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Behaviour, Decision & Markets - Essay Example

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Date Behavior, Decision & Markets Actually, there is no doubt that other-regarding preference describes essential aspects of human behavior. Moreover, this qualifies the Fehr-Schmidt model to be correct. This is deduced from evidence by experiments, which show that a big percentage of people are highly motivated by other- regarding preferences, which is in the spirit of others well being, fairness and reciprocation…
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Download file to see previous pages Proponents of such controversial experiments believe that most people’s behaviors are well explained by self-interest assumptions. This left other-regarding preferences to be viewed as forces of retaliation from the strengths of the self-interest perspectives (GaI?chter, S & Nosenzo, 2011). The experiment of quickly converging markets became applicable to confirm the hypothesis that is opposing to the other-preference hypothesis. On the contrary, supporters of other preference theory performed the bargain and corporation experiment, which disputed the outcomes of the quickly converging markets. They recommended that the self-interest hypothesis findings were premature and are not rationally applicable in explaining the fundamental aspects of human behavior. The self-interested decision choices are simple and are majorly used when dealing with straightforward and human behavior that is so easy to understand. Complex and hard to comprehend human behavior can only be explained using the other preference theory (GaI?chter, S & Nosenzo, 2011). Deducing from such concrete evidence, the question that remains unanswered is not whether self- interest is the choice or other preference. It is only important to note that in what conditions we can say that this or that condition has both economic and social effects. Hence, which is the best guideline to give a description and model these preferences. For example, other regarding preferences do not thrive well in competitive markets but this cannot be used to make conclusions that they do not exist. This impact is only realizable with rational individuals who will find it prudent not to expose their other-preference behavior in such market conditions since they are aware that they will never reap the outcomes given that the effects are not felt, in addition, the efforts to do the previously mentioned may be so costly (GaI?chter, S & Nosenzo, 2011). Outside the competitive markets where other-preference model can be applied has a series of economic activities that take place. These activities may be in small markets with small traders, markets with undefined frictions, contractually enforceable firms and organizations with contracts, which are incomplete and unenforceable. The models with self- interest assumptions may most of the time result into predictions, which are unpredictable and misleading with those made by other preference models being quite accurate. The economist stresses the fact that other people may be strongly convicted to serving others right by making sure that there welfare is in the right place, with a lot of justice and reciprocity. On the contrary, experiments also have it there are other individuals who are extremely callous and selfish, they don’t give regards to the welfare of the others even when such opportunities are availed to them at relatively low or no costs (GaI?chter, S & Nosenzo, 2011). The relation between such two completely contrasting individuals presents a strategic setting for managers in organizations to analyze behavior and find out what exists and defines fairness and selfishness. The derivations will tend to give explanations as to whether some people will tend to behave in a just and fairness in some settings in very different environmental conditions while it is the same people who will behave extremely ...Download file to see next pagesRead More
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