Peer Effects and Peer Avoidance: The Diffusion of Behavior in Coevolving Networks

We study the long‐run emergence of behavioral patterns in dynamic complex networks. Individuals can display two kinds of behavior: G (“good”) or B (“bad”). We assume that the exposure of a G agent to bad behavior on the part of peers/neighbors triggers her own switch to B behavior, but only temporarily. We model the implications of such peer effects as an epidemic process in the standard SIS (Susceptible‐Infected‐Susceptible) framework. The key novelty of our model is that, unlike in the received literature, the network is taken to change over time within the same time scale as behavior. Specifically, we posit that links connecting two G agents last longer, reflecting the idea that B agents tend to be avoided. The main concern of the paper is to understand the extent to which such biased network turnover may play a significant role in supporting G behavior in a social system. And indeed we find that network coevolution has nontrivial and interesting effects on long‐run behavior. This yields fresh insights on the role of (endogenous) peer pressure on the diffusion of social behavior and also has some bearing on the traditional study of disease epidemics. (JEL: C71, D83, D85)     

Social Amplification of Wildfire Risk: The Role of Social Interactions and Information Sources

Wildfire is a persistent and growing threat across much of the western United States. Understanding how people living in fire‐prone areas perceive this threat is essential to the design of effective risk management policies. Drawing on the social amplification of risk framework, we develop a conceptual model of wildfire risk perceptions that incorporates the social processes that likely shape how individuals in fire‐prone areas come to understand this risk, highlighting the role of information sources and social interactions. We classify information sources as expert or nonexpert, and group social interactions according to two dimensions: formal versus informal, and generic versus fire‐specific. Using survey data from two Colorado counties, we empirically examine how information sources and social interactions relate to the perceived probability and perceived consequences of a wildfire. Our results suggest that social amplification processes play a role in shaping how individuals in this area perceive wildfire risk. A key finding is that both “vertical” (i.e., expert information sources and formal social interactions) and “horizontal” (i.e., nonexpert information and informal interactions) interactions are associated with perceived risk of experiencing a wildfire. We also find evidence of perceived “risk interdependency”—that is, homeowners’ perceptions of risk are higher when vegetation on neighboring properties is perceived to be dense. Incorporating social amplification processes into community‐based wildfire education programs and evaluating these programs’ effectiveness constitutes an area for future inquiry.     

Optimal Pricing Strategies for Capacity Leasing Based on Time and Volume Usage in Telecommunication Networks

In this study, we examined optimal pricing strategies for “pay‐per‐time,” “pay‐per‐volume,” and “pay‐per‐both‐time‐and‐volume” based leasing of data networks in a monopoly environment. Conventionally, network capacity distribution includes short‐/long‐term bandwidth and/or usage time leasing. When customers choose connection‐time–based pricing, their rational behavior is to fully utilize the bandwidth capacity within a fixed time period, which may cause the network to burst (or overload). Conversely, when customers choose volume‐based strategies their rational behavior is to send only the minimum bytes necessary (even for time‐fixed tasks for real time applications), causing the quality of the task to decrease, which in turn creates an opportunity cost for the provider. Choosing a pay‐per time and volume hybridized pricing scheme allows customers to take advantage of both pricing strategies while lessening the disadvantages of each, because consumers generally have both time‐ and size‐fixed tasks such as batch data transactions. One of the key contributions of this study is to show that pay‐per both time and volume pricing is a viable and often preferable alternative to the offerings based on only time or volume, and that judicious use of such a pricing policy is profitable to the network provider.     

Understanding Mechanisms Underlying Peer Effects: Evidence From a Field Experiment on Financial Decisions

Using a high‐stakes field experiment conducted with a financial brokerage, we implement a novel design to separately identify two channels of social influence in financial decisions, both widely studied theoretically. When someone purchases an asset, his peers may also want to purchase it, both because they learn from his choice (“social learning”) and because his possession of the asset directly affects others' utility of owning the same asset (“social utility”). We randomize whether one member of a peer pair who chose to purchase an asset has that choice implemented, thus randomizing his ability to possess the asset. Then, we randomize whether the second member of the pair: (i) receives no information about the first member, or (ii) is informed of the first member's desire to purchase the asset and the result of the randomization that determined possession. This allows us to estimate the effects of learning plus possession, and learning alone, relative to a (no information) control group. We find that both social learning and social utility channels have statistically and economically significant effects on investment decisions. Evidence from a follow‐up survey reveals that social learning effects are greatest when the first (second) investor is financially sophisticated (financially unsophisticated); investors report updating their beliefs about asset quality after learning about their peer's revealed preference; and, they report motivations consistent with “keeping up with the Joneses” when learning about their peer's possession of the asset. These results can help shed light on the mechanisms underlying herding behavior in financial markets and peer effects in consumption and investment decisions.     

MODELING OF CONFIGURAL JUDGMENT PROCESSES AS A SERIES OF SUBSPACE HYPERPLANES

Past research in modeling human judgments has been accompanied by continuing debate as to the necessity and effectiveness of using “configural” models, vis-a-vis“first-order” models, to represent complex decision processes. The resounding power of first-order models adequately to represent apparently configural processes repeatedly has been demonstrated to the frustration of those researchers who intuitively feel that man decides in a complex and configural manner. This paper presents the theory that the apparent weakness of configural models may be attributed to the assumption that interaction effects are “continuous” phenomena when in fact they are “discrete” or local interactions. The definition of subspaces of the predictor set, over which “local” first-order hyperplanes may be used, is investigated as a viable means of representing “discrete” interactions while preserving some of the parsimony of the “continuous” formulations. The application of the Automatic Interaction Detection technique to define subspaces and local models is attempted with positive results for an installment loan officer. Then a comparison with the results from a recent study which used various “continuous” formulations shows a definite superiority of the “local” modeling approach.     

Labor Market Intermediaries and the New Paradigm for Human Resources

Labor market intermediaries (LMIs) are entities that stand between the individual worker and the organization that needs work done. They include well-known operations such as executive search firms that act as brokers to fill jobs and temp agencies that lease labor to clients but also less familiar entities such as professional employer organizations (PEOs) that take on the legal obligations of employment for clients. LMI's mediate between individual workers and the organizations that need work done, shaping how workers are matched to organizations, how tasks are performed, and how conflicts are resolved [Autor, D.H. (2009). Studies of labor market intermediation: Introduction. In D. Autor (Ed.), Studies of labor market intermediation (pp. 1–26). Chicago, IL: University of Chicago Press]. They essentially disintermediate aspects of management that had been performed by employers. The growth and increasing prominence of LMI's is important for all research associated with the workplace because we can no longer do a study of “workers” in an organization and assume that they are all employees: Some may be temps under contract to an agency, some may be “employed” by a PEO, some may work for vendors. The reason that matters is because LMI's appear to alter attitudes and behaviors on all sides. For example, they change the bilateral, employee–employer relationship into a three-way “triangular” relationship. They may well create “dual allegiance” issues, where individuals feel ties to the search firm that placed them in their current job and their employer or the agency that employs them and the client on whose behalf they are currently working. Most fundamentally, they challenge the existing paradigms we have used to understand the workplace: Does “attraction–selection–attrition” have any relevance, for example, when employers hire temps placed by agencies into permanent jobs? What does career development mean when the person with the most influence over your next job is a search consultant? There is already an extensive literature on LMIs, but it is spread across disciplines and fields and mainly examines the labor market outcomes associated with the use of LMIs. The literature lacks a management voice. We know relatively little about the effects of LMIs on workplace attitudes and behaviors, the central focus of organizational behavior; about how LMIs and the associated rise of outside hiring change how we should think about topics such as recruiting and selection, a central concern of personnel psychology; we know even less about how LMIs change the way firms think about competencies and boundaries of the firm, central topics in strategy, when the firm's workforce is actually employed by another organization or when it can be reshuffled very quickly. We develop a taxonomy of LMIs and use it to classify the burgeoning but disjointed literature on LMIs across the social sciences. We classify LMIs in terms of three main attributes of human resource (HR) practices that they perform: Information Providers, Matchmakers, and Administrators. We describe first how LMI activities differ from HR management practices performed by employers in the traditional relationship. Second, we outline the existing research about how LMIs affect employment outcomes, such as access to employment, wages, work-related attitudes and behaviors, working conditions, and skill development. Finally, we highlight the implications of LMIs for management research, especially new, understudied research questions that need to be addressed.     

An organizational approach to undoing gender: The unlikely case of offshore oil platforms

This case study of two offshore oil platforms illustrates how an organizational initiative designed to enhance safety and effectiveness created a culture that unintentionally released men from societal imperatives for “manly” behavior, prompting them to let go of masculine-image concerns and to behave instead in counter-stereotypical ways. Rather than proving how tough, proficient, and cool-headed they were, as was typical of men in other dangerous workplaces, platform workers readily acknowledged their physical limitations, publicly admitted their mistakes, and openly attended to their own and others’ feelings. Importantly, platform workers did not replace a conventional image of masculinity with an unconventional one and then set out to prove the new image—revealing mistakes strategically, for example, or competing in displays of sensitivity. Instead, the goal of proving one's masculine credentials, conventional or otherwise, appeared to no longer hold sway in men's workplace interactions. Building on West and Zimmerman's (1987: 129) now classic articulation of gender as “the product of social doings,” we describe this organizationally induced behavior as “undoing” gender. We use this case, together with secondary case data drawn from 10 published field studies of men doing dangerous work, to induce a model of how organizational cultures equip men to “do” and “undo” gender at work.     

WHY MERGERS REDUCE PROFITS AND RAISE SHARE PRICES–A THEORY OF PREEMPTIVE MERGERS

We provide a possible explanation for the empirical puzzle that mergers often reduce profits, but raise share prices. If being an “insider” is better than being an “outsider”, firms may merge to preempt their partner merging with a rival. The insiders' stock market value is increased, since the risk of becoming an outsider is eliminated. These results are derived in an endogenous‐merger model, predicting the conditions under which mergers occur, when they occur, and how the surplus is shared. (JEL: L13, L41, G34, C78)     

INTERVENTIONS INTO GROUP PROCESS: AN APPROACH TO IMPROVING THE EFFECTIVENESS OF GROUPS*

Some new directions for research on group effectiveness are proposed. These include: (a) explicit recognition of group interaction process as the moderator of input-output relationships in groups; (b) research which focuses on the functions of group interaction in influencing group performance; and (c) use of experimental interventions which create new, non-typical patterns of interpersonal behavior in groups as an approach to studying group effectiveness. The results of two studies based on these proposals are summarized. One study examines the effectiveness of implicit vs. explicit discussion of group task “strategies”; the other addresses the effects of implicit (“traditional”) vs. explicit (“adaptive”) approaches to the maintenance of internal social relationships in work groups. Implications of the research are drawn both for future research on group effectiveness, and for the design of interventions aimed at improving the performance of on-going groups in organizations.     

SOCIAL INTERACTIONS IN LABOR SUPPLY

Our research examines the effect of interdependence on estimation and interpretation of earnings/labor supply equations. We consider the cases of (1) a positive spillover from others' labor supplied and (2) a need for conformity with others' labor supplied. Qualitative and quantitative comparative statics results with a Stone‐Geary utility function demonstrate how spillover effects increase labor supply uniformly. Alternatively, conformity effects move labor supplied toward the mean of the reference group so that, in the limit, labor supply becomes perfectly inelastic at the reference group average. When there are unmodeled exogenous social interactions, conventional wage elasticities are still relatively well estimated, although structural parameters may not be. Omitting endogenous social interactions may seriously misrepresent the labor supply effects of policy, however. (JEL: D11, J22, Z13)     

Following unique logics despite institutional complexity: An inductive study of academic inventors and institutional logics

This paper examines how institutional complexity, due to the availability of multiple logics, influences the behavior of academic inventors during an innovation process. Based on four case studies of medical technology innovations, this paper identifies three logics influencing academic inventors’ behavior: academic, market, and care logics. We identify several patterns that characterize the practices of academic inventors in a context with multiple institutional logics. Despite the availability of multiple logics, we observe a strong pattern of academic inventors predominantly following the market or the care logic. As for the influence of multiple logics, we find very limited interaction between logics (i.e., reinforcing, complementary and conflicting interaction), with the prevalent pattern being “no interaction” between institutional logics. Thus, instead of following several logics, academic inventors’ specific practices are mostly guided by a “unique” logic. This influence of logics leads to a clear pattern of “dominant” influence on behavior, reflected in individual strategies of “entrenching,” that is, a strategy based on building one’s behavior on a “unique” logic. However, the same available logics can also generate "aligned" influence, entailing behavior guided by several logics. But this occurs only if the academic inventor faces uncertainty regarding the exploitation of the intellectual property. With these findings, we add to the ongoing discussion concerning institutional complexity and individual behavior by elucidating in detail how institutional complexity can entail behavior guided by “unique” logics.     

Giving Versus Giving In

Abstract

Altruism is central to organizational and social life, but its motivations are not well understood. We propose a new theoretical distinction that sorts these motivations into two basic types: “giving” indicates prosocial behaviors in which one willingly engages, while “giving in” indicates prosocial behavior in which one reluctantly engages, often in response to social pressure or obligation. Unlike those who give, those who give in prefer to avoid the situation that compels altruism altogether, even if doing so leaves the would-be beneficiary empty-handed. We review the existing literature on altruism in behavioral economics, psychology, and organizational behavior and suggest that the distinction between giving and giving in is not only central from a theoretical standpoint, but also has important methodological implications for researchers trying to study prosocial behavior and practitioners trying to encourage it.     

Identifying Social Interactions Through Conditional Variance Restrictions

This paper proposes a new method for identifying social interactions using conditional variance restrictions. The method provides a consistent estimate of the social multiplier when social interactions take the “linear‐in‐means” form (Manski (1993)). When social interactions are not of the linear‐in‐means form, the estimator, under certain conditions, continues to form the basis of a consistent test of the no social interactions null with correct large sample size. The methods are illustrated using data from the Tennessee class size reduction experiment Project STAR. The application suggests that differences in peer group quality were an important source of individual‐level variation in the academic achievement of Project STAR kindergarten students.     

TRUST,SOCIAL CAPITAL,AND ECONOMIC DEVELOPMENT

Many argue that elements of a society's norms, culture, or social capital are central to understanding its development. However, these notions have been difficult to capture in economic models. Here we explore a possible role for “trustworthiness” as corresponding to social capital. Individuals are trustworthy when they perform in accordance with promises, even if this does not maximise their payoffs. The usual focus on incentive structures in motivating behaviour plays no role here. Instead, we emphasise more deep‐seated modes of behaviour and consider trustworthy agents being socialised to act as they do. To model this socialisation, we borrow from a process of preference evolution pioneered by Bisin and Verdier (2001). The model developed endogenously accounts for social capital and explores its role in the process of economic development. It captures in a simple, formal way the interaction between social capital and the economy's productive processes. The results obtained caution against rapid reform and provide an explanation for why late‐developing countries may not easily be able to transplant the modes of production that have proved useful in the West. (JEL: O1, O3, O4, Z1)     

Behavior in a Dynamic Decision Problem: An Analysis of Experimental Evidence Using a Bayesian Type Classification Algorithm

Different people may use different strategies, or decision rules, when solving complex decision problems. We provide a new Bayesian procedure for drawing inferences about the nature and number of decision rules present in a population, and use it to analyze the behaviors of laboratory subjects confronted with a difficult dynamic stochastic decision problem. Subjects practiced before playing for money. Based on money round decisions, our procedure classifies subjects into three types, which we label “Near Rational,”“Fatalist,” and “Confused.” There is clear evidence of continuity in subjects' behaviors between the practice and money rounds: types who performed best in practice also tended to perform best when playing for money. However, the agreement between practice and money play is far from perfect. The divergences appear to be well explained by a combination of type switching (due to learning and/or increased effort in money play) and errors in our probabilistic type assignments.     

Matching and Network Effects

The matching of individuals in teams is a key element in the functioning of an economy. The network of social ties can potentially transmit important information on abilities and reputations and also help mitigate matching frictions by facilitating interactions among “screened” individuals. We conjecture that the probability of two individuals forming a team falls in the distance between the two individuals in the network of existing social ties. The objective of this paper is to empirically test this conjecture. We examine the formation of coauthor relations among economists over a twenty‐year period. Our principal finding is that a new collaboration emerges faster among two researchers if they are “closer” in the existing coauthor network among economists. This proximity effect on collaboration is strong: Being at a network distance of 2 instead of 3, for instance, raises the probability of initiating a collaboration by 27%. (JEL: C78, D83, D85)     

Continuous Implementation

In this paper, we introduce a notion of continuous implementation and characterize when a social choice function is continuously implementable. More specifically, we say that a social choice function is continuously (partially) implementable if it is (partially) implementable for types in the model under study and it continues to be (partially) implementable for types “close” to this initial model. Our results show that this notion is tightly connected to full implementation in rationalizable strategies.     

PROTESTANT RELATIONAL IDEOLOGY: THE COGNITIVE UNDERPINNINGS AND ORGANIZATIONAL IMPLICATIONS OF AN AMERICAN ANOMALY

Cross-national comparisons of relational work styles suggest that the United States is an anomaly in its low relational focus. This article describes Protestant Relational Ideology (PRI), a cultural construct that explains the origins and nature of this anomaly. This construct refers to a deep-seated belief that affective and relational concerns are considered inappropriate in work settings and, therefore, are to be given less attention than in social, non-work settings. Akin to an institutional imprinting perspective, a review of sociological and historical research links PRI to the beliefs and practices of the founding communities of American society. A social cognition perspective is used to explain the mechanisms through which PRI influences American relational workways. The article also describes a program of research that uses PRI to address a wider set of organizational behavior issues that include: antecedents of prejudice and discrimination in diverse organizations; sources of intercultural miscommunication; beliefs about team conflict; mental models of “professionalism” and its effect on organizational recruitment and selection.     

From sovereign to subject: Applying Foucault's conceptualization of power to leading and studying power within leadership

This article uses Michel Foucault's conceptualization of power to rethink how power operates within leadership relations. Foucault (1980:220) defines power as a “a structure of actions, bearing on the actions of those who are free.” This idea is explored, noting how it differs from much leadership theorizing which defines power in terms of a leader's position or personal characteristics. Foucault's assertions that “power is everywhere” (1988, 12), that it is relationally based and is best perceived through its effects are examined. We identify implications for researching power from this perspective, including the appropriateness of methods capable of mapping social, historical, and institutional dynamics. We offer four analytic strategies: beginning from power's outcomes, investigating points of resistance, proactively identifying hidden dynamics and attending to networked alliances. Insights generated from this approach highlight the contingent, ephemeral nature of power and help explain the indeterminacy leaders often experience when wielding it in practice.