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Strategic decisions : behavioral differences between CEOs and others

Holm, Håkan J. LU ; Nee, Victor and Opper, Sonja LU (2019) In Experimental Economics
Abstract

We study whether CEOs of private firms differ from other people with regard to their strategic decisions and beliefs about others’ strategy choices. Such differences are interesting since CEOs make decisions that are economically more relevant, because they affect not only their own utility or the well-being of household members, but the utility of many stakeholders inside and outside of the organization. They also play a central role in shaping values and norms in society. We expect differences between both groups, because CEOs are more experienced with strategic decision making than comparable people in other professional roles. Yet, due to the difficulties in recruiting this high-profile group for academic research, few studies have... (More)

We study whether CEOs of private firms differ from other people with regard to their strategic decisions and beliefs about others’ strategy choices. Such differences are interesting since CEOs make decisions that are economically more relevant, because they affect not only their own utility or the well-being of household members, but the utility of many stakeholders inside and outside of the organization. They also play a central role in shaping values and norms in society. We expect differences between both groups, because CEOs are more experienced with strategic decision making than comparable people in other professional roles. Yet, due to the difficulties in recruiting this high-profile group for academic research, few studies have explored how CEOs make incentivized decisions in strategic games under strict controls and how their choices in such games differ from those made by others. Our study combines a stratified random sample of 200 CEOs of medium-sized firms with a carefully selected control group of 200 comparable people. All subjects participated in three incentivized games—Prisoner’s Dilemma, Chicken, Battle-of-the-Sexes. Beliefs were elicited for each game. We report substantial and robust differences in both behavior and beliefs between the CEOs and the control group. The most striking results are that CEOs do not best respond to beliefs; they cooperate more, play less hawkish and thereby earn much more than the control group.

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author
organization
publishing date
type
Contribution to journal
publication status
epub
subject
keywords
Belief elicitation, CEOs, Strategic decision-making
in
Experimental Economics
publisher
Springer
external identifiers
  • scopus:85062148890
ISSN
1386-4157
DOI
10.1007/s10683-019-09604-3
language
English
LU publication?
yes
id
b2c9fd40-750e-4d4e-94c1-abdeba819c3f
date added to LUP
2019-03-07 13:57:45
date last changed
2019-04-02 04:14:35
@article{b2c9fd40-750e-4d4e-94c1-abdeba819c3f,
  abstract     = {<p>We study whether CEOs of private firms differ from other people with regard to their strategic decisions and beliefs about others’ strategy choices. Such differences are interesting since CEOs make decisions that are economically more relevant, because they affect not only their own utility or the well-being of household members, but the utility of many stakeholders inside and outside of the organization. They also play a central role in shaping values and norms in society. We expect differences between both groups, because CEOs are more experienced with strategic decision making than comparable people in other professional roles. Yet, due to the difficulties in recruiting this high-profile group for academic research, few studies have explored how CEOs make incentivized decisions in strategic games under strict controls and how their choices in such games differ from those made by others. Our study combines a stratified random sample of 200 CEOs of medium-sized firms with a carefully selected control group of 200 comparable people. All subjects participated in three incentivized games—Prisoner’s Dilemma, Chicken, Battle-of-the-Sexes. Beliefs were elicited for each game. We report substantial and robust differences in both behavior and beliefs between the CEOs and the control group. The most striking results are that CEOs do not best respond to beliefs; they cooperate more, play less hawkish and thereby earn much more than the control group.</p>},
  author       = {Holm, Håkan J. and Nee, Victor and Opper, Sonja},
  issn         = {1386-4157},
  keyword      = {Belief elicitation,CEOs,Strategic decision-making},
  language     = {eng},
  month        = {02},
  publisher    = {Springer},
  series       = {Experimental Economics},
  title        = {Strategic decisions : behavioral differences between CEOs and others},
  url          = {http://dx.doi.org/10.1007/s10683-019-09604-3},
  year         = {2019},
}