to engage in social comparison more adversely affected by upward social comparison
fewer options of decision making
results in greater satsifaction with the choices made
- avoidance of potential regret
- creates an intractable information problem
intractable information problem
- it is already difficult to gather information regarding less options
- when there are even more, many people disengage completely
maximizing consumer behavior
predicted the tendency to engage in product comparison, social comparison, and counterfactual thinking regarding purchases
- also predicted the consideration of more products, and taking longer to decide
dispositional greed scale (DGS) correlations
- positive correlations with maximization, self-interest, envy, materialism, and impulsiveness
- negative correlations with self-control and life satisfaction
dispositional greed scale (DGS) predictions
- predicts greedy behavioral tendencies over and above materialism
- predicts greedy economic behavior
Plato and greed
greed is the cause of war, civil conflict, and immortality
- part of human nature
Aristotle and greed
argued that greed is confusion between what we actually need and what we ideally want
Hume
argued that greed is a double-edged sword
- on the one hand it motivates people to perform better
- but on the other it has destructive consequences for society
economic consequences of greed
- related to consumer debts
- lower stockholder returns
- often linked to financial scandals and bankruptcy cases
- lead to financial crisis in the late 2000s
- fraud cases
envy
the emotion that arises when someone else is better off than oneself
