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Social norms and social preferences

12 important questions on Social norms and social preferences

How are decisions affected by the presence of other humans?

  • Social norms
  • Social preferences
  • Trust and cooperation
  • Competition
  • In-group favoritism
  • Achievement and target setting

According to Bicchieri (2006), people prefer to do what they do for four reasons. Which are they?

1. Because they believe it meets a need.
2. Because they believe it is the right/moral thing to do
3. Because they believe other people are doing it
4. Because they believe others think they should do it

What types of social norms are there?

  • Descriptive norms: how people in a group actually behave
  • Injunctive norms: how people in a group should behave
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Why is it a particular concern in professions such as accounting that sometimes different norms may be present simultaneously?

It could be that the company has an aggressive style of making profit which is contrary to the standards of the internal auditor.

What types of social preferences are there?

  • Fairness
  • Reciprocity: if someone does something for you, you then feel obligated to return the favor.

What is the NIH syndrome?

Not-invented-here syndrome (NIH) can be defined by a tendency for people and organizations to avoid things that they didn't create themselves. NIH is often the result of pride that makes an organization believe that they can solve a problem in a better way than pre-existing solutions already do.

What is the goal setting theory?

Specific challenges motivate more than do-your-best goals

What is/are the judgment(s) or decision(s) that are studied in this paper?

The decision is the allocation of effort in a multi-task environment. A multi-task environment is one in which an employee allocates effort across either multiple dimensions of a single task or multiple tasks within a single job description. The judgments are the effects of relative performance information and how this affects employee performance.

What is/are the (normative) benchmark(s) against which the judgment(s) or decision(s) are compared?

Employees may obtain RPI via informal methods, such as by observing peers who work in close proximity or formal information systems provided by the firm. Firms commonly provide RPI to their employees.

What is relational risk?

The probability that the objectives of a collaboration will not be achieved because of lack of cooperation.

What is/are the judgment(s) or decision(s) that are studied in this paper?

The primary decision that is discussed in this paper is the judgment investors make on the decision that a company deviates from the “firm and industry norms”. They use derivatives as a measurement to indicate the behavior of investors because prior research has mostly shown that the consequences of the derivate usage increased firms value. Additionally, to further investigate the consequences, the authors post three experiments to investigate if investors have a response to the use of derivatives by looking at industry norms and firm norms.

What is/are the (normative) benchmark(s) against which the judgment(s) or decision(s) are compared?

This study has no clear normative benchmark against de judgment or decisions discussed in the study. From what I have noticed reading this paper, the paper mainly discusses the judgment and decisions regarding the usage of derivatives, and whether this decision of derivatives deviates from the “normative” of a firm or industry. With regards to this explanation, it could be that “following the norms” is the benchmark used in this study, but in my opinion, this is not a benchmark, as this is more behavioral of a manager/investor.

The question on the page originate from the summary of the following study material:

Judgment & Decision Making in Accounting

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