Monday, February 28, 2011

PETRIGLIERI Gianpiero
Identity Workspaces for Leadership Development
INSEAD Working Paper 2011/27/OB revised version of 2011/22/OB
Profound changes in individuals’ relationship with their employers and expectations for their work lives have generated an increasing demand for leadership development, while at the same time exposing the limitations of traditional leadership programs focused on the acquisition of conceptual knowledge and requisite skills. This chapter explores how conceptualizing leadership programs as “identity workspaces” helps to meet the demand for leadership in ways that benefit individuals, organizations, and society. Alongside the acquisition of knowledge and skills, identity workspaces facilitate the revision and consolidation of individual and collective identities. They personalize and contextualize participants’ learning, inviting them to wrestle with the questions “What does leading mean to us?” and “Who am I as a leader?” Attention to both activity and identity deepens and accelerates the development of individual leaders and strengthens leadership communities within and across organizations. I describe the conceptual foundations, learning processes, design principles, and professional competences that enable leadership programs to function as identity workspaces. Designing such programs, however, takes more than adopting the methods described here. It calls for revisiting the role of leadership developers as professionals and demands of us the same mindfulness, curiosity, courage, integrity, and social responsibility that we invite leaders to demonstrate.
KHAYAT Nadine, FALCAO Horacio
Polygon Hotel in Dubai: Challenges of Cross-Cultural Negotiations
© 2011 INSEAD Case Study

This case discusses the sale of a hotel in Dubai by an international western company to a local Arab group. Polygon Hotel Group hopes to sell the newly constructed building and then manage it as one of the properties in its chain, but it has little time, almost no cash in a market downturn, and only one bidder - Al-Shari. After many moves by Al-Shari to squeeze a better deal (which could be interpreted as cultural misunderstandings), a new company, Al-Badeel, trumps the Al-Shari offer. Now, Polygon has a BATNA and Al-Shari may lose a great deal, but there is more than power and culture at issue.

Pedagogical Objectives: The fact that it is culture does not make it right - or wrong! The Polygon case aims to understand the negotiation dynamics as well as the influence of culture. The case sheds light on negotiation tactics as a lens to better understand cultural aspects, which aspects help or hurt win-win negotiations and to help participants understand how to negotiate culture.
COOL Karel, ZEMSKY Peter, BUTLER Charlotte
Pfizer and the Distribution of Pharmaceuticals in Europe in 2009
© 2011 INSEAD Case Study

Faced with increasing parallel imports, Pfizer in Europe decides to change its drug distribution strategy. It introduces a 'Direct to Pharmacy' scheme whereby distributors become mere logistics companies. Pfizer also introduces 'dual pricing' to force wholesalers to sell the drugs in the targeted country. The background is a pharmaceutical industry supply chain where prices and profits are under pressure from parallel imports by wholsalers that undermine drug prices in high-price countries.

Pedagogical Objectives: The case illustrates the use of distribution strategy to capture value and set prices. It shows how profit pressure in the supply chain (the pharmaceutical industry and the wholesalers) influences the value capture strategies of the key players, how various tactics may be used to enforce different prices in different countries, and how vertical integration may be used to set prices. It also illustrates how cost and profit pressures lead to industry restructuring, and the role of industry leadership.
COOL Karel, PARANIKAS Petros, COOL Thomas
iPad vs. Kindle: eBooks in the U.S. in 2010
© 2011 INSEAD Case Study

This case chronicles the development of the market for electronic books – the success of Amazon’s Kindle reading device, and Apple’s April 2010 launch of the iPad for e-book reading and also for watching videos, surfing the web, etc. The broader context is the book publishing industry and how e-books and e-readers affect its dynamics. The case focuses on the strategies of Amazon, Apple, and the book publishers.

Pedagogical Objectives: The case allows a discussion of several issues: 1) How disruptive technologies can impact an industry; 2) How technology changes the vertical integration advantages and disadvantages in the supply chain, forcing all supply chain actors to rethink their strategy, and 3) The competition between a uni-dimensional technology (Kindle) and a technology bundle (iPad).
COOL Karel, PEYSER Eran
Intel and the Launch of WiMAX Wireless Broadband Technology in 2008
© 2011 INSEAD Case Study

The case deals with the battle between the two 4G wireless technologies, LTE, which has broad support in the telecommunications industry, and WiMax, sponsored by a consortium headed by Intel. It describes how Intel successfully spearheaded the introduction of WiFi to launch its Centrino processor and how it sought to repeat the same strategy with WiMax to launch the Centrino 2. Intel finds much of the telecom industry lukewarm towards its plan as they favour LTE, but decides to launch WiMax anyway. The case ends in 2008 when the first WiMax initiatives in the US become operational.

Pedagogical Objectives: The case allows a discussion of technology convergence, in this case between two wireless technologies, one sponsored by the telecommunications industry, the other by the computer industry. It illustrates the strategies and tactics for launching new technologies that affect two competitng supply chains, and the importance of power (coalitions) in the supply chain to foster technology adoption. It also nicely illustrates the strategy of vertical integration to jumpstart or block technology adoption.
COOL Karel, ANGOULVANT Christophe, De CLARA Laurent
Axa and the Non-Life Insurance Industry in Europe in 2010
© 2011 INSEAD Case Study

The case describes the challenges of AXA in the non-life insurance industry in Europe in 2010 in the wake of the global economic crisis. It provides an overview of the non-life insurance industry, describes the new competitive landscape with the many new arrivals such as Admiral, and the challenges and opportunities created by the internet for established players and new entrants. The case chronicles the growth and actions of AXA, and the strategic issues that CEO de Castries must address in his third mandate at the helm of AXA.

Pedagogical Objectives: The case is a "general competitive strategy" case that allows students to make a complete and detailed strategy analysis, including a study of market (segmentation) dynamics, industry and supply chain economics, option analysis, financial analysis and strategy formulation. The insurance setting allows students to apply the strategy models to a "financial services" setting. There is a particular focus on the economics of the insurance industry, supply chain dynamics and vertical integration.

Wednesday, February 16, 2011

SCHORNICK Astrid V.
The Role of Bond Markets when Portfolio Choice is Constrained
INSEAD Working Paper 2011/26/FIN

In a dynamic equilibrium setting with multiple assets, this paper shows that restricting investors’ leverage can lead to rising interest rates. When investment opportunities are good and investors have access to international bond markets, a constraint will cause them to shift their loans more heavily into one country, putting upwards pressure on interest rates. They choose to sacrifice diversification to gain more risk exposure, taking advantage of foreign bond markets’ exposure to currency risk. The resulting pressure on interest rate differentials is also reflected in exchange rates. Even in the benchmark unconstrained economy, carry trades are profitable due to a currency risk premium. But the distortion that a constraint imposes on investors’ portfolios induces a negative skew in exchange rates: as countries’ economic risks are more unevenly shared among investors, exchange rate volatility rises while its expected rate of appreciation falls.
Self-Signaling and the Costs and Benefits of Temptation in Consumer Choice, Journal of Marketing Research 49, 1 (2012) 15-25

The literature on consumer self-control emphasizes that temptation is costly and focuses on the costs of resisting temptation. We propose that temptation can entail not only costs but also benefits. These arise from self-signaling effects of how consumers handle tempting choice options. Succumbing to temptation is a (costly) self-signal of weak willpower, whereas resisting temptation is a (beneficial) self-signal of strong willpower. In a series of five experiments, we demonstrate that these self-signaling costs and benefits of temptation depend not only on the chosen item but also on the temptation from the other options in the choice set. We discuss theoretical implications of our findings for research on impulsive choice and self-control and on self-signaling and managerial implications for pricing and assortment strategies.

Tuesday, February 15, 2011

HIBON Michele
Prediction Distributions and the Forecasting Competition on Transportation Data
International Journal of Forecasting Forthcoming
SMITH N. Craig, ANSETT Sean, EREZ Lior
What's at Stake? Stakeholder Engagement Strategy as the Key to Sustainable Growth
INSEAD Working Paper 2011/25/AL/ISIC

Charges of labor rights abuses and environmental harm are increasingly common for major brands sourcing in today’s globally expanded supply chains, often presenting major reputational risks at minimum. However, the standard response of attempting to police supply chains by emphasizing compliance standards is often unlikely to be a sufficient or effective long-term solution. Apparel retailer Gap Inc. went from a typical compliance-oriented approach to develop instead a genuine, comprehensive and much more effective stakeholder engagement strategy. Developing strategic stakeholder engagement involves five key steps: 1) stakeholder mapping to get internal engagement; 2) identifying the material issues; 3) defining objectives; 4) resolving issues collaboratively; and 5) embedding engagement. Our research with Gap Inc. management and its external stakeholders shows how this approach proved to be more effective by contrasting two comparable child labor incidents in the company’s supply chain. However, it took time to develop and required a different mindset, including a shift from risk aversion to partnership, from “quick fixes” to sustainable solutions, and an expanded conception of supply chain responsibility going beyond attention to first tier suppliers. As well as solving if not averting problems in the supply chain (and elsewhere), strategic stakeholder engagement helps management see the future, facilitates trust, and can improve the company’s public image. More fundamentally, it provides a deeper understanding of a company’s obligations to its stakeholders and thus is consistent with authentic commitment to corporate social responsibility.
ZHANG Kaifu, EVGENIOU Theodoros, PADMANABHAN V. (Paddy), RICHARD Emile
Content Contributor Management and Network Effects in a UGC Environment
INSEAD Working Paper 2011/11/DS/MKT

The success of any User-Generated Content (UGC) website depends crucially on its asset of content contributors. How firms should invest in the acquisition and retention of content contributors represents a novel question that is particularly important for these websites. We develop a vector autoregressive (VAR) model to measure the financial values of the retention and acquisition of both content contributors and content consumers. In our empirical application to a C2C marketplace, we find that contributor (seller) acquisition has the largest financial value due to their strong network effects on content consumers (buyers) and other content contributors. However, the wear-in of contributors’ financial values takes longer since the network effects take time to be fully realized. Our simulation-based studies (i) shed light on the value implications of ‘enhancing network effects’, and, (ii) quantify the revenue contributions of marketing newsletter campaigns. Our results indicate enhancing network effects in complementary ways can further increase the marginal benefits of acquisition and retention. We also find that simply tracking click-throughs may vastly underestimate the values of marketing newsletters, in our case by more than a factor of five, which may lead to suboptimal marketing effort allocations.

Monday, February 14, 2011

SMITH N. Craig, ANSETT Sean, EREZ Lior
What's at Stake? Stakeholder Engagement Strategy as the Key to Sustainable Growth
INSEAD Working Paper 2011/25/AL/ISIC

Charges of labor rights abuses and environmental harm are increasingly common for major brands sourcing in today’s globally expanded supply chains, often presenting major reputational risks at minimum. However, the standard response of attempting to police supply chains by emphasizing compliance standards is often unlikely to be a sufficient or effective long-term solution. Apparel retailer Gap Inc. went from a typical compliance-oriented approach to develop instead a genuine, comprehensive and much more effective stakeholder engagement strategy. Developing strategic stakeholder engagement involves five key steps: 1) stakeholder mapping to get internal engagement; 2) identifying the material issues; 3) defining objectives; 4) resolving issues collaboratively; and 5) embedding engagement. Our research with Gap Inc. management and its external stakeholders shows how this approach proved to be more effective by contrasting two comparable child labor incidents in the company’s supply chain. However, it took time to develop and required a different mindset, including a shift from risk aversion to partnership, from “quick fixes” to sustainable solutions, and an expanded conception of supply chain responsibility going beyond attention to first tier suppliers. As well as solving if not averting problems in the supply chain (and elsewhere), strategic stakeholder engagement helps management see the future, facilitates trust, and can improve the company’s public image. More fundamentally, it provides a deeper understanding of a company’s obligations to its stakeholders and thus is consistent with authentic commitment to corporate social responsibility.
KIMMEL Allan J., SMITH N. Craig, KLEIN Jill
Ethical Decision Making and Research Deception in the Behavioral Sciences: An Application of Social Contract Theory Ethics & Behavior 21, 3 (2011) 222-251

Despite significant ethical advances in recent years, including professional developments in ethical review and codification, research deception continues to be a pervasive practice and contentious focus of debate in the behavioral sciences. Given the disciplines’ generally-stated ethical standards regarding the use of deceptive procedures, researchers have little practical guidance as to their ethical acceptability in specific research contexts. We use social contract theory to identify the conditions under which deception may or may not be morally permissible, and formulate practical recommendations to guide researchers on the ethical employment of deception in behavioral science research.

Friday, February 11, 2011

GUILLEN Laura, FLORENT-TREACY Elizabeth
INSEAD Working Paper 2011/23/IGLC

Leadership effectiveness can be divided into two broad categories that include ‘getting along’ behaviours (teamwork and empowerment of others) and/or ‘getting ahead’ behaviours (visioning, energizing, designing and rewarding). This study examines the effects of emotional intelligence on getting along and getting ahead leadership behaviours at work. Results from an analysis of a dataset derived from a 360° leadership behaviour survey completed by 929 managers indicated that emotional intelligence had a significant effect on collaborative behaviours at work, and that collaborative behaviours directly affected the inspirational side of leadership performance. Further, getting along behaviours were found to fully mediate the relationship between emotional intelligence and getting ahead behaviours. Theoretical and practical implications are discussed.

Thursday, February 10, 2011

Early Words that Work: When and how Virtual Linguistic Mimicry Facilitates Negotiation Outcomes Journal of Experimental Social Psychology 47 (2011), 616-621

We hypothesized that in online, virtual formats, negotiators receive better outcomes when mimicking their counterpart's language; furthermore, we predicted that this strategy would be more effective when occurring early in the negotiation rather than at the end, and should also be effective across both independent and interdependent cultures. Results from two experiments supported these hypotheses. Experiment 1 was conducted in Thailand and demonstrated that negotiators who actively mimicked their counterpart's language in the first 10 min of the negotiation obtained higher individual gain compared to those mimicking during the last 10 min, as well as compared to control participants. Experiment 2 replicated this effect in the United States (with Dutch and American negotiators) and also showed that trust mediated the effect of virtual linguistic mimicry on individual negotiation outcomes. Implications for virtual communication, strategic mimicry, and negotiations are discussed.

Wednesday, February 9, 2011

CHANDON Pierre, SMITH Ronn J., MORWITZ Vicki, SPANGENBERG Eric R., SPROTT David E.
When Does the Past Repeat Itself? The Interplay of Behavior Prediction and Personal Norms Journal of Consumer Research 38, 3 (2011) 420-430

Does asking people about their future behaviour increase or decrease the likelihood that they will repeat their past behaviour? In two laboratory and two field experiments, we find that behaviour prediction strengthens behaviour repetition, making people more likely to do what they normally do when personal norms regarding engaging in a behaviour are weak or not easily accessible. However, when personal norms are strong or made accessible at the time of the prediction request, behaviour prediction weakens behaviour repetition and increases the likelihood that people do what they think they should do – even if it’s not what they normally would do. These findings provide new tools for influencing behaviour repetition, reconcile some seemingly contradictory past findings, and contribute to the debate regarding the relative importance of habits and intentions in guiding behaviour.
ZHANG Kaifu, EVGENIOU Theodoros, PADMANABHAN V. (Paddy), RICHARD Emile

The success of any user-generated content (UGC) website depends crucially on its content contributors. How firms should invest in the acquisition and retention of content contributors represents a novel question that is particularly important for these websites. We develop a vector autoregressive (VAR) model to measure the financial values of the retention and acquisition of both content contributors and content consumers. In our empirical application to a C2C marketplace, we find that contributor (seller) acquisition has the largest financial value due to their strong network effects on content consumers (buyers) and other content contributors. However, the wearing-in of contributors’ financial values takes longer since the network effects take time to be fully realized. Our simulation-based studies (i) shed light on the value implications of ‘enhancing network effects’, and (ii) quantify the revenue contributions of marketing newsletter campaigns. Our results indicate that enhancing network effects in complementary ways can further increase the marginal benefits of acquisition and retention. We also find that simply tracking click-throughs may vastly underestimate the values of marketing newsletters, in our case by more than a factor of five, which may lead to suboptimal marketing effort allocations.

The Captains of Lives: Transformation Journey of Singapore Prison Service ( parts A and B)
© 2011 INSEAD Case Study
Also available: Teaching Note

In the late 1990s, faced with a number of burning management issues, a growing inmate population, and a problem of officer recruitment, the director of the Singapore Prison Service implemented a thorough transformation process, developing a new paradigm for modern prison management which impacted the whole of Singaporean society. Case A describes the brave decisions and innovative ideas championed by the directorate, inviting students to slip into the role of senior management and discuss the pros and cons of a key management decision without knowing the outcome (Case B).

Pedagogical Objectives: "Captains of Lives" charts the issues and stages that typically arise in change management and the transformation of public and private organizations: analysis of the organisation in need of change, changing the paradigm through a visioning process, networking to secure key stakeholder support, motivating staff to get involved, and maintaining business excellence. Focusing on the "tipping point" when faced with a setback at a critical point, it seeks to show how leaders have to be dedicated to the change process, and, subsequently, how best to follow a period of organisational transformation.

WITT Michael A.
China Modernizes: Threat to the West or Model for the Rest? (Review of Randall Peerenboom's book). Asian Business and Management. Forthcoming.


WITT Michael A., REDDING Gordon
Chinese Business Systems and the Challenges of Transition in China's Changing Workplace: Dynamism, Diversity and Disparity. Peter Sheldon, Malcolm Warner, Yiqiong Li and Sunghoon Kim. (eds.) Routledge (2011)








WITT Michael A.,
Singapore in Global Perspectives on Corporate Governance and Initial Public Offerings. William Judge and Alessandro Zattoni. (eds.) Cambridge University Press. Forthcoming.
WITT Michael A. (Editor)
Asian Business and Management (eight volume set in the SAGE Library in Business and Management), Sage (2012) 2496

Much of our existing knowledge about business and management has evolved in the West, but the emergence of Asian firms as major players in the world economy is challenging business and management scholars to widen their focus. Asia represents a major source of variations in structure, behavior and context – from cultural, institutional and political to social and economic. This affords new opportunities for testing existing theories of business and management and for driving the development of new ones. Japan has already provided a precedent for this, with much of the current state of the art in technology and operations management resting on Japanese management foundations. This major work presents a collection of seminal works on Asian business and management, carefully chosen by the editor on the basis of impact and expert nominations. The set consolidates key contributions from diverse sources and organizes articles by themes to enable better understanding of key areas. The editor’s introduction reviews the included articles and identifies major streams of research within each theme.
ABDELLAOUI Mohammed, DIECIDUE Enrico, ONCULER Ayse
Risk Preferences at Different Time Periods: An Experimental Investigation. Management Science 57, 5 (2011) 975-987

Intertemporal decision making under risk involves two dimensions: time preferences and risk preferences. This paper focuses on the impact of time on risk preferences, independent of the intertemporal trade-off of outcomes, i.e., time preferences. It reports the results of an experimental study that examines how delayed resolution and payment of risky options influence individual choice. We used a simple experimental design based on the comparison of two-outcome monetary lotteries with the same delay. Raw data clearly reveal that subjects become more risk tolerant for delayed lotteries. Assuming a prospect theory–like model under risk, we analyze the impact of time on utility and decision weights, independent of time preferences. We show that the subjective treatment of outcomes (i.e., utility) is not significantly affected by time. In fact, the impact of time is completely absorbed by the probability weighting function. The effect of time on risk preferences was found to generate probabilistic optimism resulting in a higher risk tolerance for delayed lotteries.
ZHANG Kaifu; EVGENIOU Theodoros; PADMANABHAN V. (Paddy); RICHARD Emile
Content Contributor Management and Network Effects in a UGC Environment. Marketing Science. Forthcoming.

The success of any User-Generated Content (UGC) website depends crucially on its asset of content contributors. How firms should invest in the acquisition and retention of content contributors represents a novel question that is particularly important for these websites. We develop a vector autoregressive (VAR) model to measure the financial values of the retention and acquisition of both content contributors and content consumers. In our empirical application to a C2C marketplace, we find that contributor (seller) acquisition has the largest financial value due to their strong network effects on content consumers (buyers) and other content contributors. However, the wear-in of contributors' financial values takes longer since the network effects take time to be fully realized. Our simulation-based studies (i) shed light on the value implications of "enhancing network effects", and, (ii) quantify the revenue contributions of marketing newsletter campaigns. Our results indicate enhancing network effects in complementary ways can further increase the marginal benefits of acquisition and retention. We also find that simply tracking click-throughs may vastly underestimate the values of marketing newsletters, in our case by more than a factor of five, which may lead to suboptimal marketing effort allocations.

PETRIGLIERI Gianpiero
Identity Workspaces for Leadership Development in The Handbook for Teaching Leadership: Knowing, Doing, and Being  S. Snook, R. Khurana, N. Nohria (Eds.) Sage, (2012)

Profound changes in individuals’ relationship with their employers and expectations for their work lives have generated an increasing demand for leadership development, while at the same time exposing the limitations of traditional leadership programs focused on the acquisition of conceptual knowledge and requisite skills. This chapter explores how conceptualizing leadership programs as “identity workspaces” helps to meet the demand for leadership in ways that benefit individuals, organizations, and society. Alongside the acquisition of knowledge and skills, identity workspaces facilitate the revision and consolidation of individual and collective identities. They personalize and contextualize participants’ learning, inviting them to wrestle with the questions “What does leading mean to us?” and “Who am I as a leader?” Attention to both activity and identity deepens and accelerates the development of individual leaders and strengthens leadership communities within and across organizations. I describe the conceptual foundations, learning processes, design principles, and professional competences that enable leadership programs to function as identity workspaces. Designing such programs, however, takes more than adopting the methods described here. It calls for revisiting the role of leadership developers as professionals and demands of us the same mindfulness, curiosity, courage, integrity, and social responsibility that we invite leaders to demonstrate.

Monday, February 7, 2011

SWELDENS Steven
Highly Commended Award winner
2010 Emerald/EFMD Outstanding Doctoral Research Award
Marketing Research Category
"Evaluative Conditioning 2.0: Direct versus Associative Transfer of Affect to Brands"
PERESS Joel
Winner of 2010 Smith Breeden Prize (Distinguished Paper)
Journal of Finance
"Product Market Competition, Insider Trading and Stock Market Efficiency"
PETRIGLIERI Gianpiero
Identity Workspaces for Leadership Development
INSEAD Working Paper 2011/22/OB

Profound changes in individuals’ relationship with their employers and expectations for their work lives have generated an increasing demand for leadership development, while at the same time exposing the limitations of traditional leadership programs focused on the acquisition of conceptual knowledge and requisite skills. This chapter explores how conceptualizing leadership programs as “identity workspaces” helps to meet the demand for leadership in ways that benefit individuals, organizations, and society. Alongside the acquisition of knowledge and skills, identity workspaces facilitate the revision and consolidation of individual and collective identities. They personalize and contextualize participants’ learning, inviting them to wrestle with the questions “What does leading mean to us?” and “Who am I as a leader?” Attention to both activity and identity deepens and accelerates the development of individual leaders and strengthens leadership communities within and across organizations. I describe the conceptual foundations, learning processes, design principles, and professional competences that enable leadership programs to function as identity workspaces. Designing such programs, however, takes more than adopting the methods described here. It calls for revisiting the role of leadership developers as professionals and demands of us the same mindfulness, curiosity, courage, integrity, and social responsibility that we invite leaders to demonstrate.



Friday, February 4, 2011



INSEAD Working Paper 2011/21/OB/DS

Previous researchers have documented a negative correlation between anxiety and risk preferences. We propose that culture, and in particular relational mobility, moderates this relationship. Relational mobility is the degree to which individuals have opportunities to voluntarily form new and terminate old relationships. Across three studies, we found that among low relational mobility participants (e.g. for whom few opportunities for movement exist), greater anxiety was related to less risk taking. For high relational mobility participants (e.g. for whom multiple opportunities to sever old and form new ties exist), the anxiety-risk relationship was less negative and at times reversed. These moderating effects were observed for self-reported intentions to take risks, for the perceived benefits of risk-taking, for perceptions of the likelihood of future events, for actual risk-taking behaviours that had financial consequences for the participants, when anxiety and risk were assessed together, and when those measures were separated by over a week. These findings add a cultural component to our growing understanding of the complex relationship between emotions and risk.


INSEAD Working Paper 2011/17/DS/OB

One of the biggest sources of diversity in the way people experience, interpret and react to the world is their personality. A substantial literature has concluded that much of the observed variability in personality can be captured by five broad factors (Digman, 1990), which are now often referred to as the Big Five. Since people with different personality types tend to process information differently (Humphreys & Revelle, 1984), we hypothesized that aggregating the judgments of pairs of individuals on the basis of the diversity of their personality profiles would affect the accuracy of the aggregate judgments. Specifically, if members of high (personality) diversity pairs tend to rely on more diverse sets of information when forming their judgments (compared to low diversity pairs), then one should find that their aggregate judgments are more accurate than the aggregate judgments of low diversity pairs.



We examined the relationship between maximizing (i.e. seeking the best) versus satisficing (i.e.seeking the good enough) tendencies and forecasting ability in a real-world prediction task: forecasting the outcomes of the 2010 FIFA World Cup. In Studies 1 and 2, participants gave probabilistic forecasts for the outcomes of the tournament, and also completed a measure of maximizing tendencies. We found that although maximizers expected themselves to outperform others much more than satisficers, they actually forecasted more poorly. Hence, on net, they were more overconfident. The differences in forecasting abilities seem to be driven by the maximizers’tendency to give more variable probability estimates. In Study 3, participants played a betting task where they could select between safe and uncertain gambles linked to World Cup outcomes. Again, maximizers did more poorly and earned less, because of a higher variance in their responses. This research contributes to the growing literature on maximizing tendencies by expanding the range of objective outcomes over which maximizing has an influence, and further showing that there may be substantial upside to being a satisficer.


JAIN Kriti, BEARDEN J. Neil, FILIPOWICZ Allan
Depression and Accuracy: Evidence from the 2010 FIFA World Cup
INSEAD Working Paper 2011/19/DS/OB

Before and during the 2010 Soccer World Cup, participants made probabilistic forecasts for the outcomes of the tournament. We examine the relationship between depression levels and performance in this real-world forecasting task. Across two different waves of predictions, for both continuous and categorical classifications of depression, and with multiple measures of prediction accuracy, we find that depressed forecasters were less accurate. The poorer accuracy amongst the more depressed forecasters was mediated by neglect for base-rate probabilities: The depressed participants assigned probabilities that departed more substantially from the baserates, particularly for low base-rate events. Given the high incidence of depression in the workforce, the importance of probabilistic forecasting as a judgment task, and that we may be the first to look at forecasting accuracy on an ecologically valid task with objective outcomes over which the forecaster has no control, these finding may have important implications for both theory and practice.

LAU Nelson, BEARDEN J. Neil, TSETLIN Ilia
Deadline Setting Decisions under Reciprocation Uncertainty: An Experimental Study
INSEAD Working Paper 2011/20/DS

We study the problem faced by a decision maker who must set a deadline for an offer to be accepted. There are two sources of uncertainty. First, he must estimate the probability of his offer being accepted under various deadlines. Second, he must estimate whether the recipient of an offer that is accepted will reward or punish him as a function of the deadline he set. We model the decision maker’s dilemma by embedding his decision problem in a game against another player, the responder. The responder is waiting for a better alternative, but an exploding offer must be accepted or rejected before discovering whether the better alternative will arrive. An extended offer allows the responder to first learn about the outcome of the better alternative. The responder, upon accepting the proposer’s offer, can reciprocate by altering the proposer’s payoff. In four experiments, we observe that many proposers issue exploding offers, even though this results in substantially lower payoffs. Differences in payoffs are primarily due to negative reciprocation towards exploding offers, which we term the reciprocation curse. Our analyses suggest that proposers giving exploding offers fall prey to projection bias – i.e., they issue exploding offers if they themselves would accept exploding offers. The main prescriptive conclusion for proposers is to consider explicitly the potential reciprocation curse when setting deadlines.

Thursday, February 3, 2011


One of the biggest sources of diversity in the way people experience, interpret and react to the world is their personality. A substantial literature has concluded that much of the observed variability in personality can be captured by five broad factors (Digman, 1990), which are now often referred to as the Big Five. Since people with different personality types tend to process information differently (Humphreys & Revelle, 1984), we hypothesized that aggregating the judgments of pairs of individuals on the basis of the diversity of their personality profiles would affect the accuracy of the aggregate judgments. Specifically, if members of high (personality) diversity pairs tend to rely on more diverse sets of information when forming their judgments (compared to low diversity pairs), then one should find that their aggregate judgments are more accurate than the aggregate judgments of low diversity pairs.


We examined the relationship between maximizing (i.e. seeking the best) versus satisficing (i.e.seeking the good enough) tendencies and forecasting ability in a real-world prediction task: forecasting the outcomes of the 2010 FIFA World Cup. In Studies 1 and 2, participants gave probabilistic forecasts for the outcomes of the tournament, and also completed a measure of maximizing tendencies. We found that although maximizers expected themselves to outperform others much more than satisficers, they actually forecasted more poorly. Hence, on net, they were more overconfident. The differences in forecasting abilities seem to be driven by the maximizers’tendency to give more variable probability estimates. In Study 3, participants played a betting task where they could select between safe and uncertain gambles linked to World Cup outcomes. Again, maximizers did more poorly and earned less, because of a higher variance in their responses. This research contributes to the growing literature on maximizing tendencies by expanding the range of objective outcomes over which maximizing has an influence, and further showing that there may be substantial upside to being a satisficer.

JAIN Kriti, BEARDEN J. Neil, FILIPOWICZ Allan
Depression and Accuracy: Evidence from the 2010 FIFA World Cup
INSEAD Working Paper 2011/19/DS/OB

Before and during the 2010 Soccer World Cup, participants made probabilistic forecasts for the outcomes of the tournament. We examine the relationship between depression levels and performance in this real-world forecasting task. Across two different waves of predictions, for both continuous and categorical classifications of depression, and with multiple measures of prediction accuracy, we find that depressed forecasters were less accurate. The poorer accuracy amongst the more depressed forecasters was mediated by neglect for base-rate probabilities: The depressed participants assigned probabilities that departed more substantially from the baserates, particularly for low base-rate events. Given the high incidence of depression in the workforce, the importance of probabilistic forecasting as a judgment task, and that we may be the first to look at forecasting accuracy on an ecologically valid task with objective outcomes over which the forecaster has no control, these finding may have important implications for both theory and practice.

LAU Nelson, BEARDEN J. Neil, TSETLIN Ilia
Deadline Setting Decisions under Reciprocation Uncertainty: An Experimental Study
INSEAD Working Paper 2011/20/DS

We study the problem faced by a decision maker who must set a deadline for an offer to be accepted. There are two sources of uncertainty. First, he must estimate the probability of his offer being accepted under various deadlines. Second, he must estimate whether the recipient of an offer that is accepted will reward or punish him as a function of the deadline he set. We model the decision maker’s dilemma by embedding his decision problem in a game against another player, the responder. The responder is waiting for a better alternative, but an exploding offer must be accepted or rejected before discovering whether the better alternative will arrive. An extended offer allows the responder to first learn about the outcome of the better alternative. The responder, upon accepting the proposer’s offer, can reciprocate by altering the proposer’s payoff. In four experiments, we observe that many proposers issue exploding offers, even though this results in substantially lower payoffs. Differences in payoffs are primarily due to negative reciprocation towards exploding offers, which we term the reciprocation curse. Our analyses suggest that proposers giving exploding offers fall prey to projection bias – i.e., they issue exploding offers if they themselves would accept exploding offers. The main prescriptive conclusion for proposers is to consider explicitly the potential reciprocation curse when setting deadlines.

BEARDEN J. Neil, FILIPOWICZ Allan
Anxiety, Risk and Culture: Relational Mobility Moderates the Influence of Anxiety on Risk-taking
INSEAD Working Paper 2011/21/OB/DS

Previous researchers have documented a negative correlation between anxiety and risk preferences. We propose that culture, and in particular relational mobility, moderates this relationship. Relational mobility is the degree to which individuals have opportunities to voluntarily form new and terminate old relationships. Across three studies, we found that for low relational mobility participants (e.g. for whom few opportunities for movement exist), more anxiety was related to less risk taking. For high relational mobility participants (e.g. for whom multiple opportunities to sever old and form new ties exist), the anxiety - risk relationship was less negative and at times reversed. These moderating effects were observed for self-reported intentions to take risks, for perceived benefits of risk-taking, for perceptions of the likelihood of future events, for actual risk taking behaviors that had financial consequences for the participants, when anxiety and risk were assessed together, and when those measures were separated by over a week. These findings add a cultural component to our growing understanding of the complex relationship between emotions and risk.
RONNEGARD David
The Legal Ontology of the Corporation as a Description of its Goal, and its Role in Society
INSEAD Working Paper 2011/16/ISIC Revised version of 2009/09/ISIC

The purpose of the corporation in society has been an issue of contention ever since the Berle-Dodd debate in the 1930’s and still resonates as part of the “basic-debate” in the field of business ethics today. Prescriptions about the purpose of the corporation (such as Stakeholder Theory) should be argued in relation to a robust description of the purpose that the corporation actually has so that we know what change is being argued for. This paper provides a description of the purpose of the corporation in society through an analysis of four primary attributes of the corporate legal form. These are the shareholder primacy norm; that the corporation is a separate legal entity from the shareholders; the transferability of corporate shares; and the limited liability of shareholders. The paper explicates these legal attributes and describes their development in the UK and the US. The economic function of these attributes is then analysed in the context of the industrial revolution when they arose. It is maintained as a point of description that the purpose of the corporation in society is to serve as a legal vehicle for production and economic growth. A consequence of regarding the purpose of the corporation in terms of its legal attributes is that its purpose can be changed by augmenting the corporate legal form.
PLASSMANN Hilke, ZOEGA RAMSOY Thomas, MILOSAVLJEVIC Milica
Branding the Brain - A Critical Review
INSEAD Working Paper 2011/15/MKT

The application of neuroscience to marketing has gained increasing popularity over the last decade in the academic as well as the corporate world. In this paper we critically reflect whether and if yes how consumer behavior and market research might benefit from neuroscience. In particular, we aim at giving an overview of why researchers and practitioners alike are excited about applying neuroscience to marketing questions, and what the current state of the art in academic and company-driven research in this area is. To do so, we propose a framework of different value signals that are important for consumer decision-making and give an overview what we know about their neural representation. We point out directions for future research, highlight caveats of current academic and corporate efforts in this area and conclude with the future potential of research at the intersection of cognitive neuroscience and marketing.