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Avoiding greedy behavior in situations of uncertainty: The role of magical thinking

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  • Arad, Ayala

Abstract

Previous studies have found evidence for the belief that actions which tempt fate increase the likelihood of negative outcomes. These included actions that presuppose a good outcome, that reflect hubris or that involve excessive risk taking. This paper explores a related form of magical thinking whereby individuals believe that asking for too much in situations of uncertainty may be punished by the universe and may decrease the probability of the desired outcome. It was found that many participants irrationally forgo the “greedy” option under uncertainty, even though it dominates other options and their behavior is not observed. It is suggested that some participants fear being magically punished for greediness and it is shown that the avoidance of greedy actions under uncertainty is related to the belief that one should not tempt fate. This phenomenon may have implications for various types of economic decisions such as charity donation, insurance purchase and bargaining.

Suggested Citation

  • Arad, Ayala, 2014. "Avoiding greedy behavior in situations of uncertainty: The role of magical thinking," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 53(C), pages 17-23.
    • Handle: RePEc:eee:soceco:v:53:y:2014:i:c:p:17-23
    DOI: 10.1016/j.socec.2014.07.003
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    Cited by:

    1. Ran I. Shorrer & Sandor Sovago, 2017. "Obvious Mistakes in a Strategically Simple College Admissions Environment," Tinbergen Institute Discussion Papers 17-107/V, Tinbergen Institute.
    2. Jon Elster, 2017. "On seeing and being seen," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 49(3), pages 721-734, December.

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