Neuroeconomic and Behavioral Aspects of Decision Making (eBook)

Kesra Nermend is President of Center of Knowledge and Technology Transfer, Head of the Department of Computer Methods in Experimental Economy, and Professor at Institute of IT in Management in the Faculty of Economics and Management at the University of Szczecin, Poland. He has authored and co-authored about 100 publications mainly in area of quantitative methods and tools for the analysis of economics. He is chair of Organization Committees and member of the Programme Committees of Scientific Conferences. He is also a member of the Board of Polish Information Processing Society, West-Pomeranian branch, member of the Polish Association for Knowledge Management and member of Selection of Classification and Data Analysis at the Polish Statistical Association and West Pomeranian Information Society Council. Małgorzata Łatuszyńska is Vice-Dean for student affairs in the Faculty of Economics and Management, Vice-President of the Center of Knowledge and Technology Transfer, and Head of the Department of Methods of Economic Processes Modeling and Simulation at the Institute of IT in Management at the University of Szczecin, Poland. She has authored and co-authored 170 publications mainly from the scope of simulation methods and tools for computer science in economics, management and transport. She is Chair and member of the Programme Committees of scientific conferences, member of the Board of Polish Information Processing Society, West-Pomeranian branch, member of the Board of Scientific Society of Organization and Management, West-Pomeranian branch and member of the Polish Association for Knowledge Management.

Preface 6
Contents 8
Part I: Theoretical Basis of Decision Making: Interdisciplinary Approach 11
Chapter 1: Neurobiology of Decision Making: Methodology in Decision-Making Research. Neuroanatomical and Neurobiochemical Fund... 12
1.1 Introduction 13
1.2 Methods of Research into Decision Making 14
1.3 Brain Activity and Decision Making 16
1.4 Neurobiochemistry of Decision Making 17
1.5 Neuroanatomy of Decision Making 19
1.5.1 Orbitofrontal Cortex 19
1.5.2 Dorsolateral Prefrontal Cortex 20
1.5.3 Anterior Cingulate Cortex 21
1.6 Brain Processes: People´s Behavior Prediction and Empathy vs. Decision Making 22
1.7 Neurobiology of Moral Dilemmas vs. Decision Making 23
1.8 Conclusions 24
References 25
Chapter 2: Psychological Determinants of Decision Making 28
2.1 Introduction 28
2.2 Stages of Decision Making 29
2.3 Dualism of Mental Systems in Decision Making 33
2.4 Heuristics in Decision Making 35
2.5 Decision Making Under Uncertainty 37
2.6 Decision Making and Volition 38
2.7 Consequences of Decision Making 38
2.8 Conclusions 39
References 40
Chapter 3: Emotions in Decision Making 44
3.1 Introduction 44
3.2 Classical Decision-Making Theory and New Paradigms 45
3.3 Affectivity and Decision-Making Efficiency 47
3.4 Effect of Emotions on Customer Behavior 50
3.5 Aging and Decision Making 52
3.6 Conclusions 53
References 54
Chapter 4: Application of Neuroscience in Management 57
4.1 Neurosciences 57
4.1.1 Neurology 59
4.1.2 Neurobiology 59
4.1.3 Neurochemistry 59
4.1.4 Neurophysiology 59
4.1.5 Neuropsychology 59
4.1.6 Neuropsychotherapy 60
4.1.7 Cognitive Neuroscience 60
4.2 Neurosciences, Neoevolutionsim Paradigm and Management 60
4.3 The Methodology of the Social Sciences 64
4.3.1 Brain Imaging 65
4.3.2 Single-Neuron Measurement 65
4.3.3 Electrical Brain Stimulation (EBS) 65
4.3.4 Brain Damage in Humans and Psychopathology 66
4.4 Neoevolutionary Methods in Management 66
4.5 Conclusions 69
References 69
Chapter 5: Neuroeconomics: Genesis and Essence 71
5.1 Introduction 71
5.2 Milestones Toward the Creation of Neuroscience 72
5.3 The Essence of Neuroeconomics 76
5.4 Areas of Neuroeconomics Research 78
5.5 Conclusions 81
References 82
Chapter 6: Measuring Economic Propensities 84
6.1 Introduction 84
6.2 Propensity Theories 85
6.3 Two General Measures of Propensity 87
6.4 Measures of Propensity to Consume, Save, Invest and Money Storing 88
6.5 Empirical Results 90
6.6 Conclusions 94
Appendix 1 Questionnaire 94
References 96
Chapter 7: Convolutional Representation in Brain Simulation to Store and Analyze Information About the Surrounding Environment... 98
7.1 Introduction 98
7.2 Convolutional Representation Numbers in Data on Objects Storing 100
7.3 Simulation of Environment Tracking 107
7.4 Conclusions 111
References 111
Part II: Behavioral Aspects of Economic Decision Making 113
Chapter 8: Identification of Heuristics in the Process of Decision Making on Financial Markets 114
8.1 Introduction 114
8.2 Rationality and Irrationality in Finance 115
8.3 Foundations of Experiments in Finance 117
8.4 Anomalies, Biases and Heuristics 119
8.5 Statistical Analysis in Behavioral Finance 121
8.5.1 General Remarks 121
8.5.2 Structural Equations Models 122
8.5.3 Empirical Analysis in Behavioral Finance 129
8.6 Conclusions 130
References 131
Chapter 9: The Impact of Behavioral Factors on Decisions Made by Individual Investors on the Capital Markets 135
9.1 Introduction 136
9.2 Using Structural Equation Models in Behavioral Finance: An Overview 136
9.3 Methodology 137
9.3.1 Structural Equation Model 137
9.3.2 Measures of SEM Model Fit 138
9.3.3 Bootstrap Procedure 140
9.4 Individual Investors on the Polish Capital Market 141
9.4.1 Questionnaire 141
9.4.2 The Survey 142
9.4.3 Data Analysis 145
9.5 Model Solution and Empirical Implications 147
9.5.1 A Model of Psychological Mechanisms of Investment Behaviors 147
9.5.2 Do the Behavioral Factors Have a Significant Impact on Investors´ Decisions on the Capital Market? Results of Analysis 149
9.6 Conclusions 159
References 160
Chapter 10: Efficiency of Investment with the Use of Fundamental Power Aspects 162
10.1 Introduction 163
10.2 Portfolio Analysis 163
10.2.1 The Classic Markowitz Model 164
10.3 Fundamental Criterion of Constructing a Securities Portfolio 167
10.4 Fundamental Portfolio Construction Procedure Based on the TMAI 171
10.5 Conclusions 175
References 175
Chapter 11: Investors Decisions in the Light of Exploitable Predictable Irrationality Effect on Warsaw Stock Exchange: The Cas... 177
11.1 Introduction 177
11.2 Measuring Effects of Sport Events on Stock Exchanges 178
11.3 Data and the Methodology of the Research 181
11.4 Empirical Results 183
11.5 Conclusions 185
References 186
Chapter 12: Behavioral Aspects of Performance Measurement Systems in Enterprises 187
12.1 Introduction 187
12.2 Behavioral Theories in Development of Strategic Performance Management 188
12.3 Performance Measurement System in a Company´s Strategic Management 191
12.4 Designing a Performance Measurement System as an Efficient Way to Influence Human Behavior 193
12.5 The Impact of Performance Measurement Systems on Human Behavior and Organizational Capabilities 197
12.6 Conclusions 200
References 200
Chapter 13: The Impact of Behavioral Factors on the Decisive Usefulness of Accounting Information 203
13.1 Introduction 204
13.2 The Impact of Behavioral Factors on Information from Financial and Management Accounting 205
13.3 The Overview of Behavioral Factors Influencing the Decision Makers on the Basis of Accounting Information 209
13.4 Conclusions 213
References 213
Chapter 14: The Selected Problems of Behavioral Accounting: The Issue of Intellectual Capital 216
14.1 Introduction 216
14.2 Challenges of the Contemporary Accounting in the Age of the Knowledge-Based Economy 217
14.3 Behavioral Aspects of Accounting as an Information System 218
14.4 Behavioral Aspects of Intellectual Capital Reporting 220
14.5 Conclusions 223
References 224
Chapter 15: The Impact of Information Usefulness of E-Commerce Services on Users Behaviors 226
15.1 Introduction 226
15.2 Information Usefulness 227
15.3 Information Quality Aspects 230
15.4 The Research Assumptions of Information Usefulness Evaluation 231
15.5 Evaluation Methodology of Information Usefulness in On-line Shopping Sites 233
15.6 Conclusions 240
References 241
Chapter 16: System Dynamics Modeling in Behavioral Decision Making 244
16.1 Introduction 244
16.2 The Essence of System Dynamics 245
16.3 Applications of SD as a Behavioral Simulation Method 247
16.4 Conclusions 249
References 251
Chapter 17: Prediction of Decision Outcome via Observation of Brain Activity Signals During Decision-Making Process 255
17.1 Introduction 256
17.2 Cognitive Neuroscience Techniques in Managerial Decisions 257
17.3 Experiment Design 258
17.4 EEG Data Pre-processing 260
17.5 Feature Extraction 262
17.6 Features Classification and Results 263
17.7 Experiment Results and Discussion 265
17.8 Conclusions 267
References 267
Part III: Practical Issues: Case Studies 270
Chapter 18: Validation of EEG as an Advertising Research Method: Relation Between EEG Reaction Toward Advertising and Attitude... 271
18.1 Introduction 272
18.2 Tools and Measures Used in Consumer Neuroscience 273
18.2.1 Psychophysiological Measures 274
18.2.2 Electroencephalography 275
18.2.3 Functional Magnetic Resonance Imaging 275
18.3 Research Fields in Consumer Neuroscience 276
18.3.1 Decision Making and Reward Processing 276
18.3.2 Attention and Memory 277
18.3.3 Emotions and Motivation 277
18.4 Consumer Neuroscience in Practice 278
18.4.1 Neuromarketing-a Passing Fashion Or the Future of Market Research? 278
18.4.2 Applied Consumer Neuroscience-Neurophysiology in Marketing Research Practice 279
18.5 Research Goal 280
18.6 The Relation Between EEG (Frontal Asymmetry) and Attitude Toward an Advertised Object 281
18.6.1 Study 1-EEG Reaction Toward Political Candidates in Relation to Political Preferences and Level of Tolerance 281
18.6.1.1 Participants and Stimuli 281
18.6.1.2 Electrophysiological Recording and Data Preparation 282
18.6.1.3 Results 283
18.6.2 Study 2-EEG Reaction Toward Social Advertising Referring to Homosexuality in Relation to Attitudes Toward Homosexuality 283
18.6.2.1 Participants and Stimuli 284
18.6.2.2 Electrophysiological Recording and Data Analysis 284
18.6.2.3 Results 285
18.7 Conclusions 285
References 286
Chapter 19: Assessing Cerebral and Emotional Activity During the Purchase of Fruit and Vegetable Products in the Supermarkets 290
19.1 Introduction 291
19.2 Methodology and Sample 292
19.3 Results 294
19.3.1 The Department ``Emotions´´ 294
19.3.2 Emotion Does Not Remember, but Pays 296
19.3.3 ``Global´´ or ``Local´´: The Power of the Faces Is Transversal to These Two Customers´ Categories 297
19.3.4 Fourth and Fifth Range: The Cold Chain Is `On Top´ 298
19.3.5 The Farmer´s Comeback to the Store 302
19.4 Conclusions 303
References 304
Chapter 20: Using the Facereader Method to Detect Emotional Reaction to Controversial Advertising Referring to Sexuality and H... 305
20.1 Introduction 306
20.2 Method 306
20.2.1 Automatic Expression of Emotions 306
20.2.2 Facereader-The New Way to Study the Facial Expressions of Emotions 307
20.3 Research Goals 308
20.4 Research Results Presentation 309
20.4.1 Validation of the New Algorithm Used for Analysis in a Facereader Methodology (Study 1) 309
20.4.2 Automatic Emotional Reaction (Facial Expressions) Toward Controversial Advertising-Differences Between Men and Women (S... 311
20.4.3 Differences Between Declared and Automatic Emotional Reaction Toward Controversial Advertising Referring to Homosexuali... 315
20.4.4 Using Facereader Combined with Eyetracker to Better Understand Emotional Reactions Toward Controversial Advertising (St... 316
20.5 Conclusions 318
References 322
Chapter 21: The Implementation of Cognitive Neuroscience Techniques for Fatigue Evaluation in Participants of the Decision-Mak... 324
21.1 Introduction 324
21.2 Experiment Design 327
21.3 Experiment Results and Discussion 328
21.4 Conclusions 332
References 332
Chapter 22: Cognitive Neuroscience Techniques in Examining the Effectiveness of Social Advertisements 335
22.1 Introduction 335
22.2 The Description of the Experiment and Research Methods 338
22.3 The Analysis of Results 341
22.4 Conclusions 344
References 344
Chapter 23: Measuring the Impact of Intrusive Online Marketing Content on Consumer Choice with the Eye Tracking 347
23.1 Introduction 347
23.2 Literature Review 348
23.3 Experiment Design 350
23.4 Results 351
23.5 Conclusions 356
References 356
Chapter 24: Experimental Study of Color Contrast Influence in Internet Advertisements with Eye Tracker Usage 358
24.1 Introduction 358
24.2 Literature Review 359
24.3 Eye Tracker 361
24.4 Experiment and Results 361
24.5 Discussion 365
24.6 Conclusion 366
References 367
Chapter 25: The Use of Experiment in Simulation of Debt of Local Government Units 369
25.1 Introduction 369
25.2 The Need for Multi-variant Approach to Assess the Level and Possibilities of Indebtedness of the Local Government Units 371
25.3 Experiment as a Tool to Support Decision-making Process of Indebtedness of Local Government Units 375
25.4 The Use of the Shock Analysis as an Expression of the Experiment Supporting the Decision-Making Process of the Local Gove... 378
25.5 Conclusions 384
References 385
Chapter 26: Reflections on Research Process: Online Experiments on Allegro Platform 388
26.1 Introduction 389
26.2 The Idea of Field Experiments 389
26.3 Field Experiments Online vs. Offline 391
26.4 Online Auction Markets as Separate Markets 392
26.5 Allegro Platform as a Space for Conducting Market Experiments 395
26.6 Conclusions 398
References 398
Index 399