Collaborative Research: DRU Consumer Choice and Organizational Decision-Making

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Understanding human behavior is a critical component of guiding organizational decisions and predicting outcomes of government programs and of private sector pricing and supply decisions. Both public and private organizations interact with individuals in complex decision environments. We study individual and strategic decision-making in naturally occurring situations involving ambiguous and asymmetric information with small and large stakes. We will take advantage of the cooperation of major private industries in providing us with a wealth of data on consumer behavior and in allowing us to run real-world experiments to validate behavioral theories. The proposed experiments will be highly controlled but will occur in natural settings, making findings easier to generalize to other social situations. The analysis of consumer data will take advantageof recent developments in analysis of decision making in strategic situations. This research will be complemented with laboratory experiments where new economic and institutional designs will be developed and tested. Conceptually, there are three main contributions of this work. First, we tackle identification problems common in the social sciences by designing real-world experiments and analyzing experiments that occur naturally in the private sector.Second, we bridge the gap between human behavior and organizational decisions (as revealed through demand and supply decisions) by integrating elements of individuals' behavior into supply models. Third, we develop statistical choice models that better incorporate individual idiosyncrasies in decisions making and strategic behavior.