Lecture 11: Maximization and Greed

Question 1

hyperchoice

Answer 1

a situation where having too many options to choose from leads to feeling overwhelmed, indecision, or dissatisfaction

Question 2

homo economicus

Answer 2

responsible for oversaturated markets with too many options
- when we are fully informed we are supposed to know what to do

Question 3

Barry Schwartz

Answer 3

tyranny of choice vs freedom of choice
- difficult of too much choice increases the possibility of regret

Question 4

choice overload

Answer 4

Draeger’s supermarket
- 250 varieties of mustard
- 75 varieties of olive oil
- > 300 varieties of jam

Question 5

Iyengar & Lepper

Answer 5

• variety of 6 or variety of 24 jams on stand
• variety of 6 or variety of 30 godiva chocolate

Question 6

maximizers

Answer 6

try new things/varieties until they find the best
- achieve better objective outcomes but experience these as worse subjectively

Question 7

satsificers

Answer 7

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

Question 8

maximization/satsificing (and regret) scale

Answer 8

• 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

Question 9

maximization correlation (scale development)

Answer 9

• r (happiness) = -
• r (satsifaction) = -
• r (regret) = +
• r (depression) = +

Question 10

maximization correlation (consumer context)

Answer 10

• r (regret) = +
• r (happiness) = -
• r (social comparison) = +

Question 11

regret and ultimatum game

Answer 11

• regret low offers (if not accepted)
• feedback on minimal acceptable offer -> anticipate regret over high offers -> lower offers

Question 12

the axiom of greed (axiom of maximization)

Answer 12

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

Question 13

economists and greed

Answer 13

argue that greed is good
- good for economic growth and development
- leads to increased employment, wealth, and well-being

Question 14

evolutionary theorists and greed

Answer 14

argue that greed is good
- essential for human well-fare
- facilitates self-preservation: evolutionary advantages when resources are scarce

Question 15

working hypothesis of greed

Answer 15

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

Question 16

greed & harm to others

Answer 16

greey may lead to harm others
- bi-product

Question 17

assessing greediness

Answer 17

the dispositional greed scale (DGS)

Question 18

dispositional greed scale (DGS)

Answer 18

• 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

Question 19

greed over time

Answer 19

greed is more or less stable over time

Question 20

who are the greedy

Answer 20

younger people tend to be greedier
- cohort effect?

Question 21

development of greed

Answer 21

• scarcity hypothesis
• luxury hypothesis

Question 22

scarcity hypothesis

Answer 22

growing up poor you are more greedy than growing up rich
- additionally greedier if you have siblings

Question 23

luxury hypothesis

Answer 23

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

Question 24

greed for men vs women

Answer 24

on average men are slightly more greedy than women
- < 35 women are more greedy than men
- > 35 men are more greedy than women

Question 25

greed with political orientation

Answer 25

right-wing slightly more greedy than left-wing

Question 26

what do the greedy do

Answer 26

• harvesting dilemma
• dictator and ultimatum game
• financial behavior

Question 27

harvesting dilemma

Answer 27

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

Question 28

dictator game

Answer 28

how do you divide $10 between yourself and someone else?
- the more greedy, the more money kept to themselves

Question 29

ultimatum game

Answer 29

• the greedier they are, the less they give to others
• the greedier they are, the less likely to accept low offers

Question 30

financial behavior

Answer 30

• greedy people generate more income
• greedy people spend more money
• greedy people save less money
• greedy people have higher debt

Question 31

John Stuart Mill

Answer 31

important principles for understanding economic behavior
- pursuit of wealth
- aversion to labor

Question 32

John Maynard Keynes

Answer 32

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

Question 33

why are we not living the ‘good life’

Answer 33

• people work too hard and die rich
• people earn too much
• people like their work and want to leave money for kids

Question 34

overearning paradigm (Hsee et al.)

Answer 34

people earn more chocolates than they eat
- greedy people over earn more than others

Question 35

social comparison

Answer 35

maximizers more likely to engage in social comparison more adversely affected by upward social comparison

Question 36

fewer options of decision making

Answer 36

results in greater satsifaction with the choices made
- avoidance of potential regret
- creates an intractable information problem

Question 37

intractable information problem

Answer 37

• it is already difficult to gather information regarding less options
• when there are even more, many people disengage completely

Question 38

maximizing consumer behavior

Answer 38

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

Question 39

dispositional greed scale (DGS) correlations

Answer 39

• positive correlations with maximization, self-interest, envy, materialism, and impulsiveness
• negative correlations with self-control and life satisfaction

Question 40

dispositional greed scale (DGS) predictions

Answer 40

• predicts greedy behavioral tendencies over and above materialism
• predicts greedy economic behavior

Question 41

Plato and greed

Answer 41

greed is the cause of war, civil conflict, and immortality
- part of human nature

Question 42

Aristotle and greed

Answer 42

argued that greed is confusion between what we actually need and what we ideally want

Question 43

Hume

Answer 43

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

Question 44

economic consequences of greed

Answer 44

• 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

Question 45

envy

Answer 45

the emotion that arises when someone else is better off than oneself