Effects of Social Information on Risk Taking and Performance: Understanding Others’ Decisions vs. Comparing Oneself with Others in Short-Term Performance

Sabine Pittnauer (), Martin Hohnisch (), Andreas Ostermaier () and Andreas Pfingsten ()
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Sabine Pittnauer: Faculty of Industrial Engineering and Management, Technion, Haifa 32000, Israel
Martin Hohnisch: Faculty of Industrial Engineering and Management, Technion, Haifa 32000, Israel
Andreas Ostermaier: Department of Business and Management, University of Southern Denmark, 5230 Odense, Denmark
Andreas Pfingsten: Finance Center, University of Muenster, D-48143 Muenster, Germany

Organization Science, 2023, vol. 34, issue 6, 2352-2372

Abstract: When a problem leaves decision makers uncertain as to how to approach it, observing others’ decisions can improve one’s own decisions by promoting more accurate judgments and a better insight into the problem. However, observing others’ decisions may also activate motives that prevent this potential from being realized, for instance, ego concerns that prompt excessive risk taking. Our experimental study investigates how two features of the social environment influence the effect of observing others’ decisions on individual risk taking and performance. We manipulated (1) the psychological distance to others whose decisions could be observed (and thereby the tendency to seek self-enhancing social comparison) and (2) the opportunity for interaction (and thereby for a cumulative effect of any such tendency on decisions over time and for an effect on social information itself). Because the two features covary in real-world settings, we designed two treatments corresponding to the two natural combinations. Both treatments provided participants with two other participants’ period decisions in a multiperiod problem under uncertainty. No new objective information about the problem could be inferred from these decisions. We predicted that participants who observed the decisions of distant others (who had solved the same problem earlier) would perform better than participants in a control sample without any information about others’ decisions and that participants who observed the decisions of proximal others (with whom interaction could arise) would take more risk and perform worse than those who observed distant others’ decisions. The data corroborate our predictions. We discuss implications for organizational learning.

Keywords: Decision making; uncertainty; problem solving; social learning; social comparison; construal level theory (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ororsc:v:34:y:2023:i:6:p:2352-2372

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