nep-neu New Economics Papers
on Neuroeconomics
Issue of 2023‒10‒30
two papers chosen by

  1. Cognitive Limitations: Failures of Contingent Thinking By Niederle, Muriel; Vespa, Emanuel
  2. Benefitting or suffering from a paradoxical leader? A self-regulation perspective By Fürstenberg, Nils; Booth, Jonathan E.; Alfes, Kerstin

  1. By: Niederle, Muriel; Vespa, Emanuel
    Abstract: In recent years, experiments have documented a new mechanism that leads to failures of profit maximization: the failure of contingent thinking (FCT). This article summarizes key experimental findings, clarifies what constitutes an FCT, and outlines how FCTs can be tested in other environments. Subsequently, we relate FCTs to recent theoretical work on cognitive limitations in behavioral economics. Finally, we connect FCTs to suboptimal behavior documented in applied environments.
    Keywords: Economics, Applied Economics, Economic Theory, Behavioral and Social Science, Clinical Research, Basic Behavioral and Social Science, Applied economics, Economic theory
    Date: 2023–09–13
  2. By: Fürstenberg, Nils; Booth, Jonathan E.; Alfes, Kerstin
    Abstract: Why do followers’ reactions to perceived paradoxical leader behavior (PLB) differ? To answer this question, we draw from self-regulation theory and argue that making sense of a paradoxical leader’s seemingly contradictory behavior can pose a challenge for followers and requires specific cognitive traits and abilities that enable them to navigate such complex and dynamic environments. We propose that followers who lack these cognitive traits and related abilities find it more difficult to make sense of and navigate their paradoxical leader’s behavior, thereby perceiving them as behaviorally unpredictable. This, in turn, impairs followers’ self-regulation when working with such leaders, and leads to lower well-being. Conversely, followers endowed with appropriate cognitive traits can make sense of PLB and thrive in these environments. To test our propositions, we conducted two multi-wave field studies. In Study 1, we examine the role of followers’ trait cognitive flexibility in interpreting PLB; whereas Study 2 explores the role of followers’ trait self-regulation. The findings from these studies support our hypotheses, with an important implication: the efficacy of PLB may not only solely depend on a leader’s ability to enact these behaviors but also on their followers’ ability to interpret and make sense of them.
    Keywords: leader unpredictability; paradoxical leader behavior; self-regulation; sensemaking; well-being
    JEL: J50
    Date: 2023–10–05

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