Decision Making Under Pressure: a Behavioural
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DECISION MAKING UNDER PRESSURE: ABEHAVIOURALECONOMICS PERSPECTIVE David A. Savage BIT (Data Comm), BBus (Econ), MRes (Econ) Primary Supervisor: Professor Benno Torgler (School of Economics & Finance) Associate Supervisor: Professor Uwe Dulleck (School of Economics & Finance) Submitted in fulfilment of the requirements for Doctor of Philosophy (Economics) School of Economics and Finance Queensland University of Technology November, 2013 Keywords 9/11; Behavioural Economics; Communications; Decision Making; Extreme En- vironments; Disasters; Emotions; Floods; High Pressure Circumstances; Life and Death Events; Lusitania; Mount Everest; Natural & Quasi-Natural Exper- iment; Prospect Theory and Risk Attitudes; Titanic; World & European Cup Football; World Trade Centre. i Abstract This research collection seeks to fill some of the gap existing in the behavioural economics literature pertaining to the individual decision making process under extreme environmental situations (life and death events) and in high stress or pressure events. These works analyse the revealed behavioural preferences of decision makers through the investigation of four di↵erent environments with varying types of shocks. These shocks are naturally occurring within each envi- ronment and are either exogenous or endogenous in nature. Specifically, these works contrast and compare the penalty shootout process in World and Eu- ropean Cup Football competitions; the change in cooperation and behaviours of climbers in the Himalayan Mountains between 1950-2009; the e↵ect on risk taking of individuals after a large wealth shock induced by a major flood event; and the emotional development of communications during the 9/11 disaster. Contents 1 Introduction 1 1.1 Background.............................. 7 1.2 Significance, Scope and Definitions . 7 2 Behavioural Economics: The Analysis and Understanding of Disaster and Extreme Environments 9 2.1 Introduction.............................. 9 2.2 Behavior, Emotions, Myth & Panic: ThePast ............................... 12 2.3 An Experimental Approach to Analysis: The Present . 24 2.4 Corporation, Collaboration and Conclusion: The Future . 29 3 To Those That Came Before . 34 3.1 Introduction.............................. 34 3.2 TheTitanic.............................. 35 3.3 The Titanic vs. Lusitania . 39 3.4 Conclusions .............................. 41 4 Nerves of Steel? Stress, Work Performance and Elite Athletes 43 4.1 Introduction.............................. 44 4.2 Theoretical Considerations . 47 i 4.3 Method ................................ 53 4.3.1 Design and Procedure . 53 4.3.2 Statistical Analysis . 56 4.4 Results................................. 58 4.5 Conclusions .............................. 65 5 THE TIMES THEY ARE A CHANGIN’: The e↵ect of insti- tutional changes on cooperative behaviour over last sixty years at 26,000ft 67 5.1 Introduction.............................. 68 5.2 Historical Development . 72 5.3 Commercialisation . 81 5.4 Data and Methodology . 88 5.5 Limitations . 99 5.6 Conclusions .............................. 107 6 Variation in Risk Seeking Behaviour in a Natural Experiment on Large Losses Induced by a Natural Disaster 114 6.1 Introduction.............................. 114 6.2 Background . 117 6.3 Methodanddata .......................... 120 6.3.1 Quasi-experimental design . 120 6.3.2 Data . 121 6.3.3 Empirical methodology . 124 6.4 Results................................. 126 6.4.1 Flood level, monetary losses and risk seeking . 126 6.4.2 The possible role of background risk . 129 6.4.3 Other possible explanations . 131 6.5 Conclusions .............................. 133 ii 7 The Emergence of Emotions and Religious Sentiments During the September 11 Disaster 135 7.1 Introduction.............................. 135 7.2 Methods................................ 141 7.2.1 Participants . 141 7.2.2 Research Design . 142 7.2.3 Procedure........................... 144 7.3 Results................................. 155 7.4 Discussion............................... 160 8 Conclusions 167 A List of Publications 175 B Statements of Authors Contributions 177 iii List of Figures 5.1 Growth of commercial expeditions since 1950. 82 5.2 Traditionalist views of climbing . 108 5.3 Non-traditionalist view of climbing. 109 6.1 Proportion of Risk Takers around the flood line. 126 6.2 Subjective Property Loss Values around the flood line. 127 7.1 Negative Emotion Category (BKE Dataset) . 148 7.2 Absolute Count Totals (BKE and ST Datasets) . 149 7.3 Positive Emotion Category (LIWC Analysis of BKE and ST) . 150 7.4 Negative Emotion Category (LIWC Analysis of BKE and ST) . 152 7.5 Religion Category (LIWC Analysis of BKE and ST) . 154 7.6 Raw Counts (ST Dictionary and Datasets) . 156 7.7 Adjusted Counts (ST Dictionary and Datasets) . 157 7.8 Raw Count (ST Dataset and LIWC) . 158 7.9 Adjusted Count (ST Dataset and LIWC) . 159 7.10 Raw Count (BKE Dataset and ST Dictionary) . 160 7.11 Adjusted Count (BKE Dataset and ST Dictionary) . 161 7.12 Raw Count (BKE Dataset and LIWC) . 162 7.13 Adjusted Count (BKE Dataset and LIWC) . 163 iv List of Tables 3.1 Passenger Structure on the Lusitania and the Titanic . 39 4.1 Descriptive Statistics (Team, Club and Individual level) . 56 4.2 Stress Determinants on Shot Success . 60 4.3 Robustness Checks (with Team & Time Fixed E↵ects) . 63 5.1 Expeditions with the Death of a Sherpa . 101 5.2 DescriptiveStatistics-ExpeditionLevel . 111 5.3 BaselineModels............................ 112 5.4 PeriodBreakdowns.......................... 113 6.1 Tests of Pre-Existing Di↵erences. .................. 128 6.2 E↵ect of the Wealth Loss on Risk Attitude. 130 7.1 Original S&T Dictionary . 146 7.2 Adjusted Dictionary Sets . 146 7.3 Positive Emotion Correlation Matrix (*Adjusted dictionary) . 151 7.4 Negative Emotion Correlation Matrix A . 152 7.5 Negative Emotion Correlation Matrix B . 153 7.6 Religion Correlation Matrix . 153 7.7 T-testStatistics............................ 155 v “The known is finite, the unknown infinite; intellectually we stand on an islet in the midst of an illimitable ocean of inexplicability. Our business in every generation is to reclaim a little more land, to add something to the extent and the solidity of our possessions.” Thomas Henry Huxley on the reception of the “Origin of Species” (1887) ”In [my] journeyings [I was] often, in perils of waters, in perils of robbers, in perils by mine own countrymen, in perils by the heathen, in perils in the city, in perils in the wilderness, in perils in the sea, in perils among false brethren” 2nd Corinthians, Chapter 11: Verse 26 of the King James Bible vi Acknowledgements As one nears the end of a long journey, one casts thoughts back to the paths taken and to the roads left behind, acknowledging the struggles, the victories as well as the defeats. The old adage states that the journey is more important that the destination and how one gets to the end is of greater value than the accolades of reaching the end. But as I sit here and cast my mind back over the previous years, one wonders if my journey is representative of all the pilgrims on this road and if asked could I, in all good conscious, give my blessing for others to undertake the same journey? A good friend of mine once remarked upon her inability to adequately explain what postgraduate study was like to her husband, she said “You know, no matter how much or often I explain what it is like he just doesn’t understand.” This was not because he is stupid, but because it is unlike anything else and only those who have been through it can appreciate or understand it. How often have friends, colleagues or supervisors heard the phrase “I wish someone would have told me. ” over the duration of a career. I am pretty sure if someone told me exactly what it would have been like, I would have either disbelieved them, thought them crazy or outright lying. It takes so few words to describe the process of research and writing papers that the enormity of the reality is almost a shock. Collect some data, do some analysis and write a paper! How much simpler could that be? Those of us who make it out the other side can laugh at this, because this is exactly what it is but it completely misses the mark. It is like describing the celestial body at the heart of our solar system as just the sun. The experience is so much more than you think, less than you vii expect and greater then you could ever hope for. Hard work and success has its own punishment it seems. Beyond these deep and introspective thoughts, I would very much like to thank all those who have supported me and have made this even remotely possible. Firstly, and most importantly, I have to acknowledge that the major part of this success and of all my works goes to my partner, Deborah. Without whom, I am absolutely sure that none of this would have happened or have been anywhere near as good or successful. For love, support and belief in my madness, I thank you from the bottom of my heart. For being my best friend, with whom I share all of this. Secondly, I would like to thank my very own man for all seasons - Benno, who has been my friend, colleague, co-author, co-conspirator, mentor and inspiration. Benno has always been there for me and with me along this trip and for that I am glad. I hope that my future students receive from me the attention and development I received from this great mentor. I would also like to thank his wife, Manuela - for allowing me to have so much of his time and also being awesome in her own right. I would also like to thank my other “go to man”, Uwe, who pushed, cajoled, shoved and when necessary threatened me in the right direction. I would also like to thank the post grad group for making me feel like an immigrant in my own country (I still don’t speak German) who have allowed me to blow o↵steam and enjoy way too many co↵ees and beers.