Economics Insights @ CBS

Understanding the role of emotion in forming preferences is critical in helping firms choose effective marketing strategies and consumers make appropriate consumption decisions. In five experiments, participants made a set of binary product choices under conditions designed to induce different degrees of emotional decision processing. The results consistently indicate that greater reliance on emotional reactions during decision making is associated with greater preference consistency and less cognitive noise.

A recurring theme in attribution theory is that lay explanations for intentional and nonintentional behaviors diverge (Buss, 1978; Fincham & Jaspers, 1980; Kruglanki, 1975; Malle, 2004; White, 1991). In this vein, Reeder (this issue) proposes that they evoke different inferential paths that produce different attributional patterns. In response to nonintentional behavior, perceivers think like scientists, reasoning abstractly about causes, seeking parsimony by discounting personal forces given plausible situational forces.

This monograph focuses on the use of incomplete contracting models to study transfer pricing. Intrafirm pricing mechanisms affect division managers' incentives to trade intermediate products and to undertake relationship-specific investments so as to increase the gains from trade. Letting managers negotiate over the transaction is known to cause holdup (underinvestment) problems. Yet, in the absence of external markets, negotiations frequently outperform cost-based mechanisms, because negotiations aggregate cost and revenue information more efficiently into prices.

This special issue was conceived as a way to highlight how social cognition researchers are using the paradigm of negotiations to ask and answer a range of important questions central to their core concerns: how do communication media affect social information processing; how do different roles affect preferred processing styles; how do goals and expectancies shape interactions and outcomes?