Fretting About Modest Risks Is a Mistake

Matthew  Rabin; Max   Bazerman

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Article | California Management Review | 2010

Fretting About Modest Risks Is a Mistake

by Matthew Rabin and Max Bazerman

Abstract

Managers often engage in risk-averse behavior, and economists, decision analysts, and managers treat risk aversion as a preference. In many cases, acting in a risk-averse manner is a mistake, but managers can correct this mistake with greater reflection. This article provides guidance on how individuals and organizations can move toward greater reflection and a more profitable aggregate portfolio of decisions. Inconsistency in risk preferences across decisions is a costly mistake for both individuals and for organizations.

Keywords: decision biases; Risk Management; Risk and Uncertainty; Decision Making;

Format: Print

Find at Harvard

Citation:

Rabin, Matthew, and Max Bazerman. "Fretting About Modest Risks Is a Mistake." California Management Review 61, no. 3 (May 2019): 34–48.

About the Authors

Matthew Rabin

Professor (Harvard University)

Negotiation, Organizations & Markets

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Max H. Bazerman

Jesse Isidor Straus Professor of Business Administration

Negotiation, Organizations & Markets

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More from these Authors

Article | Harvard Business Review Digital Articles | April 29, 2020

How Should We Allocate Scarce Medical Resources?

Max Bazerman, Regan Bernhard, Joshua D. Greene, Karen Huang and Netta Barak-Corren

Who should get a ventilator if there aren’t enough to go around? Research on decision making leads to three concrete guidelines that policy-makers and physicians can use to make fair choices when allocating scarce, life-saving resources. The key to making fair and ethical choices is to assure that decisions are made through an impartial process.

Keywords: COVID-19; Health Pandemics; Resource Allocation; Decision Making; Policy; Fairness; Ethics;

Citation:
Bazerman, Max, Regan Bernhard, Joshua D. Greene, Karen Huang, and Netta Barak-Corren. "How Should We Allocate Scarce Medical Resources?" Harvard Business Review Digital Articles (April 29, 2020). View Details

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Article | Proceedings of the National Academy of Sciences of the United States of America

Signing at the Beginning vs at the End Does Not Decrease Dishonesty

Ariella Kristal, A.V. Whillans, Max Bazerman, Francesca Gino, Lisa Shu, Nina Mazar and Dan Ariely

Honest reporting is essential for society to function well. However, people frequently lie when asked to provide information, such as misrepresenting their income to save money on taxes. A landmark finding published in PNAS (Shu, Mazar, Gino, Ariely, and Bazerman, 2012, “Signing at the Beginning Makes Ethics Salient and Decreases Dishonest Self-reports in Comparison to Signing at the End”) provided evidence for a simple way of encouraging honest reporting: asking people to sign a veracity statement at the beginning instead of at the end of a self-report form. Since this finding was published, various government agencies have adopted this practice. However, in this project, we failed to replicate this result. Across five conceptual replications (N = 4,559) and one highly powered, pre-registered, direct replication (N = 1,235) conducted with the authors of the original paper, we observed no effect of signing first on honest reporting. Given the policy applications of this result, it is important to update the scientific record regarding the veracity of these results.

Keywords: Morality; nudge; policy-making; replication; honesty; Moral Sensibility; Behavior; Policy;

Citation:
Kristal, Ariella, A.V. Whillans, Max Bazerman, Francesca Gino, Lisa Shu, Nina Mazar, and Dan Ariely. "Signing at the Beginning vs at the End Does Not Decrease Dishonesty." Proceedings of the National Academy of Sciences of the United States of America 117, no. 13 (March 31, 2020). View Details

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Editorial | Scientific American | March 21, 2020

When We're Wrong, It's Our Responsibility as Scientists to Say So

Ariella Kristal, A.V. Whillans, Max Bazerman, Francesca Gino, Lisa Shu, Nina Mazar and Dan Ariely

We tried to reproduce our 2012 paper on how to make people report their income more honestly—and we ended up refuting it.

Keywords: responsibility; Outcome or Result;

Citation:
Kristal, Ariella, A.V. Whillans, Max Bazerman, Francesca Gino, Lisa Shu, Nina Mazar, and Dan Ariely. "When We're Wrong, It's Our Responsibility as Scientists to Say So." Scientific American (March 21, 2020). View Details

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Fretting About Modest Risks Is a Mistake

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