04_P & B - Chapter 05

It is an important element of human behavior in society and economics

-> e.g. Volunteering, charities and donation behavior

Fairness is a fundamental cornerstone of political und moral attitudes and thinking styles

One important theory in moral and political psychology, which postulates six basic foundations:

• Care/Harm
• Fairness/Cheating
• Loyalty/Betrayal
• Liberty/Oppression
• Authority/Subversion
• Sanctity/Degradation

Understanding them helps in understanding political and moral discussions and arguments

Fairness plays an important role in the workplace; high fairness expectations
-> Lack of fairness leads to negative reactions from employees

Trust and reciprocity
are the basis of the contract between the employee and the organization;
In addition to the work contract there is a psychological contract that includes implicit expectations from both parties; the trust that both parties adhere to this implicit contract
is the basis of work contracts

Altruistic behavior has usually no immediate benefit but may bring a benefit long-term for the person that is bigger than the initial cost

Altruism from an economics viewpoint: A person may also derive utility from the wellbeing of others; fostering their wellbeing may thus also be rational (rational behavior / utility maximizing)

-> e.g. tax reduction

1. Moral/social norms:
   Based on the duties and expectations in a society
    
2. Rationality:
   Good for the common welfare; secures social peace; resources bring sometimes other people greater benefit than oneself
    
3. Self-actualization:
   Frequent motivation for voluntary work and donations
    
4. Sympathy/Affection:
   Altruism with reference to certain purposes / groups of people, i.e. philanthropy

Reason for altruistic behavior is not always clear-cut, i.e. it can be a mix of different reasons

• Exertion of political influence
• promotion of programs that are scientifically not robust
• unethical investments
• donations for the purpose of tax optimization, etc.

People have a ...

• Need for fairness
• inequality aversion

1. distributive justice -> people strive for a fair distribution of goods
2. procedural justice -> people strive for a fair processes that lead to fair decisions
3. social justice  -> people strive for a justice with respect to distribution of wealth,
   opportunities, and privileges

Trust enables us to participate in economic exchange and thus act in a business context

Trust between contract parties reduces transactional costs, simplifies cooperation and thereby creates a competitive advantage

Information asymmetry frequently exists between vendor and consumer, i.e. an imbalance of knowledge about the subject matter of the contract

Especially for credence goods, i.e. extremely information-intensive products where the consumer cannot evaluate the quality

Credence goods are e.g. credit cards, medicines, car producer

When someone gives you something or does you a favor, you are more likely to do what they ask.

• Mutuality principle; a basic principle of human action
• Is deeply rooted within our behavior; we rely on compliance of this principle
• often use in marketing: Little presents make customers feel as if they owe the company something -> Increases the likelihood that customer buys something

1. Reciprocity:
   When someone gives you something or does you a favor, you are more likely to do what they ask.
    
2. Consistency:
   People who get you to agree to a small favor can get you to do a related big one because you feel you must remain consistent.
    
3. Social proof:
   Those around you like to influence you, particularly when you are unsure.
    
4. Liking:
   You are more likely to do something if someone you care about asks you.
    
5. Authority:
   Those with expertise or power – e.g., doctors, police – or with the trappings of power – e.g. uniforms – wield more influence.
    
6. Scarcity:
   Rare items or opportunities seem more desirable.