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Using a dictator game, we examine the other‐regarding behavior of allocators, who are given the responsibility of unilaterally making an allocation decision without consultation on behalf of a two‐person group between their group and another group. We then contrast the behavior of the same individuals in an analogous interindividual situation. We also explore other‐regarding perceptions of passive recipients, who are asked to give behavioral forecasts of how they would behave if assigned the allocator role and how they think their allocators would behave. Gender differences are found in both behavior and perceptions. Males are significantly more self‐interested and less other‐regarding when they are responsible for a group, while females behave similarly under both conditions. Female recipients' forecasts of their own behavior are significantly higher than both their expectations of allocators and the actual female behavior observed in the experiment. Both male and female recipients underestimate the other‐regarding behavior of allocators.

Participative budgeting can benefita firm by incorporating subordinates’ private information into financing and operating decisions. In the managerial accounting literature, studies of participative budgeting posit superiors that range from passively committed to highly active participants, some of whom are permitted to communicate, choose compensation schemes, negotiate with subordinates, and reject budgets. This paper synthesizes and analyzes experimental research in participative budgeting with a focus on the role of the superior defined in the research design, and on how that role affects budget outcomes, subordinate behavior, and in some cases superior behavior. We demonstrate how superior type influences economic and behavioral predictions, and likewise affects budgeting outcomes and the interpretation of the results. This paper is intended to further our understanding of how superior type affects behavior in participative budgeting studies, and to facilitate the choice of superior type in future research designs.

I propose a model of behavior in social interactions where individuals maximize a three-term utility function: a conventional consumption utility term and two “social” terms that capture social preference. One social term is a taste for desert, which is maximized when the individual believes the other person is getting what they deserve. The second social term measures the target individuals’ anger or gratitude from the interaction which is determined by a value function derived from prospect theory. After introducing the model and generating a series of comparative statics results and derived predictions, I report the results of a series of quasi-field experiments on social preferences. I discuss how the model explains several paradoxes of empirical moral philosophy that are less explicable by current economic models of social preference focusing on outcomes and intentions.

We study whether group identity mitigates inefficiencies associated with appropriable quasi-rents, which are often created by relationship-specific investments in bilateral trade relationships. We conjecture that group identity strengthens the effect of an agent’s generous action in increasing his trade partner’s altruistic preferences, and this effect helps reduce incentives to undertake ex-post inefficient opportunistic behavior such as investment in an outside option. Our experimental results, however, do not support this conjecture, and contrast with our previous experimental findings that group identity mitigates distortions in ex-ante efficient relation-specific investment. We discuss a possible cause of the difference and its implications for the theory of the firm.

Behavioral strategy aspires to build theories that are behaviorally plausible. However, the diversity of human behaviors can make it challenging to know what behavioral assumptions to use when building theories about organizations and their strategies. Fortunately, organizational contexts are, to varying degrees, designed. This introduces a powerful set of levers – sorting, framing, and structuring – that reduce this diversity of behavioral possibilities to a tractable yet plausible few. Attention to the organizational contexts that shape individual and group behavior can, therefore, help behavioral strategists attain their objectives of building theories with sound behavioral foundations.

This paper suggests to combine different kind of “other-regarding” preferences as an approach to fair behavior which is observed in controlled experiments. We assert that participants in two-person experiments have a good will capital which may be described by altruistic preferences. These preferences guide a large fraction of participants when they have to make distributional choices in one-stage games. We further show that in games with more than one stage the previous action of the other person may cause reciprocal feelings in addition to the altruistic preferences. A friendly (unfriedly) act of the other person may increase (decrease) the good will capital of the participants. Upon these findings, we conclude that a combination of altruism and reciprocity is able to describe the variety of behavior in several experiments despite their differing strategic context.

This chapter conducts a systematic comparison of behavioral economics’s challenges to the standard accounts of economic behaviors within three dimensions: under risk, over time, and regarding other people. A new perspective on two underlying methodological issues, i.e., inter-disciplinarity and the positive/normative distinction, is proposed by following the entanglement thesis of Hilary Putnam, Vivian Walsh, and Amartya Sen. This thesis holds that facts, values, and conventions have inter-dependent meanings in science which can be understood by scrutinizing formal and ordinary language uses. The goal is to provide a broad and self-contained picture of how behavioral economics is changing the mainstream of economics.

The purpose of this paper is to explore the question of how far costly transfers of economic benefits to others, often understood in economics as instances of (behavioural) altruism, can be motivated by individual group status concerns, i.e. without the common reference to other‐regarding preferences.

Results from both economics and social psychology are reviewed and spliced together so as to obtain a more comprehensive picture of group status‐based aspects of behavioural altruism. A more formal argument is provided in order to highlight specific effects. Applications (e.g. migration and workforce motivation) are discussed to support the argument and to illustrate its practical relevance.

The reviewed literature indeed supports the argument that individuals care about the status of the groups they belong to and are willing to trade this against economic benefits. Accordingly, certain altruistic acts can be motivated by the individual's (selfish) concern for group status. However, the effect apparently depends on the degree of the individual's identification with the respective group which opens ways to influence its strength.

The argument may help policy makers, chief executive officers, and people in similar positions who have to design decision environments, i.e. institutions, in a way that motivates the eventual decision makers to transfer economic benefits (e.g. donations, taxes, effort, …) to the respective institution.

The paper adds to the discussion about the driving forces behind altruistic behaviour. In particular, it points out the potential importance of group status concerns in connection with aspects of social identity for individual decisions to transfer economic benefits to others. The relevance of the effect in view of the design of institutions is discussed.

The main purpose of this paper is to analyze the effect of fairness psychology on the motivation and behavior that drives managerial entrenchment. The paper also provides a theoretical basis to set up an effective incentive and restraining mechanism for corporations.

This paper conducts an experiment to investigate the effect of fairness preference on managerial entrenchment in enterprises.

The results of the experiment show that managers are very concerned about fair payoffs, i.e. the comparison of the principals’ earnings with managers’ market average levels of pay. The worse managers’ fairness preference becomes, the greater are the degrees of managerial entrenchment exhibited. In addition, a large payoff gap between managers and principals produces a higher sensitivity in high-ability managers, while a large payoff gap between managers and managers elsewhere in a market leads to a higher sensitivity in low-ability managers.

This paper provides new insights into incentives and constraints affecting the behaviors of managers at the corporate board level. Maintaining equity between managers’ payoffs, principals’ earnings and managers’ market average pay levels can restrain both the entrenchment behavior of managers caused by unfair psychology and also the increasing costs of staff switching jobs, thus producing greater profits for companies.

Purpose – This chapter addresses the nature, formalization, and neural bases of (affective) social ties and discusses the relevance of ties for health economics. A social tie is defined as an affective weight attached by an individual to the well-being of another individual (‘utility interdependence’). Ties can be positive or negative, and symmetric or asymmetric between individuals. Characteristic of a social tie, as conceived of here, is that it develops over time under the influence of interaction, in contrast with a trait like altruism. Moreover, a tie is not related to strategic behavior such as reputation formation but seen as generated by affective responses.

Methodology/approach – A formalization is presented together with some supportive evidence from behavioral experiments. This is followed by a discussion of related psychological constructs and the presentation of suggestive existing neural findings. To help prepare the grounds for a model-based neural analysis some speculations on the neural networks involved are provided, together with suggestions for future research.

Findings – Social ties are not only found to be important from an economic viewpoint, it is also shown that they can be modeled and related to neural substrates.

Originality/value of the chapter – By providing an overview of the economic research on social ties and connecting it with the broader behavioral and neuroeconomics literature, the chapter may contribute to the development of a neuroeconomics of social ties.