Nothing so certain as your anchors? A consumer bias that might lower prices

Anchoring is a well-known decision-making bias: original guesses for a certain question could act as anchors and could influence our final answers. Reference prices - in a similar fashion - can lead to a bias in consumer valuations, and thus consumer demand will be coherent but not one derived from a utility framework. In our paper we investigate the effect of the existence of anchoring on how oligopolistic firms might change their pricing strategy. More specifically, we analyze the effect of anchoring on pricing when differentiated firms compete in Bertrand fashion. We show that if the anchoring effect is smaller than a threshold the average price is lower compared to the no-anchoring case.

Determinants of confidence and their effect on epistemic judgments: Implications for auditor calibration bias

Auditor decisions regarding the causes of accounting misstatements can have an audit effectiveness and efficiency. Specifically, overconfidence in one's decision can lead to an ineffective audit, whereas underconfidence in one's decision can lead to an inefficient audit. This dissertation explored the implications of providing various types of information cues to decision-makers regarding an Analytical Procedure task and investigated the relationship between different types of evidence cues (confirming, disconfirming, redundant or non-redundant) and the reduction in calibration bias. Information was collected using a laboratory experiment, from 45 accounting students participants. Research questions were analyzed using a 2 x 2 x 2 between-subject and within-subject analysis of covariance (ANCOVA). ^ Results indicated that presenting subjects with information cues dissimilar to the choice they made is an effective intervention in reducing the common overconfidence found in decision-making. In addition, other information characteristics, specifically non-redundant information can help in reducing a decision-maker's overconfidence/calibration bias for difficulty (compared to easy) decision-tasks. ^