Behavioral Economics

ECONOMIC ISSUES, PROBLEMS AND PERSPECTIVES
BEHAVIORAL ECONOMICS
TRENDS, PERSPECTIVES
AND CHALLENGES
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ECONOMIC ISSUES, PROBLEMS
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ECONOMIC ISSUES, PROBLEMS AND PERSPECTIVES
TRENDS, PERSPECTIVES
AND CHALLENGES
TANSIF UR REHMAN
EDITOR
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Published by Nova Science Publishers, Inc. † New York

I dedicate this work to all those intellectuals and
researchers, who are participating and sharing their
knowledge to make this world prosperous regardless of the
race, region and religion.
CONTENTS
Preface ix
Chapter 1 Themes, Philosophy and Applications
of Behavioral Economics 1
Tansif ur Rehman
Chapter 2 Frontiers of Behavioral Economics 15
Tansif ur Rehman
Chapter 3 A New Look at the Ultimatum Game:
Relational and Individual Differences
Underlying the Division of Gains and Losses 31
Renata M. Heilman
Chapter 4 Behavioral Economics Factors in the Decision-
Making of Green Building Technology for
Sustainable Infrastructure Governance 67
Sharifah Akmam Syed Zakaria
About the Editor 129
Index 131
PREFACE
This book distills knowledge gained through a long academic career.

For the past few years, the author’s work has focused primarily on
behavioral economics. While he had learned much during his doctorate and
international exposure, he learned even more after working with Nova
Science Publishers.
Through this experience, a new perspective has emerged that describes
interests regarding the very fundamentals of behavioral economics. A
desire to share these epiphanies motivated the production of this book.
As the world moves further into a more globalized and digital age,
generating vast content of different types of subject matter, there will be a
greater need to access the respective aspects encompassing behavioral
economics. It is the author’s passion to not only find out, but to develop
tools to break down barriers of accessibility for future generations.
This book represents the culmination of years of work, and writing it
has been a challenging yet satisfying experience. The author also would
like to express his gratitude to the people who supported him in this
endeavor.
In: Behavioral Economics ISBN: 978-1-53613-152-9
Editor: Tansif ur Rehman © 2018 Nova Science Publishers, Inc.
Chapter 1
THEMES, PHILOSOPHY AND APPLICATIONS

OF BEHAVIORAL ECONOMICS
Tansif ur Rehman*
Area Study Centre for Europe, University of Karachi, Pakistan
ABSTRACT
Behavioral economics has come across as a vibrant subdiscipline of

economics, as it is likely to have a major impact on the contextual body
of economics as a whole. Though it is facing challenges from the fields of
psychology as well as economics, it is striving towards success due to the
very fact that it has been able to incorporate evidences drawn from a
variety of diversified sources. It provides estimations and theories often
used in economics which are coupled with psychological experiments. It
has also benefited from the possibility of postulating entities on the level
of representation. The common connotations along with different facets
that exist in the concept of behavioral economics have been discussed in
this chapter.
Keywords: behavioral economics, applications, philosophy, themes
*
Corresponding Author Email: tansif@live.com.
2 Tansif ur Rehman
Behavioral economics can be completely defined by the most

repetitively used and self-explanatory words, that is, psychology and
economics (Rabin, 1998). Behavioral economics can also be defined as the
research project intended to amalgamate the two fields of study (once
again, psychology and economics) (Camerer & Ho, 1999). This
amalgamation pertaining to the concept is the major aspect within the
history of economics. Among the finest schools of thought, Adam Smith
has stated many psychological facets of behavioral economics and human
experiences. Afterwards, many economists considered removing the
concept of psychology from the field of economics. For instance, the
demarcation between psychology and economics rose via Slutsky in 1915,
as he believed that in order to make strong foundations of economics, it
must be set apart from the field of psychology.
The general proposition in economics is related to the individual’s
preferences and to study their ways in which people would like to explore
and explain their inclination towards any object which is completely based
on solid reasoning and a self-centered approach. The experts in psychology
and behavioral economics addressed many proofs relevant to the definite
behavioral inclination and propensity, which includes: mental accounting,
loss aversion and hyperbolic discounting. At this stage, it can be concluded
that there are two standard classifications of deviations, that is, people are
imperfectly rational, and they hold non-standard preferences.
Many past researches have variations related to this concept; during
the 20th century, one of the most basic concepts described that neoclassical
economists purposefully separated economics from psychology, compared
to the traditional economists who proposed these two concepts as an
amalgamation (Bruni & Sugden, 2005). The example of billiard players
who follow the concept of physics proposed by Newton can be considered,
but it is a fact that these players never studied academic physics in order to
perform a perfect shot. In short, Friedman (1953) urged that the
estimations one makes are based totally on forecasting, instead of knowing
its practicability (Starmer, 2004).
Themes, Philosophy and Applications of Behavioral Economics 3
Comparatively, behavioral economists made it a foundation to

experimentally test estimations in terms of economic practices and
transform theories after making relevant observations, while Friedman
emphasized the lack of examining the practicability of that estimation.
Regardless of the concept proposed by neoclassical economists, behavioral
economists repeatedly make use of such opinions that preserve the concept
of behavioral models (Berg & Gigerenzer, 2007).
THEMES AND PHILOSOPHY OF BEHAVIORAL ECONOMICS
Behavioral economics relate demonstrating of methodical absconds in

human reasonability to the field and building of game plan, association,
commercial center and arrangement. These imperfections incorporate
bound on judiciousness, determination, egocentric group, and any possible
conduct coming about because of an advanced mind with restricted
consideration (Mullainathan & Thaler, 2000; Rabin, 1998). The
investigation of singular contrasts in wisdom, and learning, is moreover
basic for understanding whether blender collaboration and money related
mixture minimizes stun of prudence cutoff points.
On one hand, the behavioral mass trading capability cerebral pain is
the relentless eventual outcome of loosening up the estimations of
immaculate sanity. Like flawless competition and impeccable data, the
presumption of immaculate operator objectivity is a valuable restricting
case in the theory of economics. Summing up those presumptions to record
for flawed competition and immoderate data was tested, abate, and turned
out to be capable; debilitating the supposition of immaculate soundness as
well.
One of the characteristic of the theory of human sensibility, which for
the most part remembers them from examinations of financial rivalry is
that other amiable sciences have accumulated a huge amount of
arrangements and observational beyond any doubt about the human
discernment. In this tentatively decided system to behavioral matters in
profit making concerns, the assumption is chosen to fit respectively. This
4 Tansif ur Rehman
philosophy might be considered deductively modest, or it could be

considered effective and deferential of relative preference crosswise over
disciplines.
Other than attempting to get the right of research in psychology in
picking presumption, the observationally determined methodology of
behavioral economics making concerns imparts the methodology of
different sorts of expository intuition. The prime motive is to have a very
opaque (clear) formal theory and various issues which apply crosswise
over numerous areas, which make forecasts about commonly happening
information (and also exploratory information).
The approach of behavioral economics embraced by Milton Friedman,
the ‘F-twist’ contention consolidates two standards:
1) Speculations ought to be checked (by accurateness of their

desires).
2) Speculations should not be checked (by accurateness of their
suppositions).
The tentatively decided philosophy to behavioral economics reported

two things:
1) Explicitly showing focuses on the restriction of discernment,

restraint and wander to oneself.
2) Using truths to propose assumptions about those purposes of
restrictions. An alternate, ‘mindless’, approach (Gul &
Pesendorfer, 2005) takes after components of practice, not
demonstrating limits yet eagerly overlooking observational points
of interest group of brain inquiry. The dispute for the inconsiderate
philosophy is Friedmanesque: Since hypotheses that derive
usefulness program from watching choice were not at first
proposed to be attempted by any data other than selection.
Earlier than initiating, there are two focuses. First and foremost, the
examination above ought to make it visible that behavioral economics is
not an alternate economic discipline. It is a school of thought, which is

systematically planned to apply to a distant reaching assortment of an
economic request in finance, economy of work, shopper hypothesis, etc.
Second, behavioral economics is a system and trial economic concerns
as a strategy. Beyond any doubt behavioral economics, analyses ended up
being helpful as a method for creating that abnormalities were certainly not
conveyed by the parts that are to an extent hard to block the field data, i.e.,
peril revulsion, transaction costs, perplexity, decision toward oneself, and
so on. Anyhow the fundamental purpose of these trials was simply to
recommend repeatedly that may be consolidated in models to make
requirements about regularly turn out field data.
BEHAVIORAL PATHS NOT TAKEN
Why, the very notion of behavioral economics did not take rise before
in the historic era of economics? The response drawn intensely on mental
instincts by numerous psychologists. Yet those instincts were generally
abandoned in the progression of scientific actualizes of economic
examination, balance when all is said in done and consumer theory (e.g.,
Ashraf, Camerer & Loewenstein, 2005; Colander, 2005). For example,
Adam Smith believed there was a disproportionate aversion to losses
which is a central feature of Kahneman and Tversky’s (1982) prospect
theory. Smith (1759) also anticipates Thaler’s (1980) seminal 2.
“The word pain is, in just about all cases, a sharper sensation than the
inverse and reporter delight. The one practically dependably discourages us
substantially all the more beneath the conventional, or what may be known
as the common state of our satisfaction, than the other ever raises us above
it” (as cited in Bonar, 1926).
The property violation, consequently robbery and burglary, which take
from us what we are head of, are more noteworthy law violations than
rupture of the agreement, which just baffles us of what we anticipated.
Investigation of the heartlessness to circumstance expenses, contrasted
with out-of-pocket expenses. Why the concept of behavioral occurrence
6 Tansif ur Rehman
similar to these get leave the neoclassical conversion? A conceivable reply

by Bruni and Sugden (2005) is how profoundly economic theories ought to
be moored in mental reality. Other researchers thought disregarding
psychology was adequate as well as fundamental.
It is a truth that political economy has accordingly an extraordinary
enthusiasm toward depending as little as would be prudent on the space of
psychology. Studies enlighten that the subjective reality is uncovered by
preferences or the objective truth. Preferences essentially uncover genuine
inclination by limiting consideration, so reliability consequence from
knowledge.
The statement regarding decision making proposed by Paretian and
authentic preference is not compelling evidence or a powerful
observational consistency. It is a philosophical stance, immaculate and
straightforward. Also in light of the fact that Pareto unmistakably confines
the area of preferences to ‘recurring action’ where learning process has
explained people what they require, he overlooks fundamental economic
decisions that are extraordinary or hard to investigate from
experimentation (Einhorn, 1982), corporate mergers, richness and mate
decision, part of the way irreversible instruction, working environment
decisions, making arrangements for aspects like purchasing houses,
retirement etc.
Hypothetical efforts in economics considers an alternate way?
Numerous economists like Edgeworth, Ramsey and Fisher have
anticipated concerns regarding how to calculate consumption
straightforwardly, however needed advanced apparatuses. What appeared
the task, impractical a hundred years’ prior may be achievable now, that is,
given improvements in brain research, i.e., neurosciences and genetics.
METHODOLOGY OF BEHAVIORAL ECONOMICS
The frameworks used as a piece of behavioral economics are identical

as those in diverse regions of economics. At its initiation, behavioral
economics depended enthusiastically on evidence created by examinations.
Behavioral economists have forwarded previous investigation and got a

handle on the full degree of methods used by economists. Most noticeably,
various late commitments to behavioral economics studies depend on field
information. Other late papers use strategies, for example, field
experiments (Gneezy & Rustichini, 2000), computer simulation (Angeletos
et al., 2001) and even cerebrum examines (McCabe et al., 2001).
Experiments assumed a huge part in the starting period of behavioral
economics on the grounds that exploratory control is extraordinarily useful
for recognizing behavioral clarifications from the standard ones (Camerer
& Thaler, 1995). Different examinations have helped and assisted the
testing criteria, i.e., pertinent to the judgment failures which common
people regularly make in psychology tries to additionally influence costs
what’s more amounts in businesses. The lab is particularly valuable for
these studies on the grounds that individual and business level information
could be watched at the same time (Ganguly, Kagel, & Moser, 2000).
Behavioral economists at first depended broadly on the experimental
information. We can clearly see behavioral economics as a totally different
venture from experimental economics (Loewenstein, 1999). Experimental
economists, then again, characterize themselves on the premise of their
support and utilization of experimentation as an examination instrument.
Exploratory economists have completed a critical financing in making new
experimental schedules that are appropriate for having a tendency to
monetary issues, and have fulfilled a fundamental assertion between
themselves on various essential methodological issues.
This accord emphasizes that we discover engaging and deserving of
imitating. For instance, experimental economists frequently make
guidelines, what’s more programming accessible for exact replication, and
crude information is regularly filed or liberally imparted for reanalysis.
Experimental economists likewise demand paying execution based
motivating forces, which lessens reaction commotion and likewise possess
a virtual forbiddance against the misleading subjects (Camerer & Hogarth,
1999).
Matters in economics furthermore normally use ‘stationary replication’
– where the identical task is repeated over and over, with new endowments
8 Tansif ur Rehman
in each time period. Data from the past limited times of the investigation
are customarily utilized to make purposes about concordance direct outside
the lab. Though we acknowledge that investigating lead afterwards has
linked to unimaginable premium, it is similarly clear that various key parts
of financial life are like the initial couple of times of a dissection rather
than the last. In case we study marriage, informative decisions, and placing
something away for retirement, or the purchase of generous durables that
can occur basically several times in a singular’s life, a middle just on ‘post-
union’ behavior is distinctly not justified.
The focus on mental credibility and economic pertinence of
investigation publicized by the behavioral economics perspective proposes
the immense estimation of observational study outside the laboratory and
of an additional broad scope of strategies to the research in the laboratory.
APPLICATIONS
Macroeconomics and Saving
Various notions in macroeconomics inherit a behavioral underpinning

that could be illustrated through inquiry in psychology. Case in point, it is
regular to accept that costs and wages are not changeable, which has
imperative ramifications for the behavior in macroeconomic. Rigidities are
ascribed to a dubious exogenous power just like ‘menu costs’. Behavioral
economics recommends a few thoughts for where rigidity nature originates
from. Aversion to loss among shoppers and laborers, may be urged by
specialists’ sympathy toward reasonableness, can lead to nominal rigidity
nature and yet are once in a while talked about in the present-day writing
(Bewley, 1998).
A vital concept in macroeconomics is the savings model of life-cycle.
This speculation expressed that people make a hypothesis about their
lifetime procuring profile and course of action of their reserve funds as
well as usage to cover use up their lives. The saving theories of ‘behavioral
life cycle’ in which diverse resources of money making are staying tracked
concerning in distinctive mental records. Mental records can reflect
characteristic perceptual or cognitive divisions.
It is important to consider that various key implications of the life-
cycle propositions have not been by and large supported precisely. Desires
may be upgraded by giving consumption capacity ‘development of habit,’
in which consumption in a present era depends upon the motivation of the
situation behind past consumption, and by more intentionally speaking to
flimsiness about upcoming wage (Shefrin & Thaler, 1992).
A basic thought in Keynesian economic concerns is ‘illusion of
money’— the inclination to resolve on decisions centered on ostensible
amounts rather than altering over those studies alongside the term ‘real’ by
the regulation of inflation. The illusion of money seems by all accounts, to
be pervasive in a couple of spaces. It makes the feeling that agents don’t
seem to mind if their nominal wage falls as long as their ostensible wage
does not fall (Baker, Gibbs, & Holmstrom, 1994). The extensiveness of
cash figment sketch methodologies to model it (Shafir, Diamond, &
Tversky, 1997).
Labor Economics
A central point in macroeconomics is programmed unemployment. A

renowned unemployment record sets that pays are intentionally waged
over the market payment level, which creates an excess worker supply and
hereafter, unemployment. Akerlof and Yellen (1990) have an alternate
understanding: Human impulses to respond, convert the employer-worker
connection into a ‘blessing trade’.
In the idea of work and labor economics, diverse investigators
expressed that in test work advertise there is an excess supply of workers.
Organizations offer remuneration; workers who pick the careers, then settle
on decision to pick a level of exertions, which is ending up being lavish for
10 Tansif ur Rehman
work and paramount to the associations. To create all fascinating analysis,

organizations and workers can maintain wages, the effort levels still don’t
establish (Fehr & Gachter, 2000).
Distinctive researches examined unique sorts of flight from the typical
assumptions that are made going to supply the work. The typical record of
the life-cycle of worker supply, moreover hint that workers should
temporarily replace specialist and unwinding centered around the wage
rate they confront and the vitality they put on relaxation in diverse time. In
case the wage variances are at intervals, workers should work long times
when the pay is high and short hours when the pay is low (Camerer et al.,
1997; Mulligan, 1998).
Finance
In finance, the typical concept of valuing of advantage expects that

budgetary speculators simply consider the dangers that may face related to
assets in the event that they influence the marginal utility of utilization, and
they consolidate freely accessible data to figure out stock returns as
accurate as could reasonably be expected i.e., ‘efficient markets theory’.
Although these speculations do create some faultless desires, e.g., the auto-
correlation of progressions in costs is close to zero, because there are
different abnormalities and misdeeds. The misdeeds have presented the
change of ‘behavioral finance’ hypotheses, i.e., a couple of monetary
masters and financial specialists in holdings have confined sanity
(Barberis, Huang, & Santos, 2001).
Distinctive researches represent facts and figures on individual
behavior which suggests that an incredible degree of great capacity may be
resolved, partially by presumption from financial experts (Odean, 1999).
Early critics like Shiller (1981) stated that stock value swings are so
unstable it would be impossible to reflect just news and other researchers
like De Bondt and Thaler (1985), uncovered an imperative eruption impact
focused around the psychology of representativeness, had their measurable

work i.e., audited with an extraordinary investigation by all means.
CONCLUSION
Critics have pointed out that the behavioral matter of money is not a
united speculation. A specialist may depend on a ‘single’ device – say, a
force drill – that additionally utilizes an extensive variety of bores to do
different jobs. Is this one instrument or many? Arrow (1986) states that
monetary models don’t determine much prescient force from the single
apparatus of utility amplification. Once in a while, these determinations are
even conflicting; for instance, immaculate premium towards oneself is
surrendered in models of inheritances. Though reestablishment is found in
life-cycle saving concepts, the threat repulsiveness is ordinarily
acknowledged in worth markets and peril slant in the markets. They act as
various gadgets for different jobs. In this sense, behavioral economics
matters because it aims to make better gadgets that, in a couple of cases,
can work for various occupations.
Economists like to bring up the common division of work between
logical controls: Clinicians should grip the individual identities, and
economists would direct within diversions, marketplaces, as well as
economies. The fundamental aspect is that the inferred brain research in
economics is an extraordinary thing. We contemplate that it is essentially
imprudent, and inefficient to implement cash, causing concerns without
any restrained thought to incredible brain research.
We should finally discuss the idea that behavioral economics is not
proposed to be an alternate methodology in the future. It is similar to a
school of thought, which should lose the remarkable status of being
semantic when it is extensively educated and used. By then, strict rational
soundness is nowadays fundamentally measured in economics and will be
realized as accommodating exceptional cases. Specifically, they aid in the
outline and points which are truly established simply by more universal,
behaviorally-based propositions.
12 Tansif ur Rehman
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Chapter 2
FRONTIERS OF BEHAVIORAL ECONOMICS
Tansif ur Rehman
Area Study Centre for Europe, University of Karachi, Pakistan
ABSTRACT
Behavioral economics can be best viewed as a branch of cognitive

sciences, as it draws its proof from psychology and other appropriate
controls for the purpose of developing models of cutoff points on reason,
self-control, and additionally, enthusiasm towards oneself. It was
historically a direct result of the cognitive revolution, therefore these
aspects are well-reflected in behavioral economists’ willingness to
operate on the level of representation. They willingly explain behavior
with reference to emotional, cognitive, as well as affective states. This
heritage is also mirrored in their interdisciplinary approach and their
usage of various types of methodology.
This chapter highlights the fundamental subjects, theory and frontiers
of behavioral economics.
Keywords: behavioral economics, franchising, frontiers, neuroeconomics

Corresponding Author Email: tansif@live.com.
16 Tansif ur Rehman
ACRONYMS
DLPFC Dorsolateral Prefrontal Cortex

fMRI Functional Magnetic Resonance Imaging
LIP Lateral Intraparietal Cortex
MEG Magnetoencephalography
OFC Orbitofrontal Cortex
PET Positron Emission Tomography
QRE Quantal Response Equilibrium
ROR Return on Revenue
TMS Transcranial Magnetic Stimulation
FRONTIERS OF BEHAVIORAL ECONOMICS
The respective content is related to the few novel backwoods in

behavioral economics, i.e., franchising, foundations, field studies, the
domains of importing various types of psychology, and neuroeconomics.
FRANCHISING OF BEHAVIORAL ECONOMICS
A great part of the force of monetary examination originates from

models utilized within distinctive application territories, which depend on
imparted general standards, reliable preferences, and harmony. However,
these are redone to the unique inquiries in diverse application ranges.
Finance
The focal theory of money-related economics throughout the previous

three decades is that the stock item trades are educationally profitable.
Certainty, this situation begins from a direct controversy: Any semi-solid
Frontiers of Behavioral Economics 17
structure’s wastefulness (recognizably utilizing economically procured

information) would be recognized by well-off speculators. Market
productivity was in this manner thought to give a hardened test to models,
which expect speculators to have constrained judiciousness. However,
behavioral economics has focused around discernment limits, as it has
developed quickly and may be the clearest, observational, established
accomplishment for behavioral economics. One focal point is that the
assumptions of advantage that are estimated regularly give sharp
expectations. An alternate huge playing point is that there are a lot of
people with access to affordable, accessible information which might be
utilized to test these assumptions.
A fundamental speculative trap on the business sector’s potential was
representing that if the one that is examined has constrained skylines
(because of the quarterly assessment of institutional portfolio chiefs, for
instance) then regardless of the possibility of costs meandering far from the
essential qualities, financial specialists may not have enough aggregate
motivation to exchange costs again, which permits mispricing (De Bondt
and Thaler 1985).
An essential issue here is that the costs would completely uncover the
data that brought about the money selling to painstakingly analyze the
micro-structural reasoning stated that such divergence could conceivably
happen. A late pattern is stretching out a number of these opinions to
corporate finance in the ways different companies elevate and employ
finances from the capital markets. Behavioral impacts may be significantly
stronger here than in possession valuing on the grounds that substantial
choices are made by people or little gatherings, and order is just pushed by
sheets of chiefs, vocation concerns, sorting for capable leaders, and so on.
Hence, it is conceivable that expansive corporate missteps are made from a
fusion of limitedly-objective supervisors and feeble administration.
An intriguing gimmick of the development of scholastic money is the
manner by which some early behavioral plans that were generally rejected
are currently considered important. The radical thought is that securities
exchange financial specialists did not recognize ostensible and expansion
balanced (actual) return on revenue (ROR). Years later, the fundamental
18 Tansif ur Rehman
theory is expected with the respective investigation (Campbell and

Vuolteenaho 2004).
Game Theory
The concept of game theory is an experimental classification of

acknowledged key affiliations and get-together numerical theories of how
players with altering levels of insight are subjected to play in the
entertainment and hence immense amounts of the respective
entertainments are entrapped. The harmony hypotheses regularly expect a
high level of shared discernment and confounded Bayesian deduction,
diversion theory is ready for presentation of behavioral options that
debilitate balance suspicions in a restrained manner. Numerous
hypothetical papers have investigated the ramifications of debilitated
suppositions of judiciousness. Numerous expectations of the concept of
game theory depend delicately on what players generally know and on
suspicions about the utility decided from conclusions, therefore explores
the precisely control methods, data, and settlements have been abnormally
useful in elucidating the conditions under which balance expectations are
liable to hold or not (Camerer 2003; Crawford 1997).
Two of the focal commitments of the behavioral game theory concept
are surely worth highlighting, as one is the examination of bringing to an
end focuses on key accounts. One kind of hypothesis studies how
constrained complete strategies with obliged estimation and memory
system will operate (Rubinstein 2003). Experimentally determined
assumptions place some conveyance of steps of considering. The other
imperative commitment is exact hypotheses of how fiscal settlements to a
performer and others outline the vital performer’s efficacy.
Behavioral game theory has to a great extent been formed by test
perception of instructing individuals playing amusements in examinations
for cash. Here, harmony expectations don’t generally passage overall
contrasted with learning hypotheses, and to Quantal response equilibrium
(QRE) and cognitive chain of command methodologies. At the same time
harmony theory may apply at different levels of dissection, particularly

low and elevated amounts, for example, the behavior of animal etched by
development, i.e., evolution (e.g., optimal foraging), and organizations
‘decisions which are analyzed carefully and widely-deliberated.
Labor and Organizational Economics
Labor economics in all of its dimensions is absolutely prepared for the

behavioral analysis. Most laborers don’t have much opportunity to gain for
a fact before settling on imperative choices with irreversibility - picking
instruction, and a first employment that frequently decides a vocational
track (Camerer 2003; Della Vigna and Malmendier 2005).
The merchandise that specialists offer their time is likewise liable to
include more social correlation, idealism and feelings than when firms
offer autos or iPods. By and large, laborers seem to think about the scope
of non-pecuniary impetuses other than money.
Inside the firm, an assessment of laborer execution is blemished in
everything except the least complex associations wherein the rates of the
piece may be connected to one’s gain (similar to products of the soil
picking and auto repair); flawed assessment prompts scope for
predispositions in judgment.
Numerous analyses have concentrated on correspondence in basic
renditions of work markets. In the event that there is an abundance labor
supply and no such degree (level) of notoriety building self-intrigued
specialists ought to be cheerful to land positions, however, ought to
likewise evade; firms ought to suspect this and offer a base pay. When the
exertion is extremely significant to organization and not too much absurd
to workers, organization paid recompense far over the base, and masters
react by doing more exertion when they were paid a higher salary. At the
point when specialists are distinguished to firms, and firms can over and
over contract great laborers, other researches express in what way a ‘2-tier’
economy can ascend experimentally (Brown, Falk and Fehr 2004).
20 Tansif ur Rehman
Besides, including extraneous motivating forces could be destructive in

the event that they ‘crowd out’ natural motivators (a sensation considered
in brain research a long time ago), so typical concepts receive the wrong
signal in finding the variations in the influences of external motivation.
The higher impetuses can affect lower exertion on the grounds that high
wages indicate that the work is difficult, or an expert is unskilled (Benabou
and Tirole 2003).
Public Finance
Behavioral public finance inquires in what way restrains and

limitations on buyer judgment influence valuation. The focal rule is that a
few assessments are more obvious than others. Lawmakers abuse these
contrasts in hunting down approaches to build expense receipts. A full
theory of levy and using in this way relies upon a decent record of which
sorts of expenses are simple and hard to force (overall sorted out vested
party rivalry will obviously matter as well), and how clever revenue-
seeking politicians are at the very core of understanding the respective
investor’s tax psychology (McCaffery 1994; Krishna and Slemrod 2003).
The body of behavioral public finance is inclined towards the very
foundation that furthermost deeply opposes subjects of wellbeing
examination in behavioral cash matters. In the typical supposition, what
customer preference is engaged as a repetitious significance of wellbeing
(i.e., uncertainty buyers are normal, then what they prefer is moreover fine
for them). Considering the brain research allows the likelihood that private
decisions don’t amplify welfare. Different cerebrum territories control
‘wanting’ decision and ‘liking’ - hedonic assessment (Berridge and
Robinson 2003). On the off chance that loving is genuine welfare, and at
that point, the neural peculiarity of these routines induces that it is practical
for judgments and wellbeing to be different. The reasonable spots are
decisions by young people and followers as well as potential oversights in
remarkable decisions; and as a matter of fact, when it is difficult to the
addition.
FORMAL FOUNDATIONS
The aim and purpose of the subject matter of behavioral economics is

not as simple as to just build the very settings of irregularities, as these
irregularities in reality are applied to provoke as well as induce the official
plan ‘B’ to sound decision assumptions. To a lot of people such
assumptions have risen lately.
Tremendous advancement has been completed in deriving from
unconventionalities and individualities to over-all expectations that are
methodical and may be associated to mark newfangled predictions. The
wide-ranging propositions that the most of the economists are reasonably
pleased with the ‘just’ rose after years of cautious consideration and
improvement. Behavioral economics concepts and models will become
sophisticated, broader, and appreciated; hence, it has been taken into the
consideration by the masses of bright researchers and scholars.
The official ‘double system’ concepts, is illustrated on ancient
dichotomies in the science of cerebrum psychology. These concepts for the
most part hold improvement by one of the frameworks and make conduct
of an alternate framework programmed (or nearsighted) and nonstrategic,
so that enlargements of standard instruments could be utilized. In
Kahneman (2003) view the systems, i.e., system 1 and system 2 are
intuitive and deliberative. According to Fudenberg and Levine (2006) they
are long-run and short-run. While, Loewenstein and O’Donoghue (2004)
refer them as being deliberative and effective. Bernheim and Rangel
(2005) view the systems as hot and cold. Benhabib and Bisin (2005) refer
them as controlled and automatic. Brocas and Carrillo (2005) say that a
myopic ‘agent’ system has private information about utility, so a farsighted
‘principal’ creates the respective mechanisms for the myopic agents to
reveal their information.
Initially, analysts established the outflows ‘limited soundness’ and
‘technical judiciousness’ and seeded the seeds for the looks at reasonability
restrains that are the material of this chapter. The concepts proposed by
Rubinstein (2003) are regularly adjusted to a particular money related
application and delineate the numerical eventual outcome of particular
22 Tansif ur Rehman
counts which embody impartiality limits. Although these concepts are

extensively known, generally speaking they have not incited a kept up the
task of investigation, seminal work on bargaining has. His disenchantment
with carelessness to concepts dictated by ‘similarity judgment’, a central
thought in brain research is clearly evident in his elaboration regarding the
‘time preference models’.
FIELD STUDIES
A decent illustration that highlights enthusiasm towards is time

preferences investigation of wellbeing like club participations. The
wellbeing clubs permit individuals to use a settled entirety for a yearly
enrollment, on the other hand pays for everyone in order to visit freely.
People who have hyperbolically marked, however, are ‘gullible’ regarding
their upcoming hyperbolic disposition, will employ for broad cost yearly
plans with for each expense of visits that are underneath negligible expense
(Della Vigna and Malmendier 2005).
The studies propelled by confirmation of ‘projection bias’ - the thought
that one’s present passionate state pushes a lot of impact on an estimation
of one’s upcoming conditions. An impacting and fundamental area of the
study in a field is to do testing in settings. The tests conducted in a field are
drawn from hypothetical clear examinations conducted in school labs, to
make an estimation of solution effects in field districts where these effects
are of extraordinary premium (Conlin, O’Donoghue and Vogelsang 2005).
IMPORTING ‘NEW’ PSYCHOLOGY
The early researchers demonstrate that a thin scope of cognitive

psychology, generally from choice exploration exists. Other psychological
concepts like ‘memory’, which are hardly new in psychology are not new
to economists, are also commencing to be applied (Wilson 2004).
Consideration is maybe a definitive rare cognitive asset. A couple of

studies have begun to investigate its suggestions for mass trading.
Attention getting occasions, irregular exchanging earnings, or broadcast
events comrade with purchases by single speculators (Odean and Barber
2005). Businesses respond less to income advertisements established on
Fridays as compared to other days; organizations seem to get an
understanding of that one as well (Della Vigna and Pollett 2005). There is
a structure proposed where an organization must select benchmark quality
aspects of their things with a specific end goal to get the attention of the
buyers (Falkinger 2005).
The theoretical concept of attribution depicts how people commonly
understand the reasons from effects. Various researches show precise
misattributions, taking an example of, the inclination to over attribute
motivation to individual movements as opposed to exogenous structural
peculiarities. For instance, oil organization executives are remunerated
when oil costs go up; however, are not punished when costs go down
(Bertrand and Mullainathan 2001). Creators of money making concerns
papers whose names come prior to an arrangement of creators profit
excessively by different measures, despite the fact that the request is
practically constantly in order (Einav and Yariv 2005).
Classification alludes to the path in which the mind structures are
classified. An essential property of classifications is that probabilistic proof
which is frail can tip understandings starting with one class, then on to the
next, delivering huge impacts from minute causes. Fryer and Jackson
(2004) have been successful in developing an ‘optimal categorization
model’ and they have elaborated its respective application with regards to
the labor market discrimination.
NEUROECONOMICS
Neuroeconomics is the creation of microeconomics in purpose of

enthusiasm of work conducted on neural system. It is standard to be far-
fetched about whether there is a need of economists to get information
24 Tansif ur Rehman
totally where in the cerebrum reckonings jump out at making expectations

about the financial conduct, for example, reactions to costs. At the same
time we should keep in mind that the revealed inclination facet which
intentionally declined ‘endeavoring to unveil the epitome of things’ (in
Pareto’s declaration) was grasped around a 100 years ago. It was almost
impossible at that time to make the respective causal interventions as well
as measurements that can be made today with pharmacological and
hormone changes, genetic testing in species, gene knockouts in mice, and
even Functional Magnetic Resonance Imaging (fMRI),
Magnetoencephalography (MEG), Positron Emission Tomography (PET),
Transcranial Magnetic Stimulation (TMS), etc. Technological substitution
now suggests that economists might learn something from these new
measurements pertaining choice.
Some crucial facts about the psyche can run financial exhibiting (as in
‘twofold methodology’ models). Territories of these assumptions are
interlined and establish particular ‘circuits’ for performing diverse
endeavors. The human brain is similar to a mind of primate with more neo-
cortex. To disagree this vital conviction is compared to developments. The
way that various mankind and animal mind set (brain) configurations are
bestowed intimates that human conduct for the most part includes
communication between ‘old’ mind area and all the more recently
developed ones. The plummet of people from different species likewise
implies we may take in approximately around human behavior from
diverse classes. Taking an example, rats get reliant on drugs that people get
to be organically dependent on, which intimates that old prize hardware
imparted by rodent and human brains is a piece of human compulsion.
While we regularly consider complex conduct as planned, assets for
‘executive function’ or ‘cognitive control’ are somewhat rare (packed in
the cingulate). Subsequently, the mind and body are great at designating
parts of complex conduct into programmed courses of action. For instance,
a person who is doing a job of the driver is surely overwhelmed by oral
orders, visual symbols, and memory required for the different tracks as
well as the supremacy of other pertinent aspects. Numerous mishaps result
throughout this learning methodology. At the same time in a couple of
years, driving gets to be effortless to the point that drivers can surely
verbalize and utilize though steadily driving. Neuroeconomics is not
proposed to test theories related to finances in a tried and true way to a
certain extent. Seen along these lines, Neuroeconomics is prone to deliver
three sorts of discoveries: Evidence for judicious decision courses of
action; confirmation supporting behavioral matters of trade and profit
methodologies as well as parameters; proof of distinctive sorts of building
which don’t fit effortlessly into the standard demonstrating classes.
Results Consistent with Rational Choice
In the choice regions, where advancement at the same time as had very
much to mold compartment type of group frameworks that are critical for
living (support, sexuality and welfare). The past analysts run across
neurons in monkey sidelong Lateral Intraparietal Cortex (LIP) which fire at
a rate that is just about consummately connected with the normal
estimation of an approaching juicy prize, activated by a monkey eye
development (saccade) (Platt and Glimcher 1999). Monkeys can
additionally figure out how to surmise blended methods in recreations,
presumably utilizing summed up calculations (Lee, McGreevy and
Barraclough 2005). Neuroscientists are additionally discovering neurons
that seem to express estimations of decisions (Padoa-Schioppa and Assad
2005).
Results Consistent with Behavioral Economics
The additional neural evidence is at the present inexplicably consistent

with behavioral matters of trade and profit thoughts. Two frameworks
included in time marking down, predictable with a semi hyperbolic β-δ
hypothesis. Low offers in final offer amusements (contrasted with close
equivalent offers) differentially enact enthusiastic regions (insula),
arranging and assessment zones Dorsolateral Prefrontal Cortex (DLPFC)
26 Tansif ur Rehman
and clash determination territories (i.e., front cingulate). The activity

pertains to the insula and DLPFC estimate whether options will be cast off
or not. This effect is dependable with societal inclination shows in which
money and repugnance for treachery or lopsidedness are traded off (by the
cingulate) (Sanfey et al., 2003). Vulnerability differentially authorizes the
orbitofrontal cortex and the amygdala, an ‘alertness’ area which responds
rapidly to repulsive shocks and is discriminating in energetic planning and
learning. The way that Orbitofrontal Cortex (OFC) development is firmer
and all the more continuing for obscure choices hint that people with
mischief to the OFC may not show mediocre cases of dubious
offensiveness (Hsu et al., 2005).
New Constructs and Ideas
The impact of neuroeconomics will surely not start apparently from

settling an open consideration between a sensible choice and behavioral
economics as it will begin by making an itemized experimental premise for
constructs which are new in economic matters.
A brain development in agreement will be exceedingly shielded when
players are making their own choices, appeared differently in relation to
when they are confining feelings about the choices of others, on the
grounds that making exact convictions obliges them to reenact decisions by
others. Bhatt and Camerer (2005) discovered almost no distinction in mind
movement in the middle of picking and speculating in periods in which
players’ decisions and convictions were in balance. Along these lines,
amusement theoretic harmony is a ‘mind set’ and also a detention on the
reliability of trust and most excellent effect.
Causing Preferences
A couple of areas of the psyche are dynamic all through money related
decision making. For instance, the insula which is enacted by the low final
offer is likewise initiated by substantial distresses like torment and

nauseate; so when an individual stated an option is ‘unbelievably small’
they may make conversation. The valuation of a consumption that is
frequently considered a fundamental preference may really be the center
period of an organic procedure.
The hormone of oxytocin is incorporated in social holding and is
included in examinations of trust entertainments (Zak et al., 2005).
Enthusiastic states which influenced how individuals estimated
merchandise they were enriched with (turning around the average
‘endowment effect’ in which possessed products are esteemed all the more
profoundly).
Subjects recollect either basic (two-digit) or bothersome (seven-digit)
number based digits of strings as they run by provisions that were tempting
or ethical. Overburdening the controller framework with the additionally
burdened 7-digit memory undertaking prompted more utilization of the
enticing sustenance. The least complex dialect of theory of preference may
state that the bothersome seven-digit nervous system errand ‘changed
inclination’ (Shiv and Fedorikhin 1999).
CONCLUSION
Behavioral economics has enhanced our knowledge to a great extent

regarding the very basics of economic behavior. During this process, it has
surely strengthened our appreciation for the game theory as well as the
rational actor model, as a behavioral methodology is rooted in these
respective constructs. Numerous ideas have been proposed, which by and
large adjoin more than one constraint to form the respective choices,
together with risk, doubt and time.
Foremost examples in behavioral economics comprised a ‘franchise’
of arrangements to applied domains, (for instance, finance and work
matters related to economics), change of theoretical models, and
comprising different types of brain science (e.g., thought, attribution,
order, and limited memory).
28 Tansif ur Rehman
Meanwhile, neuroeconomics, a discipline of behavioral economics,

makes use of unobtrusive components of neural development to prompt the
very micro-establishments thus involved.
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Chapter 3
A NEW LOOK AT THE ULTIMATUM GAME:

RELATIONAL AND INDIVIDUAL
DIFFERENCES UNDERLYING THE DIVISION
OF GAINS AND LOSSES
Renata M. Heilman*
Department of Psychology, Babes-Bolyai University, Romania
ABSTRACT
Fairness shapes the emergence and development of most social

relationships. In daily life, fairness in distributing resources is extremely
relevant. Next to distributing resources, however, the distribution of
losses often occurs among business or life partners. From a historic point
of view, most research in the decision-making field has examined fairness
in distributing resources in individual decisions, and devoted little
attention to the distribution of losses. Moreover, only scant research
explored the distribution of gains when groups rather than individuals
make the choices. Considering that people live in highly complex social
environments, many significant decisions are, in fact, made in the context
*
Corresponding Author Email: renataheilman@psychology.ro.
32 Renata M. Heilman
of social interactions and involved both gains and losses. By investigating

the underlying precursors of fair behaviors (for individual and group
decision-making), scholars can reach a better understanding of the
evolution of moral behaviors and the roles they play in current societies.
The field of behavioral economics studies the effects of
psychological, emotional, cognitive and social factors on various types of
financial decision settings, including social decisions and fairness. Most
behavioral economics laboratory studies have been conducted using
simple decision-making tasks, called games. The Ultimatum Game (UG)
is a decision-making task that examines decisions about fairness as well
as people’s response to (un)fair behavior. Even after more than thirty
years of research in the context of the UG, there are still open questions
that require further investigation.
The present chapter addresses some of the topics that are currently
understudied and focuses on two major organizational implications of
fairness related decisions. First, most UG studies are limited in terms of
the domain of decisions, namely gains or losses. In the field of behavioral
economics, fairness preferences have been extensively investigated in the
context of asset distribution (i.e., how people share gains).
In spite of the fact that in real life situations it is quite often that
people have to share losses, the context of liability sharing has received
little attention from the research community. Second, the necessity to
investigate relational factors, in addition to individual differences, for a
better understanding of fairness social decisions. Recent research on
group rationality shows that collaboration among individuals is a
prerequisite to decision quality. In the organizational research literature,
factors that promote or inhibit collaboration among team members have
been widely investigated, yet little is known about how collaboration
influences the distribution of gains and losses.
By exploring these two organizational implications in relation with
laboratory and field studies, the current chapter will bridge behavioral
economics with more applied fields, such as organizational behavior and
human resources management.
Keywords: behavioral economics, fairness judgments, gains and losses,

ultimatum game
ACRONYMS
ER Emotion Regulation
UB Ultimatum Game
A New Look at the Ultimatum Game 33
A BEHAVIORAL ECONOMICS PERSPECTIVE

ON FAIRNESS JUDGMENTS
Fairness shapes the emergence and development of most social

relationships. Archaeological and ethnographic evidence suggest that
fairness in allocation of resources might provide an evolutionary
advantage. In daily life, fairness in distributing resources is extremely
relevant (Van den Bergh & Dewitte, 2006). For instance, decisions about
distributions of resources are depicted by situations in which a manager
has to decide how to allocate salary rises from a limited available amount
of money or how medical resources should be divided among patients with
different health needs. By investigating the underlying precursors of fair
behaviors, scholars can reach a better understanding of the evolution of
moral behaviors and the roles they play in current societies.
Next to distributing resources, however, the distribution of losses often
occurs among business or life partners. From a historic point of view, most
research in the decision-making field has examined fairness in distributing
resources in individual decisions, and devoted little or no attention to the
distribution of losses. Moreover, considering that people live in highly
complex social environments, many significant decisions are, in fact, made
in the context of social interactions. Therefore, the outcomes of some
social decisions are dependent on the preferences and choices of others.
Social decision scenarios are encountered on a daily basis, such as deciding
whether to trust someone or not, to punish someone for an unfair treatment
or to reciprocate in response to someone’s positive or negative actions.
From the social decisions category, significant theoretical and empirical
research projects addressed the issue of fairness in the context of
distributing limited resources among multiple individuals (Rilling &
Sanfey, 2011). In all these social decisional contexts, the norms related to
fairness are highly important.
The field of behavioral economics studies the effects of psychological,
emotional, cognitive and social factors on various types of financial
decision settings, including social decisions and fairness. For a long time,
the scientific study of decision-making exclusively belonged to the field of

economics, but in the last decades, however, our decisions became an
interdisciplinary topic of research. The need to expand the pure economic
models of decision-making, by adding variables related to individual
differences in emotions, personality or risk preferences, motivated the
appearance of behavioral economics (Camerer & Loewenstein, 2004).
Behavioral economics combines theories and research methods from
the fields of economics, psychology, statistics, neuroscience or political
sciences in the attempt to provide thorough explanations regarding our
choices and also to help people improve their decision-making skills
(Hansson, 2005). There are many different research topics covered by
behavioral economics scholars. Just to name a few of these topics, the list
can include: individual decision-making under risk and uncertainty, social
decisions that involve fairness, trust, cooperation or reciprocity, moral
dilemmas or inter-temporal choices. In a nutshell, in all major areas of our
lives, we can identify behavioral economics applications.
This chapter has two related objectives, namely (1) to explore how
individual differences impact the distribution of gains versus losses and (2)
to explore relational mechanisms and epiphenomena that influence the
distribution of gains and losses.
AN INTRODUCTION TO THE ULTIMATUM GAME
In the last decades, economic games have been successfully used to

understand critical aspects of human decision-making, including pro-social
behaviors such as fairness, strategic cooperation, betrayal aversion, trust
and altruism (Aimone & Houser, 2008; Fehr & Rockenbach, 2003;
Haselhuhn & Mellers, 2005; Kiyonari & Barclay, 2008).
Economic games have become an essential tool for exploring
decisional behavior, on the one hand because of their simplicity and their
normative solutions, and on the other, as a result of the desire to
understand how people actually behave in situations of choice. The
Ultimatum Game (UG) illustrates the tension between the selfish motives
related to one's own interest and the reasons for reciprocity and fairness in
social decisional situations (Güth, Schmittberger & Schwarze, 1982). In
other words, the UG examines decisions about fairness as well as people’s
response to (un)fair behavior.
The UG’s standard form involves two players or decision-makers. The
first player, called the proposer, has to make an offer to the second player,
the responder, regarding the division of a certain sum of money. The
responder is allowed to either accept or reject the received offer. If the
offer is accepted, the money is divided between the two players according
to the offer made. However, if the responder chooses to decline the offer
received, none of the players receive anything. Most frequently, when
participating in an UG task, both players are informed regarding the rules
of the game, the amount of money that is to be shared and the
consequences of their possible actions (Guth & Kocher, 2014). Also, the
majority of experimental studies with the UG involve real money, put into
play by the experimenter.
Normative models of decision assume that the decision-maker is
rational, therefore motivated by the maximization of personal gain. Based
on these normative models, it would be expected for the proposer to offer
the minimum amount possible. Also, a rational responder should accept
any positive offer (Camerer & Fehr, 2006). Nevertheless, decision-makers
behave very differently from the economic predictions. Often the average
offers are about 50%, thus making proposers less self-interested than
expected. Responders, on the other hand, tend to reject unfair offers,
defined as less than 20% of the stake (Camerer, 2003; Chaudhuri, 2008;
Thaler, 1988). As a result of the intriguing behavioral data obtained using
this task, the UG is often invoked as a tool to prove the predictive limits of
the normative decisional models.
Many researchers formulated a series of theories in their quest to
explain these violations of economic predictions (Heilman, 2014; Heilman
& Kusev, 2017). One possible line of argumentation starts precisely from
the proposer’s maximization of self-interest. A rational proposer who is
motivated to gain as much as possible in the decisional task will try to
avoid the punishment incurred by the responder’s rejection punishment
(Chen et al., 2017; Hoffman, McCabe & Smith, 2008). From this
perspective, a proposer offering about half of the stake might be viewed as
rational. A rational proposer could anticipate that a responder faced with an
unfair offer might be dissatisfied with the sharing option and in return
punish the greedy proposer by rejecting the offer. Social norms of what is
considered to be a fair allocation, that would not elicit a rejection from the
responder, might be responsible for what appears to be generosity from the
proposer’s side (Chaudhuri, 2008).
Looking at the same behavioral results, namely fair or even generous
offers on the proposers’ side and rejection of unfair offers by the
responders, other authors argue for a different interpretation of UG
behavior. Studies indicate that most UG players might be motivated by
something else than self-maximization. Among the most frequently
invoked reasons are judgments of fairness and underlying intentions that
drive decision-makers (Loewenstein, Thompson & Bazerman, 1989).
Existing behavioral and neuroimaging data indicates fairness judgments
might be associated with a concern for reciprocity or inequity aversion
(Brosnan, 2011; Fehr & Schmidt, 1999; Rabin, 1993; Tricomi, Rangel,
Camerer & O’Doherty, 2010). Therefore, people’s behavior when required
to divide a gain might be marked by an innate sense of fairness.
There is a very influential category of behavioral theories in the UG
centered around the notion of inequity aversion (Bergh, 2008; Bolton &
Ockenfels, 2000; Fehr & Schmidt, 1999). Inequity aversion is usually
associated with negative reactions and triggers behaviors which sanction
unfair results, especially when the results are in her own disadvantage
(Fehr & Schmidt 1999).
The first models that addressed inequity aversion included only
reasons based on objective consequences, neglecting the subjective
motives of fair actions. Thus, they failed to faithfully predict the behavior
of decision-makers in all possible situations (Falk, Fehr & Fischbacher,
2003; Falk & Fischbacher, 2006; Falk, Fehr & Fischbacher, 2008). As a
result, these models have been modified and adapted to include key issues
related to the consequences of actions based on their underlying intentions
(Falk & Fischbacher, 2006). For instance, a study by Blount (1995) found
that people are more willing to accept lower offers when they are decided
by chance (i.e., the spin of a roulette wheel) compared to the situation in
which the proposer has direct control over the amount to offer the
responder. In a similar vein, other studies have shown that people accept
less generous offers that were generated by a computer game partner, while
reject similar offers from human partner (Knoch et al., 2006).
Considering the data from multiple independent studies, it is safe to
conclude that intentions behind the allocation of resources play a major
role in determining how fairness judgments and decisional outcomes are
made. Even in their extended variants, the inequity aversion models failed
to satisfactorily describe and predict decision-making. This has created the
ground for investigating a wide range of variables (i.e., social status, social
norms, emotions, biological factors) that could influence decisions in the
UG. Some of these factors will be reviewed in the following sections (for
other detailed presentations see Camerer, 2003; Chaudhuri, 2008; Güth &
Kocher, 2014).
Based on the behavioral results obtained playing the UG, the task has
established itself as one of the most powerful tools that highlight the
limitations of the normative models of decision-making by showing that
people frequently display fair behaviors (Güth & Kocher, 2014). Even after
more than thirty years of research in the context of the UG there are still
open questions that require further investigation. Underlying factors behind
the distribution of losses and relational aspects, in addition to individual
variables, represent two important lines of future research.
INDIVIDUAL DIFFERENCES IN THE ULTIMATUM GAME
Social status and property rights seem to have a very powerful effect
on UG behavior. The method used to allocate participants to either the
proposer or the responder role has a great influence on both players’
behavior. In the standard variants of the UG (Güth, Schmittberger &
Schwarze, 1982), people are randomly assigned the role of either the
proposer or the responder. However, an apparently small change in the
allocation of the role procedure leads to significant differences. Hoffman,

McCabe and Smith (1996b) used the performance on a trivia quiz to assign
the game roles – participants with higher scores on the quiz have earned
the right to play the proposer, thus making the first decision. The results of
the study showed that proposers who won their role made significantly
greedier offers to the responders, as opposed to the condition in which
roles were randomly assigned. Additionally, responders accepted more
unfair offers from proposers who outperformed them on the trivia quiz.
Other behavioral and neuroimaging studies confirmed the importance
in social status in affecting UG behavior (Guo et al., 2014; Hu et al., 2014;
Hu et al., 2015). These results imply that a sense of entitlement, recognized
by both parties, makes people adhere differently to social norms of
fairness, thus displaying changes in UG behavior (List & Cherry, 2008).
Leliveld, van Dijk and van Beest (2008) used three variations of the UG to
investigate the role of initial ownership of property in bargaining behavior
over play chips. In the “giving” condition the proposer was given the
whole quantity of chips to be divided with the responder. The “splitting”
condition required the chips to be located in the middle of the table, at
equal distance from both the proposer and the responder. The “taking”
condition assumed the location of the chips on the responder’s side of the
table. The general game instructions were standard, namely the proposer
had to make an allocation decision, which could be accepted or rejected by
the responder. Supporting the authors’ initial hypotheses, the results
showed that proposers made the most generous allocation offers to the
responders in the “taking” condition, whereas the “giving” condition
yielded the stingiest offers (Leliveld, van Dijk & van Beest, 2008).
Additionally, the game type effect on offers was mediated by participants’
feelings of entitlement over the initial property. Proposers felt they were
more entitled in the “giving” condition, while responders were considered
more entitled in the “taking” condition. These results provide an alternative
explanation for low offers.
The mainstream interpretation of unfair offers was based on the
proposer’s self-interest maximization. However, in light the results
presented by Leliveld, van Dijk and van Beest (2008) it is possible that
perceived entitlement affects offer levels: proposers who feel they are
entitled to a larger portion of the gain, will make smaller offers. A
following neuroimaging study (Wu et al., 2012) confirmed the behavioral
results pattern previously described (Leliveld, van Dijk & van Beest,
2008). In addition, the event-related potentials recorded from responders
confronted with disadvantageous offers demonstrate that initial ownership
influenced participants’ brain response to unfair asset allocation (Wu et al.,
2012).
Earlier studies (Hoffman et al., 1996a, b) have shown that simply
raising the stake from $10 to $100 does not lead to significant changes in
participants’ behavior. Instead, Munier & Zaharia (1998), using the
strategy method, on samples from Romania and France, revealed different
behavioral tendencies. The results showed that although the proposer’s
behavior did not change, with the modal offer being an equal division of
the money, the responders had lowered the minimum bid acceptance
threshold when there was a larger amount at stake. Therefore, responders
would have been willing to accept lower offers when more money was
involved (Munier & Zaharia, 1998). Slonim and Roth (1998) found similar
results, indicating that responders are willing to accept smaller offers as the
amount involved is higher.
Gender differences associated with offers and acceptance rates have
been extensively investigated. Results show that there is a general
tendency for women to be offered a smaller division on the initial amount,
compared to the offers made to men. Additionally, women display higher
overall acceptance rates, including for less advantageous offers (Eckel &
Grossman, 2001; Eckel, De Oliveira & Grossman, 2008; Solnick, 2001;
Solnick & Schweitzer, 1999). Solnick’s study (2001) highlighted the fact
that responders of both sexes claim higher bids from women than from
men. Gender differences in UG behavior, more specifically the fact that
women accept more offers, including unfair offers, have been speculated to
be related to the gender pay gap (Ge, Kankanhalli & Huang, 2015; Joshi,
Son & Roh, 2015; Webber & Canche, 2015). Future studies could look
directly at factors that contribute to the gender pay gap and to what extent
can those factors be associated with different decisional outcomes in the

UG (Heilman & Kusev, 2017).
Cultural differences have also been investigated in relation to fairness
concerns in the UG. Transcultural comparisons are relatively difficult to
make on the basis of available data, as there are at least two limits. First,
data from a country is usually collected from a single city, so researchers
cannot know whether the differences between two countries are greater
than the differences between two cities, or two regions, in the same
country. Second, specific cultural features are not considered, which may
partly explain the differences. Nevertheless, attempts have been made to
record behavioral data from participants around the globe and interpret
their behavioral patterns and differences between samples according to
cultural variables. An ambitious research project by Henrich and
coworkers (Henrich et al., 2001) collected data from 15 small-scale
societies over five continents. Their results show that there is more
variation in behavioral patterns than was previously reported in Western
society’s college sample studies. More importantly, the fairness norms that
apply to these societies seem to be shaped by the patterns of interactions in
everyday life (Henrich et al., 2001, 2005)
A more recent meta-analysis by Oosterbek and collaborators (2004)
also highlights the great differences between behaviors of participants from
different cultures. The meta-analysis includes data from 75 studies from
over 26 countries. Concerning proposers’ behavior, the authors did not find
significant differences between regions. Instead, responders have more
varied rejection rates: Asians have a higher rejection rate than the
Americans, and Americans in the West have lower rejection rates than
those in the East. The largest offers were made in Paraguay, with an
average offer of 51%, and a modal rejection rate of 0, and the most unfair
offers were made in Peru, where proposers offered 26% of the amount at
stake and the rejection rate was 4.80% (Oosterbek et al., 2004).
Social distance (i.e., being friends or strangers) is an important factor
influencing UG behavior. Proposers’ behavior varies depending whether
they know the responder or the game is played anonymously. Studies have
shown that anonymous proposers make smaller offers, thus being more
selfish (Charness & Gneezy, 2008; Kahneman, Knetsch & Thaler, 1986;
Wu, Leliveld & Zhou, 2011). Different experimental manipulations
resulting in various degrees of information that players have about each
other lead to the conclusion that fairness norms activation is facilitated by
the familiarity of the game partners. More aspects regarding the
importance of social distance and relational factors will be discussed in a
following section.
The studies reviewed in this section demonstrate the importance of the
UG in investigating decision-making behavior. It can also be noticed that
in the first two decades since the introduction of the decisional task,
methodological variables related to the administration of the task received
most attention. Recent years, however, have led to a reorientation of the
interest of behavioral economics researchers towards inter-individual
differences at the psychological level, especially emotions and personality
traits. Fairness related social norms are associated with people’s
expectations regarding how outcomes should be divided. Whenever these
expectations are violated, certain emotional reactions are triggered.
Until the last few decades, the study of emotions and their effects on
decisional outcomes has been largely ignored by the scientific community.
Scholars used to believe either that emotions have no real effect on
decisions or that they only negatively impact decisional outcomes (Cohen,
1982; Shafir, Simonson & Tversky, 1993). Methodological difficulties in
studying emotions were also a significant deterrent in pursuing the effects
of emotions on cognitive processes in general, and on human decision in
particular.
More recent technological and methodological advancements made it
possible for scholars to scientifically investigate the complex emotions-
cognition interactions. Therefore, during the last few decades, studies
focusing on the effect of emotions on decisions have flourished. Emotions
associated with fair allocations, on the proposer’s part and emotional
reactions triggered by (un)fair offers for the responder have been the focus
of numerous empirical studies (Güth & Kocher, 2014). When receiving an
unfair offer, the decision-maker experiences a conflict between the
cognitive goal of winning as much money as possible and the affective
objective of opposing the wrongness (Sanfey et al., 2003). In consequence,

negative affective responses to an unfair offer could dominate cognitive
motives and guide the decision towards rejecting the unfair offers.
This conclusion results from studies that have shown that there is a
positive correlation between the intensity of self-reported negative
affective reactions and the likelihood of rejecting an unfair offer (Bosman,
Sonnemans, & Zeelenberg, 2001; Oechssler, Roider & Schmitz, 2008;
Pillutla & Murningham, 1996). Although there are some mixed results
reported by various studies regarding the effects of specific negative
emotions on rejection rates, the general consensus is that emotional
reactions are one of the most important factors influencing decisional
outcomes and they should not be disregarded. For example,
nonpathological sadness was associated with lower acceptance rates of
unfair offers (Harle & Sanfey, 2007). In a clinical sample diagnosed with
major depression disorder participants displayed increased rationality, as
measured by the higher acceptance rate of unfair offers (Harle, Allen &
Sanfey, 2010). The level of anxiety has also been investigated in relation to
UG (Grecucci et al., 2013; Heilman, 2014; Wu et al., 2013). High levels of
trait anxiety (Grecucci et al., 2013) as well as clinical anxiety disorders
(Wu et al., 2013) have been associated with an increased likelihood of
accepting unfair offers. Looking at the impact of emotions in the UG from
a different perspective, Xiao and Houser (2005) found that the rejection
rate declined, given that responders had the opportunity to directly convey
to the proposers their negative emotions over the received offers.
Numerous studies have addressed the factors that could have affected
the decision-making behavior of responders, including factors related to
their emotional responses, as reviewed in the previous paragraphs.
However, studies focusing on affective factors in relation to proposers’
behavior were far fewer (Cappelletti, Güth & Ploner, 2008). Stephen and
Pham (2008) have shown that proposers address different decision-making
strategies in the UG depending on the extent to which they rely on their
affective states to inform their decision. There have also been several
studies addressing the biological factors involved in proposers’ decisions.
More specifically, it has been shown that proposers who have lower levels
of omega-3 fatty acids or lower serotonin levels make more frequently

unfair offers to their responders (Emanuele et al., 2008; Emanuele et al.,
2009). Other research groups addressed biological variables in relation to
decision-makers’ behavior in the UG. For example, physiological
manifestations of emotions have been linked to the acceptance rate of
offers, leading to the idea that rejection of unfair offers is associated with
increased emotional arousal.
A research by van’t Wout and coworkers’ reports differences in the
electrodermal reactivity of responders faced with an unfair offer, either
from a human participant or randomly generated by a computer.
Specifically, responders exhibit a more intense electrodermal response to
an unfair offer from a human proposer compared to reactions to randomly
generated unfair offers, proving support for the account that underlying
intentions behind UG offers are taken into consideration when making
fairness judgments and reacting to (un)fair behaviors (van’t Wout et al.,
2006). Other studies have linked increased rejection rates of unfair offers
to low levels of omega-3 fatty acids (Emanuele et al., 2009), low serotonin
levels (Crockett et al., 2008; Emanuele et al., 2008), or even additive
genetic effects (Wallace et al., 2007). Existing studies revealed
contradictory effects of sex hormones on women’s and men’s decisions.
While higher levels of estrogen or testosterone do not affect the acceptance
rates of women (Zethraeus et al., 2009), for men it was found that rejection
of unfair offers is positively correlated with testosterone levels (Burnham,
2007; Van den Bergh & Dewitte, 2006). Intranasal oxytocin administration
was found to be associated with increased fair and generous offers (Zak,
Stanton & Ahmadi, 2007), whereas exogenous administration of
testosterone leads to a decrease in offers generosity (Zak et al., 2009).
Another interesting result regarding testosterone action was that men with
elevated testosterone levels were also more likely to use their own money
to punish players who behaved unfair towards them (Zak et al., 2009).
Although emotions are a significant part of someone’s life, people are
not entirely controlled by their emotions. People have a large repertoire of
regulation strategies that help them alter their emotional reactions. On one
hand, successful use of these regulatory strategies constitutes the premises
of good social, physical and emotional functioning. On the other hand,

dysfunctional use of emotion regulation (ER) strategies can often lead to
an increased risk of developing symptoms of several major categories of
psychiatric disorders (Davidson, Jackson, & Kalin, 2000; Phillips,
Ladouceur, & Drevets, 2008). The process model of emotions is
considered to be one of the most influential approaches in the study of
emotions and ER strategies (Gross, 1998, 2002). ER refers to all the
actions people can take to control which emotion they have, when they
have them and how they experience and express them (Gross, 2002). ER
strategies have started by being extensively investigated in the
developmental literature (Campos et al., 1983; Campos, Campos & Barrett,
1989; Thompson 1990, 1991), with an increasing focus on the topic related
to adult ER during the last two decades (i.e., Gross & Levenson, 1993;
Gross & Thompson, 2007; Izard, 1990; Ochsner & Gross, 2005).
Individual differences in two important regulatory strategies, namely
cognitive reappraisal and expressive suppression, have been associated
with a wide range of effects on human functioning, including social,
affective, cognitive and physiological outcomes, or even psychological
well-being (John & Gross, 2004). Considering the complex interactions
between emotions, ER and their outcomes in our daily lives, it is possible
to presume that some cognitive or decisional effects that have been
traditionally attributed to acute emotions, might in fact be mediated by the
use of certain regulatory strategies (Heilman, Miu & Houser, 2016). There
is already neural and behavioral evidence that ER is associated with
response to unfair offers in the UG (Rilling & Sanfey, 2011).
Another very prolific study direction involved neuroimaging methods,
which outlined the nervous structures involved in the UG players’
decision. Sanfey and coworkers (2003) used functional magnetic resonance
imaging (fMRI) in relation to UG behavior. Their study indicated an
increased activation in the anterior insula, a nervous structure involved in
the emotional processing of anger and disgust, associated with the
tendency to reject unfair offers. In contrast, accepting unfair offers is
associated with increased activation in the dorsolateral prefrontal cortex
(DLPFC), whose role in self-regulation is already widely recognized
(Mitchell et al., 2007; Sanfey et al., 2003). It has also been shown that
accepting fair or equal money-sharing offers is associated with activity in
the brain reward system, including the amygdala, the ventral striatum and
the ventromedial prefrontal cortex (VMPFC) (Sanfey et al., 2003;
Tabibnia, Satpute, & Lieberman, 2008). Patients with VMPFC lesions
reject more frequently unfair offers, compared to a normal control group
(Koenigs & Tranel, 2007). Temporary inhibition of DLPFC reduces
responders’ tendency to reject unfair offers (Knoch et al., 2006; Knoch et
al., 2008).
In conclusion, there is ample evidence from behavioral economics
studies to document the impact of individual differences in emotional
reactivity on decisional behavior in the UG. Since emotions are such an
important component of the UG decisional processes, it is safe to assume
that whatever strategies are used to control emotional reactions might also
influence decisional outcomes. Recent studies, using the UG or other
decisional tasks support the idea that the effects of particular emotions on
the decisional behavior might be mediated by emotion regulation strategies
(Crockett et al., 2008; Heilman et al., 2010; Kahneman & Frederick, 2007;
Miu & Crisan, 2011). An experimental study that used a negotiation
situation similar to the UG showed that individual differences in emotion
regulation explain 55% of the negotiator’s profit margin (Yurtsever, 2008).
Although this research has opened a new direction of investigation, there
are still very few studies to directly test the role of individual differences in
regulatory strategies in UG behavior.
The UG is one of the most used decision-making tasks derived from
behavioral economics. In spite of the multitude of existing papers devoted
to the UG, important aspects related to fairness in allocations have been
less studied. In the following sections of this chapter the aim to address
two important, yet understudied topics: (1) individual differences
underlying sharing of losses compared to gains; (2) adding relational
aspects to the general context of fairness for gain and loss allocations. By
reviewing the limited literature, this chapter tries to bridge behavioral
economics with more applied fields, such as organizational behavior and
human resources management.
SHARING GAINS AND LOSSES IN THE ULTIMATUM GAME
One particular issue limiting most UG studies is the domain of

decisions, namely gains or losses. In the field of behavioral economics,
fairness preferences have been extensively investigated in the context of
asset distribution (i.e., how people share gains). In spite of the fact that in
real life situations it is quite often that people have to share losses, the
context of liability sharing has received very little attention from the
research community. Equitable distribution of both liabilities and gains are
critical contributors to social justice (Zhou & Wu, 2011). For instance,
various economic conditions can cause budget shortfalls which force
organizations to reduce expenditures and to relocate remaining available
resources. Managers must decide to how to cut the budget for different
departments. Under what circumstances will people consider these cuts to
be fairly divided? Are there different factors accounting for fair behavior in
sharing gains compared to the situation of a liability sharing? Both scholars
and economic agents could be interested in finding answers to these
questions.
Bargaining over losses may conduct to different results compared to
gains sharing, possibly due to loss aversion. The concept of loss aversion
arose from Prospect Theory (Kahneman & Tversky, 1979) and it describes
how individuals evaluate their own outcomes in terms of potential gains
and losses. People perceive losses as more unpleasant than they perceive
commensurate gains as pleasant. In consequence, people are more inclined
to prevent a loss than to obtain an equivalent gain (Kahneman, 1992;
Kahneman & Tversky, 1979; Tversky & Kahneman, 1992). Other studies
have documented the framing effects, namely formulating information in
terms of gains or losses, on decision-making (De Dreu et al., 1994; De
Martino et al., 2006; Roiser et al., 2009; Tversky & Kahneman, 1981).
The focus of this section will be on behavioral and neuroimaging
studies investigating differences in UG behavior due to the domain of
decision-making. Camerer and coworkers (Camerer et al., 1993) conducted
a sequential bargaining study in which participants bargained over the
allocation of losses. Based on their results and corroborated with previous
research using similar methodology, the authors concluded that proposers

made similar offers in gain and loss condition, while responders rejected
more offers in the loss setting (Camerer et al., 1993). More recent studies
do not provide direct evidence for this conclusion and build a case for a
more nuanced effect of decision domain on resources allocations and
underlying fairness perceptions.
Using UG methodology in loss context, Boushey (2005) found that
proposers offered a higher proportion of the loss to the responders when
the loss came from an earned endowment compared to a loss that came
from an endowment that was simply given. Buchan and collaborators
(Buchan et al., 2005) asked participants to play two rounds of UG, one
round in each role, either as a proposer or as a responder. When playing the
proposer’s part, participants were required to state how much money out of
$100 they would be willing to offer the responder (i.e., gain condition) or
how much should the responder pay for a $100 loss (i.e., loss condition).
Their results from two related experiments consistently show that people
both demand and offer more when bargaining over losses than over gains
(Buchan et al., 2005).
In a similar vein, Lusk and Hudson (2010) directly compared UG
offers in gain and loss settings. The data indicated that proposers in the loss
UG setting made offers that were more in their own advantage than
proposers in the gain UG setting. Lusk and Hudson’s study (2010) offers
direct evidence supporting that claim that people use different strategies to
share gains as opposed to sharing losses, at least partly due to loss
aversion.
Zhou and Wu (2011) conducted a series of three experiments
confirming previous behavioral results regarding differences between
decision domains. Looking specifically at responder’s behavior, the
authors show that people exhibit a higher demand for fairness when
sharing losses, as indicated by a higher rejection rate of unfair offers under
loss condition. The study also reports that subjective ratings of unfair
losses were perceived to be more unfair as unfair gains. As the authors
conclude, their research indicates that people are willing to suffer financial
losses, in the forms of missing out on a profit or paying more than fair
share, to pursue justice in wealth allocation or liability sharing (Zhou &

Wu, 2011). Following on their behavioral results, Wu and collaborators
(Wu et al., 2014) used fMRI in addition to the behavioral study protocol.
The behavioral results of the two studies are largely compatible. The fMRI
data provide additional information regarding brain structures involved in
perception of fairness in a loss UG. More specifically, the study found an
enhanced negative correlation between fairness and activation in the
DLPFC during the loss decisional domain as compared to the gain domain
(Wu et al., 2014).
Another neuroimaging study employing the same UG methodology
yielded similar behavioral and neural activation pattern results (Guo et al.,
2013). Taken together, neuroimaging data suggests that participants
experienced more unfairness in the UG and a stronger desire to sanction
social norm violations in the loss context than in the gain context, inducing
more fairness-related neural activity when rejecting unfair losses than
unfair gains (Guo et al., 2013).
Most of the studies reviewed in this section support the claim than
decision-making domain (i.e., gain versus loss) in highly relevant to how
fairness is perceived. More specifically, it appears that under adversity,
liability sharing, people manifest an increased demand for fairness, as
would be predicted by Prospect Theory and the concept of loss aversion. It
is possible that the increased importance of fairness in the loss domain has
evolutionary roots. Humans have the capacity to develop social fairness
norms that can be applied to large groups of genetically unrelated
individuals and to enforce these social norms through strong reciprocity.
The evolution of cooperation and other pro-social behaviors, in human and
non-human groups, depends greatly on strong reciprocity (Fehr,
Fischbacher & Gachter, 2002; Fehr & Fischbacher, 2003).
Strong reciprocity entails a combination rewarding others for
cooperative, norm-abiding behaviors while at the same time punish, even
at a personal cost, for those who break the norms. In the UG, breaking the
norms of fairness in the context of loss sharing is more severely
sanctioned, suggesting that under adversity is even more urgent that
individuals obey the norms.
Allocation of losses between two or more individuals has received

surprisingly little empirical support, in spite of the fact that many personal
and organizational events require people to share a loss. What existing
results indicate is that fairness concerns matter differently in contexts of
gains and losses. The handful of studies which have dealt with sharing of
losses focused mainly on financial resources. Although there are numerous
real-life situations that require people to divide a loss between them, other
types of resources could also be investigated (i.e., time, cognitive
resources, and other material resources). Both in private lives as well as in
business contexts people are required to share all sorts of gains or losses. It
could be worth investigating if there are differences between how people
perceive fairness norms regarding the division of financial versus non-
financial resources.
RELATIONAL MECHANISMS IN THE

ALLOCATION OF GAINS AND LOSSES
The standard form of the UG is a one-shot interaction between the two

players, with no other way to collaborate than through their offers or
responses to received offers. This aspect of the task limits its application to
a rather narrow category of social interactions. The research community
largely neglected the impact that repeated games experience might have on
decision-makers. Earlier studies found little evidence supporting the idea
that decisional patterns in the UG might change over time (Roth, 1995;
Slonim & Roth, 1998). However, more recent studies indicate that
responders’ behavior might be affected by repeated play and previous
experience (Andreoni & Blanchard, 2006; Armantier, 2006; Cooper &
Dutcher, 2011; Duffy & Feltovich, 1999; List & Cherry, 2000).
A meta-study by Cooper and Dutcher (2011) using repeated play UG
revealed the fact that responders’ rejection rates depend on previous
experience as well as the magnitude of the offer. For smaller offers (i.e.,
less than 20% of the pie to share) repeated games result in an increase in
rejection rates, whereas more generous offers are accepted more frequently
as experience increases. The proposers’ behavior also changes over time,
manifesting a reduction in unfair offers frequencies (Cooper & Dutcher,
2011). Taking these results into consideration, the data mostly supports the
idea that decision-makers learn from past experience and adapt their
behavior accordingly. Although more studies are needed to experimentally
investigate the dynamic nature of other-regarding behavior, it is safe to
assume that similar results would also be found in more ecological settings.
This again highlights the importance of extending laboratory research into
real-life environments, while also considering individual and relational
factors that might come into play and shape social interactions.
Although not directly related to UG studies, other investigative
projects approached the topic of allocation of gains and losses from a more
social and organizational psychology perspective. These studies focused
mainly on relational factors among individuals and how past and prospect
of future interactions would shape their decisions to share benefits and
liabilities. It has been suggested (Deutsch, 1975) that the goal or type of
the relationship that exists between parties would be a critical factor in
determining how burdens and benefits are shared. Supporting this
suggestion, Austin (1980) found that people with a pre-existing social
relationship were more likely to prefer equal distributions. The same
distribution preference holds for people who expect future social
interactions (Greenberg, 1979; Shapiro, 1975). Long-term relationship
between people promotes a more other-regarding behavior, sometimes
including sacrificing personal well-being for the benefit of the other
(Sondak, Neale & Pinkley, 1995). In a negotiation of burdens and benefits
study, Sondak et al., (1995) explore the role of valence of the resources and
negotiators’ relative contributions to those resources. Their results indicate
that equity norms prevail in allocation of burdens, whereas equality norms
better explain allocation of benefits. Corroborating the results of the
studies that have directly investigated the relational factors between
decision-makers to the UG literature emphasizes the need to further
investigate social variables in the UG and in fairness decisions in general.
The standard one-shot form of the UG misses out on all the potential social
and relational factors that contribute to fairness related judgments and

behaviors.
Collaboration between individuals is a prerequisite to successfully
accomplish a large variety of tasks, whether they relate to one’s personal
life or work environment. In the organizational research literature, factors
that promote or inhibit collaboration between team members have been
intensely investigated. Some of these relational factors that considered to
be directly relevant for allocation decisions include psychological safety
and intragroup conflict.
People in an organization share not only a working environment but
they also have a common relational history. Psychological safety refers to
perceptions of the consequences of taking interpersonal risks in a particular
context, such as a workplace (Edmondson & Lei, 2014). Psychological
safety has been associated with sharing of knowledge and information,
expressing suggestions for organizational development or taking the
initiative to develop new products or services. All these outcomes are then
related to positive effects on team performance and learning behavior
(Edmondson & Lei, 2014). As psychological safety is a key indicator of
the quality of social relationships, it is likely that it influences more than
the distribution of cognitive resources. The existing literature provides
limited insights regarding how psychological safety is built or how it can
be destroyed. Considering that trust and collaboration are relevant to
psychological safety, researchers may wish to examine other pro-social
behaviors, such as fairness, as an antecedent or consequence of
psychological safety.
Both the behavioral economics and organizational psychology research
communities would benefit if UG methodologies and fairness related
studies would be expanded to include the potential effects of psychological
safety in fairness judgments and allocation of losses and gains.
Additionally, empirical endeavors dedicated to other types of resources
besides financial outcomes, such as cognitive resources or time, could shed
some light on how people relate to these various types of resources and
whether they have the same fairness related norms for money as they do
for knowledge or time.
Other lines of empirical investigations looked at factors related to
different types of intragroup conflict. Negative emotions are frequently an
integral part of conflicts. Research dissociates between two general forms
of conflict that can appear between group members, namely task and
relationship conflict (Yang & Mossholder, 2004). Task conflict appears
when group members have different opinions about the task being
performed, whereas relationship conflict involves perceived tension and
frustration about personal differences in personality, attitudes or
preferences. Although both types of conflict can be associated with
reduced performance, the more detrimental effects of relationship conflict
have received ample experimental support (De Dreu & Weingart, 2003).
Emotionality is an intricate component of intragroup conflict. How
group members regulate emotions directly affects the quality of their
interactions and can have subsequent effects on how material and cognitive
resources are shared among the group members. Since emotional reactions
and individual differences in their regulatory preferences are frequently
encountered in working groups, it can be argued that the effects of
emotions associated with intragroup conflict might influence fairness
related behaviors and are, therefore, worthy of additional empirical
investigation.
CONCLUDING REMARKS AND

FUTURE DIRECTIONS OF INVESTIGATION
Human behaviors in social decision-making contexts are largely driven

by fairness considerations. People are willing to accept unequal divisions
of gains or losses if they consider them to be fair. At the same time, unfair
but positive sharing schemas are punished through rejection, even at a
direct cost for the punishers. Investigating all the individual or relational
factors that come into play when making fairness related judgments
represents a major research preoccupation for scholars from psychology,

economics or anthropology. Laboratory based studies constitute departure
points for more ecological research as well as recommendations and
guidelines for organizational practices.
Over the past few decades, there has been a steady growth in the
interest in how social and emotional information affects economic
decision-making. Social decision-making often requires people to integrate
several aspects of the choice scenario. Some of this information may be
objective, such as the amount of money discussed in a negotiation, whereas
some information may be more subjective, for instance the quality of past
interactions with the same partner. It is well-known that people’s choices
can be influenced by irrelevant information, such as how a problem is
framed (Tversky & Kahneman, 1981). The mechanisms through which
background information in social decision contexts play a role in
decisional outcome are less well investigated.
The purpose of this chapter was to review some of the most relevant
research regarding the UG and emphasize related topics that could be
further explored in order to create more theoretical and practical
connections between two major fields, namely behavioral economics and
organizational behavior. Studying the topic of fairness by conducting
future in depth investigations of individual and relational factors
contributing to resources allocations, could generate some important
implications for teams and organizations in which people have to share
various types of gains and losses (i.e., financial or cognitive resources).
In conclusion, given that: (1) equitable distribution of losses as well as
gains have a major social and organizational impact, (2) people are loss
averse and have a particular way of perceiving a loss as looming larger
than a gain, (3) there is very limited empirical investigation of losses
sharing in laboratory and ecological contexts compared to the existing
literature related to allocation of gains and (4) most decisions related to
allocations are made by people who have a previous history of social
interactions, one can argue for the necessity to expand behavioral
economists’ research agendas to include these neglected or understudied
topics.
ACKNOWLEDGMENTS
The author was supported by a grant (project number PNII-RU-TE-

2014-4-2111) of the Romanian National Authority for Scientific Research
and Innovation – UEFISCDI (Unitatea Executiva pentru Finantarea
Invatamantului Superior, a Cercetarii, Dezvoltarii si Inovarii). The funders
had no role in the decision to publish or preparation of the manuscript.
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ABOUT THE AUTHOR

Renata M. Heilman, PhD, is a Lecturer in Psychology at Babes-Bolyai
University, Cluj-Napoca, Romania. Her research interests are centered on
the influence of individual differences (including emotions and strategies
of emotional regulation, personality traits and cognitive factors) on
different aspects of decision making, such as risk and ambiguity,
allocation of resources, and susceptibility to framing. Dr. Heilman teaches
a graduate course on Economic Psychology and undergraduate courses on
Cognitive Psychology and General Psychology.
Chapter 4
BEHAVIORAL ECONOMICS FACTORS IN THE

DECISION-MAKING OF GREEN BUILDING
TECHNOLOGY FOR SUSTAINABLE
INFRASTRUCTURE GOVERNANCE
Sharifah Akmam Syed Zakaria*

School of Civil Engineering, Engineering Campus,
Universiti Sains Malaysia, Pulau Pinang, Malaysia
ABSTRACT
Over the past few years, the slow adoption of Green Building
Technology (GBT) in the construction industry and the hindrance of
sustainable infrastructure development to generate expected outcomes
have tailored to increasing an awareness and concern in managing the
adoption of GBT for sustainable infrastructure and its association with the
influence of behavioral economics factors. Numerous research on GBT
adoption have been performed, but it is unknown whether GBT adoption
directly applies to sustainable infrastructure development in the
construction industry. Additionally, there has been no work on how
*
Corresponding Author Email: akmam@usm.my.
68 Sharifah Akmam Syed Zakaria
behavioral economics aspects might be used to understand GBT adoption

for the sustainability of infrastructures. Therefore, it is important to
explore the influence of behavioral economics factors on how the
adoption of GBT in Malaysia can be described as an emerging
technology and to generate a new fresh concept on how GBT contributes
towards sustainable infrastructure governance.
Keywords: behavioral economics, decision-making, green technology,

sustainability
ACRONYMS
ai Average Index
CIDB Construction Industry Development Board
GBI Green Building Index
GBT Green Building Technology
RII Relative Importance Index
xi Variable Index
3S, 2E Stakeholders-Society-Sustainability-Environment-
Energy
INTRODUCTION
Focus on the rationality of economic choice is important in the field of

behavioral economics (Wilkinson & Klaes, 2012). According to Camerer,
Loewenstein, and Rabin (2011), behavioral economics area involves the
application of economic theory to predict and control behavior. In the area
of behavioral economics, it comprises of two major elements, namely the
decision-making process of people and the factors that influence their
choices in the market (Altman, 2012). In this case, it also includes
behavioral models that integrate insights from economic and psychology
theories, which cover a range of concepts, fields and approaches (Avineri,
2012). The construction industry of Malaysia is experiencing a
Behavioral Economics Factors in the Decision-Making … 69
transformation from conventional methods to a more sustainable method

with an emphasis on the environmental aspects (MPC, 2010). GBT is a
concept of sustainable development in the construction industry (Berardi,
2013); when compared with other industries, construction methods or
works are not only labor intensive, but also related to environmental
impacts (Chang, Ries, & Wang, 2011).
Over the years, the Construction Industry Development Board (CIDB)
of Malaysia has taken many initiatives to improve the Malaysian
construction industry by promoting the use of GBT (CITP, 2016), but the
adoption of GBT as a sustainability measure is not clear (Kamarudin et al.,
2012; Zailani et al., 2014). Moreover, there is less of a mechanism to
evaluate the environmental aspect pertaining to GBT (Chua & Oh, 2011).
In order to speed up the Malaysian economic growth and encouraging
sustainable development, GBT plays a vital role to achieve these
aspirations. This sphere will support the environmental, economic,
energetic and social pillars as outlined in the National Green Technology
Policy of Malaysia (KETTHA, 2017). Based on the outlook into the
perceptions of behavioral economics factors, GBT adoption and
sustainability, it is acknowledged that these four major categories, have
been accounted for in GBT adoption. Therefore, from a theory perspective,
there is limited research into the adoption of GBT from a holistic concept
with multiple perspectives of the construction stakeholders.
Moreover, building and construction sectors have been criticized for
the lack of green technology adoption (Berardi, 2012; Dowson et al., 2012:
Gibbs & O’Neill, 2015), warranting a further understanding of the issues
associated with the environment of the technology adoption process for
sustainable infrastructure development.
The last decade has seen the growth of the construction industry. This
has impacted on the construction management discipline, causing the rise
of non-technical studies in project management as an important discipline
(Hornstein, 2015; Jackson & Chapman, 2012). Therefore, the exploration
of behavioral economics factors is vital in order to explore the non-
technical aspects of GBT adoption. Moreover, the growing need to cope
with sustainability requirements while maintaining the required quality
levels has reinforced the importance of GBT adoption in building projects

(Hakkinen & Belloni, 2011; Hwang & Tan, 2012). Against the background
of socioeconomic complexities in the construction industry despite
building technology advancements, this exploration attempts to examine
the nature and progress of GBT adoption that may contribute to the
sustainability of infrastructure development.
In the construction industry, GBT involves the process of design and
construction based on the efficient use of resources in order to create more
energy saving and a healthier physical environment (Kibert, 2016; Zuo &
Zhao, 2014). Meanwhile, Ahmad, Thaheem, & Anwar (2016) describe
GBT as a technology which is environmentally friendly to fulfill
construction needs based on its capacity and capability to ensure cost-
effective activities, the use of low maintenance construction products and
to achieve an energy-efficient status. In order to conserve the natural
resources and environment, with the reduction or minimization of negative
influences on human activities, it is essential to develop equipment,
products and systems that adopt GBT (Hwang & Ng, 2013).
The perspective of this study is based on the aspiration of supporting
the National Green Technology Policy of Malaysia under the Eleventh
Malaysian Plan (2016-2020) as outlined by the Malaysian Economic
Planning Unit (EPU, 2015). Green technology will become the preferred
choice in building procurement with the aspiration to increase green
technology’s local market share and to increase the production of local
green technology production.
BACKGROUND
Economics involve the exploration of human actions based on

specified or generalized assumptions that may create ambiguity due certain
circumstances that are not always practical or empirical (Etner, Jeleva, &
Tallon, 2012; Wilson & Gowdy, 2013). Behavioral economics involve the
effects of social, cognitive, emotional and psychological aspects on the
decision-making of economic-related matters among individual or

organizations (Camerer, Loewenstein, & Rabin, 2011).
According to Altman (2015), behavioral economics also look into the
consequences for market prices, returns and resource allocation, in terms of
their impacts on different kind of behavior according to different
environments of varying experimental values. Decision-making based on
economic perspectives is included as a part of the study of choices to
evaluate major advantages and disadvantages that are obtained from the
model of rational choice (Frederiks, Stenner, & Hobman, 2015).
According to Pettigrew (2009), a decision-maker’s choice is
considered as rational if the choice is selected as the most favored ones out
of various available alternatives. According to the assumption of classical
economics, investors are consistent in their preferences and also in their
attitudes toward risk (Becker, 2013). However, the assumption of
behavioral economics is that investors are inconsistent and subject to
framing effects (Pompian, 2011). The motivation behind behavioral
economics is to determine how people behave in making decisions with
economic considerations and policy; and its relations to behavioral theory
(Wilkinson & Klaes, 2012).
Approaches involving behavioral or human-related factors in the
decision-making of GBT adoption tend to consider behavioral aspects
uniformly in using the holistic concept of involving socioeconomic,
technical, managerial, institutional and governmental contexts within
which GBT decisions are made. Nowadays, in order to accelerate the
economy of Malaysia and to attain sustainable development, GBT acts as
the key driver in achieving these goals. Thus, behavioral economics
approach attempts to synthesize the decision-making of GBT and its
influencing factors into a theoretical framework, then proceed to decision-
making models to better understand the impacts of behavioral economics
factors on GBT decision-making as a holistic concept.
Accordingly, the perception of construction stakeholders concerning
the influence of behavioral economics factors on GBT decision-making
need to be discovered based on a case study in the area of infrastructure
development. The major outcome of this chapter is a conceptual
knowledge of how construction players make decision pertaining GBT.

Using ‘real life’ experience of green projects in Malaysia, categories and
types of green environment will emerge, on the basis of which a
foundational theory of green technology adoption can be proposed. It is
expected that green environment is a fundamentally socioeconomic process
involving individual and organizational norms, philosophy and values over
what should count as appropriate environment in specific technology
adoption and project contexts.
It is important for the construction players to search for new solutions
in construction projects to comply the requirements of environmental laws
and the demand of GBT (Testa, Iraldo, & Frey, 2011). In order to enrich a
sustainable and improved standard of living, GBT is needed as a catalyst in
the advancement of knowledge society. Therefore, it is vital to develop
GBT pertaining its association with sustainability. This relates to how
different behavioral economics factors impact on the adoption of GBT;
including design criteria and materials elements (Kibert, 2016),
conservation and sustainability elements (Dao, Langella, & Carbo, 2011)
and project elements (Hwang & Ng, 2013) as key concepts that can
influence GBT for sustainable infrastructure development.
In GBT adoption, the environment factor would be different from one
individual or one project to another especially in a perspective where new
technology is less likely to be easily adopted (Shi et al., 2013). Thus, it is
important to focus on whether construction professionals in the
construction industry develop technology adoption styles to capitalize on
amalgamating the adoption practices with a particular society, project or
organizational environment. The effectiveness of system control pertaining
a technology adoption through the implementation of government and
industry policies such as expertise, regulatory and industry trends have
contributed towards its success based on the users’ involvement and
innovation needs (Weber & Rohracher, 2012).
In order to forecast and justify a new scenario in the industry, decision-
makers are subjected to social and market influences in determining their
economic choices (Walls & Hoffman, 2013). In economic behavior, there
are some modifications according to cultural adaptations, individual
differences and social transformations that need to be considered in the

process of decision-making from a psychological viewpoint (Tosi & Pilati,
2011). Additionally, a number of technology adoption attributes such as
economic, cultural and psychological elements are required as a baseline in
implementing project strategies at group or individual levels (Henisz,
Levitt, & Scott, 2012).
GBT is one of the critical success factors which is listed in
Construction Industry Transformational Plan (CITP, 2016) to achieve and
deliver success in the Malaysian construction industry. Encouraging the
use of construction waste materials and GBT adoption by many
governments are actions to minimize construction waste (Lu & Tam, 2013;
Yeheyis et al., 2013; Zuo & Zhao, 2014). In order to produce high
performance buildings with minimal or negative energy requirements for
their operations, designs need to be based on the respective design
knowledge and technology (Ascione et al., 2013; Morrissey & Horne,
2011). Additionally, the Malaysian government through its CIDB has been
encouraging GBT adoption for sustainable infrastructure development as a
part of its initiatives to enhance the construction industry (CITP, 2016).
BEHAVIORAL ECONOMICS FACTORS
Descriptive and procedural variables that influence decision-making

from economic and psychology perspectives are the fundamentals of a
large number of research in behavioral economics area (Spears, 2011). The
construction industry which is very challenging requires decision-makers
to have a better understanding on behavioral economics applications in the
adoption of GBT to obtain a competitive edge. Hence, behavioral
economics is an interdisciplinary field with rapid growth based on the
exploration and outlooks from economics, behavioral science, innovation
and technology management (Wilkinson & Klaes, 2012). As discovered by
behavioral economists, they highlighted that the model of rational choice
can be used to predict behavior in a systematic manner (Berg &
Gigerenzer, 2010).
Decision-making in the field of economics, requires some basic

assumptions to understand the rationality of decision-makers (Hastie &
Dawes, 2010) as they normally select the best alternative to ensure profit
optimization or maximization, besides attaining some functional objectives
(Frederiks, Stenner, & Hobman, 2015). The use of psychological
understanding to study some economic phenomena is the basis of
behavioral economics field (Kamenica, 2012). Therefore, the field of
behavioral economics explores the influence of people’s emotions and
mind on the actual ways of decision-making processes (Fenton‐O’Creevy
et al., 2011).
According to Fine (2012), the field of behavioral economics is a
subdivision of economics which incorporates human psychology insights
into the economic model behavior. In addition, behavioral economics is a
challenge for some researchers to redefine economic decision-making with
a psychological foundation (Hodgkinson & Healey, 2011). The mainstream
economics area involves decision-making with people know what’s in their
best interest (Gregory et al., 2012), while behavioral economics involves
decision-making with people act on related knowledge (Spears, 2011).
Fundamentally, in the judgments and choice of financial decision-
making, human preferences are relative (Hastie & Dawes, 2010).
Furthermore, the way individuals evaluate decision outcomes and process
coincidental events are highly influenced by emotional states (Gigerenzer
& Gaissmaier, 2011). Decision-making behavior is significantly modulated
by feeling states (Van Kleef, De Dreu, & Manstead, 2010), even in terms
of decisions that involve economic related matters (Zeelenloerg & Pieters,
2013). In the area of economic psychology, the synthesis of decision-
making and behavioral economics act as an interdisciplinary foundation in
order to determine the way decision-makers make their best economic
choices according to their risk considerations and personal beliefs
(Schonberg, Fox, & Poldrack, 2011).
According to de Charms (2013), behavior is a term that implies the
action of humans based on their responses towards internal and external
aspects which also reflects their hidden views. Social psychology and
economics are heuristic tools that can be used to determine the impact of
attitudes, habits, values, personal as well as social norms which also reflect
specific human behavior (Dolan et al., 2012). Specifically, the area of
economics pertaining decision-making emphasizes on internal and external
influences that reflects the intention of decision-makers to act (Griffiths &
Webster, 2010).
The way people act, take actions and do things is normally based on
their observation on others’ behavior as they are subjected to their
perceptions towards others’ acceptance concerning their behavior
(Hastings, Angus, & Bryant, 2011). Typically, the way people act is in
accordance to their commitments and values. According to Kahneman,
Lovallo, and Sibony (2011), decision-making process involves high
consideration on the anticipation of decision-makers on current events and
less focus on probabilities that are uncertain and decision-makers are
highly subjected to the use of available information.
Meanwhile, Holmes et al., (2011) highlights that the way people make
decisions depend on the influence of their internal changes as they
intuitively transform the probabilities of decision outcomes into values
according to their condition, expectation and objectives. While the research
of behavioral decision-making highlights on the way people determine
their choices, it is undeniably influenced by their priority and sensitivity
for rewards regardless their personal characters (Yoon et al., 2012).
BEHAVIORAL PERSPECTIVE
Stakeholders Domain
The construction stakeholders’ involvement, role and opinion in

decision-making are increasingly regarded as a useful contribution in
understanding technology adoption (Berardi, 2013). Construction
stakeholders have different perspectives and judgements pertaining their
insights on the influence of behavioral economics factors in the decision-
making of GBT adoption. Additionally, stakeholders’ views are also the
source of inputs in project decisions (Spitzeck & Hansen, 2010). The

attainments of sustainability goals and objectives are expected to be a
reality with the active involvement and engagement of construction
stakeholders that can be evaluated using a mechanism of survey research
(Manetti, 2011).
This study highlights a mechanism to assess and analyze the decision-
making of GBT in building projects as perceived by the construction
stakeholders. According to de Vente et al., (2016), by involving
stakeholders in the decision-making process, it is expected that the quality
and durability of decisions are likely to be greater. In decision science, the
decision-making of technology adoption encompasses the collaboration,
coordination and interventions of different individuals, organizations and
stakeholder groups.
Training-Information Interface
According to Etzioni (2011a) behavioral economics aspects add to the
standard model of economics the reality about how humans behave in
terms of interpreting information, interdependent preferences, emotions,
experience and learning. Allen et al., (2013) discovered the possibility of
organizational culture and philosophy relevant to training activities to act
as a mechanism to overcome technology adoption hurdles. Therefore, with
adequate training of construction professionals to adopt GBT, this factor is
expected to improve the level of GBT adoption among the relevant
industry players and consequently facilitate the decision to use GBT (Lin
& Ho, 2011).
Meanwhile, decision-making on GBT adoption should enhance
environmental awareness through education and training (Sarkis,
Gonzalez-Torre, & Adenso-Diaz, 2010). They also argue that information
may require the decision-maker to step back to an earlier stage and revise
the problem pertaining GBT adoption. In addition, the focus is on the
extent to which individuals use project information and trust the
information from inside or outside the project as their decision input (Fang
& Marle, 2012). Moreover, as uncertainty is always present, making the

right decision based on the relevant information available does not
guarantee the desired output (Tseng, 2010) particularly in terms of GBT
performance in infrastructure projects.
Learning
Learning is a function of one’s ability and motivation, with the
strengths of reinforcement derived from personal factors especially
cognitive factors in order to learn, organize and understand ideas (de
Clercq, Honig, & Martin, 2013). Burke and Noumair (2015) add a
feedback loop to the decision process so that learning from both the
implementation and the outcome is included. In addition, as discovered by
Fu and Zhang (2011), the attitude and learning experience of technology
users are considered as important elements that influence the decision-
making of GBT adoption. In order to find new ways for GBT adoption, its
decision-making process has the capacity to verify several issues by
establishing common ground and trust between consultants and other
project members, besides learning to appreciate each other’s viewpoints
(Young et al., 2010). Meanwhile, Hwang and Ng (2013) identify that new
learning opportunities through experiences in various projects can be
considered as an important determinant in developing decision-making
capabilities.
Justification
Rendell et al., (2011) discover that experience with social learning
contributes to one’s justification for a decision. As for GBT technology
adoption, there are differences in decision-making process in terms of
decision types; short-term operating control decisions or periodic control
decisions or long-term decisions, group or individual decisions, based on
various justifications in a building project (Wu & Pagell, 2011). According
to Croal et al., (2010), the rationale of using justifications in the decision-
making of GBT is to determine its influencing factors under the current
and future situation. GBT decision-making is also based on the way
industry professionals recognize and identify these factors using their own
justification, outlook, views and opinions (Masini & Menichetti, 2012).
Meanwhile, Govindan et al., (2015) discover that learning aspect could
lead to an appropriate justification of each decision made with regard to
GBT adoption.
Communication
Effective communication practice has an adverse effect on project
decisions and implementation (Daim et al., 2012). Generally, in GBT
decision-making, it is important to understand the communication process
that is practiced in project management (Hwang & Ng, 2013). GBT
decision-makers in building or infrastructure projects have to consider a
variety of project aspects such as communication, management,
procurement and decision style itself, in the context of the project
environment (Ochieng & Price, 2010). Based on the study of Robichaud
and Anantatmula (2010), project team members can have an insightful
impact on GBT decision-making through project and management aspects,
via the flow of communications and the decision process. Therefore, the
management factors contributing to the successful implementation of GBT
projects are based on the element of collaboration, effective
communication channels and team-member involvement (Hwang & Tan,
2012). Additionally, Underwood (2009) emphasize on the need for
effective communication in decision-making by following a set of
procedures to achieve the project objectives pertaining GBT adoption.
Society Domain
Generally, it is important to focus on whether decision-makers in the

construction industry develop decision-making styles to capitalize on
amalgamating the decision-making practices with a particular society
(Jato-Espino et al., 2014). In addition, Foster and Rosenzweig (2010)
discover that the trends of technology adoption in society indicate the
direction of future development that decision-makers in building projects

appears to be taking as GBT trends in projects could have implications on
GBT decision-making, such as demand for rapid-build projects, demand
for higher levels of building quality and demand for a higher rate of
building innovation in the society. Thus, the government has been aiming
to inspire the construction society’s mind, change their attitude and
encourage them to adopt GBT in infrastructure and building projects.
According to Smith, Vos, and Grin (2010), sustainability element is
perceived as a less important consideration because it would take a long
time to gain hold in society despite the changing perspectives towards
environmental concerns.
Awareness-Experience Interface
Decision-making on GBT adoption should enhance environmental
awareness through education and training (Sarkis, Gonzalez-Torre, &
Adenso-Diaz, 2010). GBT decision-making has resulted in a growing
awareness of the need to understand its approaches and processes in
building projects overtime (Abidin, 2010). According to Zuo and Zhao
(2014), the developments in the demand for greener building methods with
higher quality and safety standards have been related to both higher returns
and the increased awareness of the importance of GBT adoption.
Hence, behavioral factors such as people’s attitude, experience and
awareness need to be considered in the decision-making of GBT adoption.
Byrnes (2013) reveals that in any dynamic real world, the success of a
decision process is critically depends on the situational awareness of a
person. Besides various concerns in decision-making, inputs from different
sources are also important to deal with project performance, based on
various experiences in infrastructure project development (Roca et al.,
2011). In addition, Polancic, Hericko, and Rozman (2010) identify that
industry policies and government control with factors such as technology
culture, regulatory and industry trend have contributed towards the success
or failure of technology adoption, besides the factors of innovation
requirements and users’ experience. Therefore, project decisions are likely

to be made precisely based on their actual involvement or participation and
experience with professional background knowledge (Fischer, 2011).
Support
In order to ensure sustainability based on the greater adoption of GBT
in the construction industry, Lam et al., (2011) discover that is essential to
identify and understand factors that influence GBT decision-making. The
potential of GBT adoption to deliver a sustainable construction industry
with the support of government policies will improve GBT adoption in
some countries particularly developing countries like Malaysia. As
sustainability concept has been strongly reinforced by the federal and state
government, there has also been a transformation in housing and
construction technology from the conventional system to an intense
adoption of GBT (Rodrik, 2014). Therefore, in order to protect and support
the best interests of building and infrastructure projects, GBT
implementation requires the implementation of critical control processes
(Juan, Gao, & Wang, 2010).
Knowledge
In dynamic project contexts, construction professionals are required to
make decisions with multiple considerations such as involvement,
interaction, involvement and evaluation using a different knowledge base
(Gajzler, 2013). This demands the understanding of decision-making that
is relevant to changing circumstances, and embraces a diversity of
knowledge and values in GBT adoption. Widespread participation of
stakeholders has been driven by increasing knowledge and interest in
technology decisions, sustainable evolution and ongoing policies (Valdes-
Vasquez & Klotz, 2012).
Additionally, Reich, Gemino, and Sauer (2012) mention that the role
of a client is not only as a decision-maker but as a resource provider,
particularly in terms of specific capabilities of individuals serving on the
board, their knowledge and insights, leads to enhanced project
performance and competitive advantage.
Values
According to Shove (2010), external environmental changes can also
lead to evolutionary changes in the decision-making of GBT adoption over
time, through natural changes in economic forces, government rules and
societal values. There is a need for new building technology, one that
moves the industry to a new industrial system that values the environment,
under similar uncertain conditions (Medineckiene, Turskis, & Zavadskas,
2010). Marques, Gourc, and Lauras (2011) discover that decision-makers
in construction projects decided to utilize resources in different ways, as
they assigned different values, based on different awareness. Additionally,
decision-makers’ information about their environment is based on the
values and facts of their awareness, believes and knowledge that
characterize their personality (Wang & Yuan, 2011). Thus, in the
framework of decision-making on GBT adoption, from the perspective of
values, support and compassion may affect and influence the decisions.
ECONOMIC PERSPECTIVE
Environment Domain
In technology adoption, the ultimate decision outcome is based on the

dynamics and changes in the projects and their environments (Gareis,
2010). There are numerous decision theories and these decision-making
theories emerged to assist with problem solving, specifically in an
increasingly dynamic, complex and uncertain environment for managing
construction projects (Monghasemi et al., 2015). In the course of decision-
making, individuals are likely to rely on a variety of data and numerous
different decision-making tools in complex construction environments
(Taylan et al., 2014).
Thus, this contribution is increasingly being used by proliferating
environmental interest and pressure groups pertaining GBT adoption
(Babiak & Trendafilova, 2011). It is also noted that in a normal
construction environment, the consideration of GBT adoption is not
obvious as an alternative to conventional building types and methods

(Hwang & Tan, 2012). As clarified by Juan, Gao, and Wang (2010), the
consideration of environmental as well as technology factors in a
multidisciplinary working situation are the fundamentals of technology
decision-making.
Demand-Supply Interface
According to Shen et al., (2010), construction stakeholders make
decisions, serve market needs and consider market factors in fulfilling
market demands and serving customers’ needs. Moreover, nowadays, there
is a growing demand for infrastructure building and GBT adoption driven
by the development of socioeconomic conditions (Shove, 2010). This
approach has been taken-up in large-scale projects whereby such projects
have resulted in highly collaborative ventures and harnessing a variety of
important skills in responding to the complexity and demand of the
construction industry (Finkel, 2015).
Thus, economic-related factors such as business dynamic, market
demand, industry opportunity, industry competition and industry
uncertainty need to be determined and considered in GBT decision-making
(Lin, Tan, & Geng, 2013; Tseng, Tan, & Siriban-Manalang, 2013). These
interests are strongly reinforced by the increasing number of issues in the
construction industry like labor supply, costs and working conditions
(Hwang & Ng, 2013).
In terms of GBT decision-making, Chaabane, Ramudhin, and Paquet
(2012) discover that due to limited resources, decisions that are made by
project members are based on specific reasons concerning location and
material or equipment supply, besides the choice of equipment that they
use in the projects.
Competition
Although the element of competition is seen as fallacious, it has a
place as an important consideration in project decision-making (Zhao,
Tang, & Wei, 2012). According to Janicke (2012), as GBT decision-
making is considered as a dynamic process, economic influences should be

determined which include demand and supply condition, the degree of
competition, industry prospects and business trends, with the anticipation
of industry uncertainties. In this case, the elements of regulations, GBT
technology and competition are all interrelated in the context of the
construction industry (Altenburg & Pegels, 2012).
In order to ensure the sustainability of competitive advantages in
projects’ environment, it is essential to anticipate competitive trends such
as new competitors’ entrance, new type of competition, competitors
merging and acquisition, besides their failures (Huang, Keisler, & Linkov,
2011). In a perspective of this kind, the focus is to outline the scope for
comprehensive analysis of the nature of competition in construction
projects (Eriksson & Westerberg, 2011).
Opportunity
GBT adoption offers an opportunity to improve a variety of project
performance indicators, particularly sustainability (Dangelico & Pujari,
2010). Thus, it is important to ensure that technology adoption decisions
are made according to business opportunities that arise in the construction
industry to ensure long term survival and sustainability. It is important to
note that technology decisions must be identical for every instance or
business opportunity that arises (de Jong, 2013). In the context of
sustainable construction, the opportunity to promote GBT adoption has
been expanded to include residential building projects, other than
infrastructure development (Bina, 2013). However, not all of economic
factors were of equal importance, either in an absolute sense or when it
came to succeeding with a specific building project opportunity (Hall,
Daneke, & Lenox, 2010).
Mandate
Further, a complete understanding on the perception of construction
stakeholders in GBT projects regarding the impacts of various factors on
GBT decision-making is essential as it contributes to a better perspective
of GBT decision-making across infrastructure development projects, when

they are mandated to use GBT (Oh, Pang, & Chua, 2010). Widespread
participation of stakeholders has been driven by increasing knowledge and
interest in technology decisions, ongoing policy and sustainable evolution
(Cronin et al., 2011). Moreover, this was coupled with significant project
or building requirements and their related policy implementation as a
mandate in the construction environment (Lee & Koski, 2012).
According to Iwaro and Mwasha (2010), the government policy on
GBT, through its initiative to improve national productivity and reduce
environmental impacts has the power to influence project developments,
and hence the related decision-making. This is particularly true under
certain project conditions when a building project is mandated to adopt
GBT due to the project design requirements (Lam et al., 2010). In the
context of construction industry, innovation and technology adoption
policy is one the important fields that has significant impact on sustainable
developments (Zhang, Shen, & Wu, 2011).
Energy Domain
Generally, architectural perspective to GBT adoption decision-making

can be focused on achieving sustainable, energy and material efficient
designs (Agudelo-Vera et al., 2011). Thus, to fulfill construction needs in
the dynamic industry, GBT adoption is considered as an environmental
friendly technology due to its ability in resources conservation, energy
efficiency, low maintenance and cost effectiveness (Janicke, 2012).
According to Kneifel (2010), GBT adoption also allows designers to
produce high performance building using the latest design knowledge and
technology to ensure the minimum or zero requirements of operating
energy. The concept of GBT intends to attain specific objectives such as to
maximize the use of natural renewable resources and recycled building
materials, to minimize the consumption of energy and to reduce
construction waste through the implementation of a holistic approach in
planning, designing, construction and maintenance (Yeheyis et al., 2013).

Meanwhile, Aziz and Hafez (2013); Dues, Tan, and Lim (2013) discover
that minimizing resources and achieving energy efficiency as the efforts of
attaining green goals require alignment and collaboration between applied
lean principles and waste management principles.
Technology-Innovation Interface
Gambatese and Hallowell (2011) discover that in the construction
industry, technology and innovation adoption policy is one of the strategic
fields to support its industrial growth. Adoption of GBT is embedded in
appropriate and effective GBT decision-making processes which involve
complex, consultative, integrative, regulative, long-term and incremental
processes in nature (Masini & Menichetti, 2012). From an industry-
practice perspective, as governments including the Malaysian government,
begin to impose GBT and to ensure GBT is well adopted in building and
infrastructure projects, it is also important to explore its decision-making
process in terms of its nature, issues and resolutions. Against the
background of decision-making complexities in the construction industry
despite building-technology advancements, it is important to examine
decision-making that may contribute to the exploration and understanding
of GBT adoption behavior.
Moreover, as in GBT adoption which is considered as a non-common
process in the construction industry, it normally involves the elements of
uncertainty and complexity that have been important concerns in
construction management and in various decision-making approaches
(Booth & Choudhary, 2013). During the decision-making for planning and
designing, most architects and consultants are concerned with new
materials and innovation to improve project efficiency (Bribian, Capilla, &
Uson, 2011).
Normally, in evaluating technological innovations, the self-confidence
level of a decision-maker is also influenced by set of organizational factors
(Brown, Dennis, & Venkatesh, 2010). Building projects which are long-
term in nature have difficulties overcoming ‘uncertainties inertia’ when

attempting to match technological innovations to changing and uncertain
environments (Eriksson & Westerberg, 2011).
Creativity
The element of creativity that relates to construction technology is one
that is both intended and realized (Kent & Becerik-Gerber, 2010). A
creativity factor is unlikely an absolute or pure deliberation in technology
decision-making and suggested that various technology intentions are
combined in implementing construction projects in accordance to the
projects’ nature and requirements (Williams & Samset, 2010). Therefore,
there are always challenges to keep up with the dynamics of construction
industry through technology innovation, creativity and adoption in the
building sector (Kanapeckiene et al., 2010). According to Benedek et al.,
(2012), the consideration of creativity aspects was important to create a
project practice or environment that could encourage the generation of new
and different ideas for different building projects. Deriving from
innovation aspects, there are project members who perceived that the
creativity aspect is an influencing or relevant factor on/in GBT decision-
making as GBT adoption can introduce creativity elements that can also
improve project performance (Chen & Chang, 2013).
Productivity
In response to productivity matters pertaining the adoption of GBT, the
construction industry is increasingly adopting building solutions as a part
of strategic decisions to create intelligent buildings (Hwang & Tan, 2012).
Typically, the consideration of sustainable factors, productivity factors,
socioeconomic as well as other supporting factors are important in new
technology implementation (Drucker, 2011). GBT adoption involves
consideration of, not only technological and environmental factors, but
also the dynamics of social change in relation to productivity (Jackson &
Victor, 2011). In the construction industry, where definite decision outputs
are almost always uncertain, the nature of the outcome is extremely
important to ensure that decision outputs could also lead to project

productivity (Hottenrott, Rexhauser, & Veugelers, 2016).
Quality
Wrong decisions regarding GBT attributes will ultimately alter the
performance, outcomes and quality of the project (Liu, Guo, & Hu, 2014).
One of the important reasons is based on the aspirations of sustainable
development to ensure not only the conservation of environmental aspects
in building projects, but other impacts on human (GhaffarianHoseini et al.,
2013). Meanwhile, it is also emphasized by Fuerst and McAllister (2011)
that in many cases, GBT adoption involves a conflict between
environmental objectives, quality attributes and price concerns. The quality
issue in GBT adoption is multifaceted, for various reasons including
meeting project standards and requirements (Qi et al., 2010). According to
Pugh et al., (2012), before adopting GBT, the project should ensure its
adoption meets quality factors or standards to reduce the major interruption
concerns associated with project implementation.
DECISION-MAKING OF GREEN TECHNOLOGY
Despite a good track record in GBT worldwide and the recent

introduction of GBT benchmarks, i.e., the implementation of sustainability
rating tools in construction projects, the industry as a whole remains quite
slow to exploit the use of GBT (CITP, 2016). This slow development is
particularly evident among many small contractors who prefer the use of
conventional systems of construction due to their familiarity with such
methods (Hwang & Ng, 2013). Tools dominated by technical viewpoints
have long been used, primarily in the project-development phase, for
making decisions on GBT adoption, which emphasizes their focus on the
technical aspects of design and build-ability (Singhaputtangkul et al.,
2013). However, the dynamic and unpredictable nature of economic and
social systems impacting on the construction industry (Awuzie &
McDermott, 2013; Harris & McCaffer, 2013; Myers, 2013) continues to
make the optimized environment of GBT adoption as a sustainable

measure more challenging. Normally, the evaluation of decision-makers on
an item is based on several elements resulting from minor comparisons
between various optimal options available in their working memory (Kool
et al., 2010). Decision-making is less than fully rational (Zavadskas &
Turskis, 2011). As a result, individuals tend to make predictions to avoid
mistakes. This requires the exploration of decision-making nature and
issues as a logical and an adaptable process of a technical study (Abt et al.,
2010). The cognitive process of a decision-maker has to be systematically
analyzed as it serves as the fundamental of a decision and to determine the
acceptance level of a decision (Blanchette & Richards, 2010). Therefore, it
is vital to figure out the way people perceive problems, the process of
problem analysis and the creation of mental models to understand and
determine a decision-making process (Glockner & Witteman, 2010).
According to Roehrich, Grosvold, and Hoejmose (2014), individuals
decide on certain matters with the anticipation of various limitations. This
is a reflection where individuals make decisions based on bounded
rationality. Bounded rationality states that individuals have to face a
situation where they have to consider their time limitation, capacity and
capability to balance all relevant cost-benefits elements of a decision.
Similar to the decision-making actions of individuals, in the case of
decision-making, the behavior of construction firms can also be assessed,
handled and quantified (Luthans, F., Luthans, B. C., & Luthans, K. W.,
2015) and the same condition applies for the decision-making of green
technology. Attention should be given to the conditions of uncertain and
dynamic environment with more practical and diversified outlooks in
developing better decision-making skills concerning any technical and
technology-based problems (Weaver et al., 2013). Consequently, in order
to achieve the goals of creating a better environment, GBT adoption acts as
a catalyst to solve environment-related problems with a mechanism to
fulfill the needs and demands of the construction industry. The scenario of
GBT construction in Malaysia is slowly gaining foothold as sustainable
construction methodology and more environmental friendly. There are also
constraints or reasons to prefer conventional building methods over GBT
as a preferred construction method (Abidin, 2010). In the Malaysian

construction industry, for the past few years, it has been discovered that
GBT adoption offers a solution in facing the challenges of the dynamic
industry (Mokhtar Azizi et al., 2012). Therefore, from a sustainability
perspective, this chapter was intended to examine and highlight the way
behavioral economics factors are able to influence GBT adoption in terms
of its contributions towards higher performance, more efficient
construction, better health and safety conditions, design excellence creation
and better environmental friendly surroundings.
Adoption of GBT has allowed the construction industry to achieve
remarkable sustainability gains (Lam et al., 2010). GBT is now one of the
prevalent and growing building technologies in developed as well as
developing countries (Hwang & Tan, 2012). Besides the successful
outcomes of the adoption of GBT, its feature as a sustainable method
prevents any real efficiency to be leveraged across the construction
industry. In the case of the Malaysian construction industry, building
projects tend to be laggards in adopting GBT for sustainable infrastructure
development. In developing integrated design solutions for green building
projects, this requires the key roles of engineering and architecture
professionals (Zhang, Shen, & Wu, 2011). Throughout the life cycle of
construction projects, green technology implementation is based on the
holistic approach of design, planning, feasibility, construction, operation
and maintenance (Dagdougui et al., 2012). In addition, as identified by
Hwang & Ng (2013), it is important to determine the factors affecting
contractors’ role in green building projects by obtaining opinions from
those who are experienced in green construction such as design firms,
construction professionals and project owners.
GREEN TECHNOLOGY AND

SUSTAINABLE INFRASTRUCTURE
GBT is the term to represent the practices of creating structures using

approaches and activities that are responsible for environmental care and
resource efficient during the life-cycle of building projects (Yudelson,

2010). According to Kilbert (2016), in the adoption of GBT, it involves the
application of building assessment and grading using a rating system with
specified criteria for building and infrastructure projects. The rating tool of
building assessment is a mechanism to determine GBT adoption with a
means of quantifying the project performance against the specified criteria
of the building assessment system. GBT which is associated with building
rating system is being widely used in the United States, the United
Kingdom and European countries (Poveda & Lipsett, 2011).
As a push for GBT adoption, a number of requirements in the form of
guidelines and regulations, besides promotions and supports have been
performed. An example of such regulatory implementation is the
quantification of certain ratio concerning GBT adoption in certain selected
government infrastructure projects (Menz, 2005; Varnas, Balfors, & Faith-
Ell, 2009). Likewise, creating an encouraging environment towards green
technology implementation is the development agenda of Malaysia’s
sustainability goals, with its efforts to create greener environment by
implementing sustainable construction practices (Chua & Oh, 2011;
Eltayeb, Zailani, & Ramayah, 2011).
Holden, Linnerud, & Banister (2017) underline the three key pillars for
sustainability, which are economic development, environmental protection
and social equity. Meanwhile, Waas et al., (2011) discover that
sustainability focuses on living within the limitations, equitable
distribution of resources and opportunities as well as understanding the
interconnections between economy, society and the environment that
focuses on relevant areas like well-organized transportation, energy
efficiency, recycling activities, water use and natural resources
conservation.
Sustainability goals can be achieved by an organization through its
members with responsible resources management, less impact on natural
environments and climate change considerations (Eriksen et al., 2011;
Moldan et al., 2012). In addition, a sustainable way of living can be
assessed in many forms from controlling living conditions and sustainable

cities to green building and sustainable technologies, which able to
minimize the consumption of resources (Watson, Boudreau, & Chen,
2010).
According to Bonevac (2010), economic sustainability is based on the
modern concept of income or wealth maximization that could be generated
from assets, stock and capital utilization. However, there are arguments
that economic growth which is uncontrollable can be considered as
unsustainable if construction activities are implemented without
considering or applying economic sustainability from the perspectives of
environmental and social impacts. This condition requires the construction
industry to balance the sustainability elements of economic, environmental
and social aspects to achieve sustainable development goals. From another
perspective, sustainability can be viewed with regards to an environmental
perspective with its main focus on the well-being and practicality of living
systems (Berardi, 2011; 2013).
As a result of an improvement of social capital, social growth is
accomplished in terms of both individual advancement and also overall
society development (Zhang, Shen, & Wu, 2011). In general, Malaysia is
currently relying only on the Green Building Index (GBI) as a sole rating
tool available locally for the purpose of assessing the sustainability of
construction projects (Algburi, Faieza, & Baharudin, 2016).
In the execution of green building projects, architecture and other
engineering professionals play vital roles in the development of integrated
design solutions (Hwang & Tan, 2012). By adopting green technology in
the construction industry, besides demolition waste and energy reduction,
other green aspirations such as the optimization of recycled building
materials, natural resources and renewable energy can be accomplished too
(Jaillon, Poon, & Chiang, 2009). Lam et al., (2010) also identify that in
exploring the practice of green construction, the experience of construction
professionals is a valuable input in determining relevant factors that
impacted on the compliance of green specifications. Consequently, as the
following step of sustainable infrastructure development, the establishment

of decision criteria based on the scientific understanding and empirical
findings of environment assessment can be made viable.
GBT building projects’ less significant performance in the construction
industry (Robichaud and Anantatmula, 2010), the failure of many GBT
projects to return the expected results (Choi, 2009), the slow uptake of
GBT adoption in building projects (Crabtree & Hes, 2009) and the
exploration of GBT as a competitive advantage measure (Chiou et al.,
2011) have led to a growing interest in determining the adoption of GBT as
a good practice which emerged in building projects: i.e., the environment
associated with GBT with dynamic, complex, sustainable and multifaceted
phenomenon. In this case, GBT adoption was explored in terms of its
decision-making process by examining various issues from the perspective
of behavioral economics underpinning the five key variables namely
environment, energy, society, stakeholders and sustainability.
CASE STUDY: DECISION-MAKING OF GBT

AND BEHAVIORAL ECONOMICS FACTORS
The achievement of GBT adoption goals also requires a clear

understanding on the decision-making of GBT adoption in terms of the
decision-makers’ priorities, visions and values. Consequently, this
statement acts as a fundamental aspect to explore and assess the influence
of behavioral economics factors on the decision-making of GBT adoption
in relation to building projects in Malaysia, as perceived by the
construction stakeholders according to their knowledge and experience in
the industry. Initially, based on the literature reviews and conceptual
understanding of this study, it first started with an exploration on the
progression of behavioral economics concepts. Subsequently, this study
also involves the determination of how GBT decision-makers were
influenced by behavioral economics factors from the perspective of
THEORETICAL FRAMEWORK OF GBT DECISION-MAKING
Other than typical managerial perspective on infrastructure

development and the technical advancement of building technologies, it is
also important for decision-makers in the construction industry to know
other relevant factors that have value in GBT adoption and the way these
factors impacted on GBT decision-making. Therefore, in the undertaking
of globalization challenges, behavioral economics has various effects on
policy development and improvement in the area of constructability,
buildability, sustainability, labor economic, environmental and climate
change aspects based on greater insights into the decision-making process
of GBT adoption among individuals, groups, organizations and projects in
the construction industry. In order to illustrate decisions or choices from
the outcome of interactions between behavioral economics variables and
decision-maker variables from project perspectives in the decision-making
process of GBT adoption, a theoretical framework is established as
illustrated by Figure 1.
Figure 1 presents the decision-making process of GBT adoption in the
context of project implementation with its related influencing factors. It
also incorporates the variables of GBT adoption in building projects with
individuals and groups as decision-making units and the influences of
behavioral economics factors in the decision-making of GBT adoption.
This figure also includes behavioral economics elements that are relevant
to the process of GBT decision-making from the perspective or definition
of decision-makers’ roles, values and characteristics. For the purpose of
understanding the behavioral economics factors of GBT decision-making,
the framework is named as Stakeholders-Society-Sustainability-
Environment-Energy (3S, 2E) based on the National Green Technology
Policy of Malaysia. The policy is used as a guideline to clarify
fundamental aspects relevant to GBT adoptions for sustainable
infrastructure development in terms of behavioral economics features,
decision-makers category and decision types.
The conceptual framework of GBT decision-making perspective
highlights on behavioral economics factors that are considered by decision-
makers in GBT adoption. The center part of Figure 1 contains GBT

decision that represents an action response towards the interfaces of four
major domains, namely stakeholders, society, environment and energy
from behavioral economics perspectives. Decision-makers may be
influenced to take action to satisfy project requirements based on economic
considerations, and at the same time considering factors that are related to
their inner-self rationalizations. Substantially, the scope of GBT decision-
making has a wider perspective, but the scope of this chapter is only
intended to discover the influence of behavioral economics factors on GBT
decision-making with the focus on sustainable development goals.
Figure 1. Theoretical framework of GBT decision-making.

From behavioral perspective, as illustrated by the upper part of Figure

1, there are two major domains in GBT decision-making, namely
stakeholder and society. Construction stakeholders and society are based
on the interface of training and information in their actions that involve
learning process, making justifications and seizing opportunities. From
economics perspective, as illustrated by the lower part of Figure 1, there
are two major domains in GBT decision-making that are environment and
energy.
In the decision-making of GBT, environment domain plays an
important role in terms of physical surrounding of building projects,
business environment, cost-benefit analysis etc. Meanwhile, the energy
domain of GBT consists of not only in terms of energy conservation, but
also in terms of the performance and benefit of GBT itself. Interactions
between these two domains generate the interface of technology and
innovation by considering the elements of creativity, productivity and
quality.
From the synergy of behavioral and economic perspectives, as
presented by the middle part of Figure 1, GBT decision-making is based on
two interfaces. The first one is the interface of demand and supply. The
construction stakeholders are generally influenced by the environment
domain in terms of demand and supply aspects based on the elements of
competition, business or industry opportunity and the mandate of
government policy in the decision-making of GBT. Secondly, the society
also considers the energy domain of GBT according to the interface of
awareness and experience in making decision on GBT. This consideration
includes the element of support, knowledge and values.
From economic perspectives, as a common issue in other industries or
sectors, the construction industry is also facing scarcity issue that requires
the consideration of optimal choice and the description of actual choice.
Therefore, the method of handling this issue in the construction industry
involves the normative status of choice optimization with the development
of descriptive models of GBT decision-making based on behavioral
economics perspective.
METHODOLOGY
This chapter aims to determine and analyze the nature and process of
GBT decision-making in building projects as perceived by the construction
stakeholders in order to answer its research question, namely: how intense
GBT decision-making is influenced by behavioral economics factors?
Thus, this study has two objectives to assist in answering the research
question. The first objective is to determine relevant behavioral economics
factors that have impacted on GBT decision-making in building projects.
The second objective is to classify the most significant behavioral
economics factors that have impacted on GBT decision-making for
Overall, in the Malaysian construction industry, the subject of this
study is considered as unusual in terms of its breadth and perspectives, a
purposive sampling was employed to ensure the suitability of selected
participants for the questionnaire survey. Purposive sampling is also
known as judgment sampling is used in the selection of survey participants
as research samples for a specific purpose to ensure they truly represent the
target population (Etikan, Musa, & Alkassim, 2016).
In order to gather data on perception concerning the influence of
behavioral economics factors on the decision-making of GBT decision-
making, this study has identified 86 participants comprising the
construction stakeholders based on their involvement, exposure and
knowledge in infrastructure development projects with the selected criteria
of sustainable construction practices. These participants comprise of civil
engineers, project managers, contractors, developers, consultants, quantity
surveyors, architects and GBT authorities. Development of the survey
questionnaire was using an adaptation method with the support of related
literature reviews based on the specified elements of the research
framework. Likert’s scale of five ordinal measures of agreement was
applied in the questionnaires, with ordinal scale of 1 to 5 in ascending
order to reflect the degree of agreement pertaining the influence of
behavioral economics factors on GBT decision-making. In this case,
behavioral economics factors in terms of their significant effects were
assessed according to the participants’ subjectivity, prospect and

perception based on their involvement in the decision-making process of
GBT adoption in building projects.
RESULTS AND ANALYSIS
In order to further explore the participants view and their

understanding regarding GBT, they were inquired about the optional
definition of GBT based on the following elements of GBT:
Table 1. Elements of GBT
A. Know-how/technology age that save the environment.

B. Materials/equipment that care for environment protection.
C. Improvements/advancement/inventions to protect the environment.
D. Use of construction knowledge in building improvement that save energy.
E. Development in construction and environmental technology.
F. Discover/invention/innovation.
G. Research – general.
H. Affects/improved standards of working/way of work.
I. Other (Specify).
J. Don't know - can't think of anything.
The results of the participants’ understanding regarding the term GBT

and its related elements are shown in Figure 2.
Based on Figure 2, the results reveal that there were mixed responses
on GBT understanding related to sustainable infrastructure developments.
However, majority of the participants responded to the relevant and
appropriate perspective of GBT as they were focusing on environmental
aspects or similar green concepts. This reflects on their awareness and
knowledge about GBT. Therefore, their responses on the questionnaire
items can be considered as reliable.
Figure 2. The understanding of green technology elements.
Besides frequency analysis, data obtained from the questionnaire

surveys were also analyzed using the average index method. The rationale
of adopting average index method was due to the aim of figuring out the
hierarchy or significant level of each behavioral factor as represented by
the Relative Importance Index (RII) using Average Index = (∑ ai X xi) / ∑
xi; where ai = constant, weighing factor and xi = variables that represents
the frequency response of the participants. In this case, RII is quantified for
each behavioral factor. The results of participants’ responses were
analyzed, ranked and illustrated in figure forms based on the positions of
RII score. In the discussion of the results, Table 2 presents the results of
behavioral economics influences on the decision-making of GBT for
sustainable infrastructure as perceived by the construction stakeholders of
building projects in a hierarchical way.
Table 2. Results of behavioral economic, sustainability and GBT decision-making
Factors And Domain Interface Dimension Items Rii Index Average Rank
Sustainable Trend 4.071
Sustainability Infrastructure Growth 3.977 3.96 1
Governance Performance 3.837
Knowledge 3.884
Behavioral Awareness-
Society Support 3.767 3.78 2
Factors Experience
Values 3.698
Quality 3.791
Technology-
Economic Factors Energy Creativity 3.674 3.71 3
Innovation
Productivity 3.651
Competition 3.744
Economic Factors Environment Demand- Supply Opportunity 3.535 3.59 4
Mandate 3.488
Communication 3.558
Behavioral Training-
Stakeholder Learning 3.256 3.26 5
Factors Information
Justifications 2.953
Specifically, Table 2 presents the analysis of the relative levels of

importance or RIIs of behavioral economic factors and sustainability based
on the interfaces of sustainable infrastructure governance, awareness-
experience, technology-innovation, demand-supply and training-innovation
with their related dimensions items. Results show that the factor having the
highest consideration in the decision-making of GBT adoption, as
perceived by the construction stakeholders is sustainability, with the
average index of 3.96. The construction stakeholders perceived that in the
decision-making of GBT for sustainable infrastructure development, it was
influenced by the global trend of construction industry, with RII of 4.071.
In this case, construction trend refers to the recent development in terms of
construction technology and practices. This is followed by the growth of
construction industry (RII = 3.977) and the performance of infrastructure
projects (RII = 3.837).
In terms of behavioral economics factors, the construction stakeholders
perceived society domain as the most influencing factor in GBT decision-
making, as the average index score of awareness-experience interface is
3.78. Society as the end-user or customers of construction products should
be kept aware on GBT adoption so that they are responsive towards GBT
trends, either through their own experience or exposure or through others.
The results also show that the element of knowledge was perceived by the
construction stakeholders as vital in GBT decisions (RII = 3.884) because
in a knowledge-based society, people should have a good level of
understanding on GBT before it can be adopted in infrastructure projects.
Elements of support (RII = 3.767), in terms of society acceptance on GBT
adoption and the values of society (RII = 3.698) towards GBT were also
considered by the construction stakeholders in the decision-making of
GBT.
Consequently, in terms of economic factors, the construction
stakeholders perceived that GBT decision-making should take into account
economic domain, with the average index of 3.71. Hence, it is of important
concern of the construction stakeholders, given that technology-innovation
interface was perceived as impacting on the economic aspects of the
construction industry. It is believed that GBT adoption could benefit the
industry from the economic perspectives through the consideration of GBT

quality aspects (RII = 3.791), GBT as a creative building technology
solution (RII = 3.674) and the increase of construction productivity (RII =
3.651) for sustainable infrastructure development.
As presented in Table 2, environment domain is at the fourth rank of
behavioral economic factors that influenced the decision-making of GBT
adoption. As acknowledged by the construction stakeholders as a less
considered factor as compared to technology-innovation interface is
demand-supply interface, under the domain of environment with the
average index of 3.59. In the decision-making of GBT adoption, the
construction stakeholders perceived the interface of demand and supply
from competition outlook with RII of 3.744. This reflects the situation of
construction industry that considered the element of competition as highly
important to meet the demand of sustainable infrastructure development. A
number of construction stakeholders also perceived GBT adoption as an
opportunity to meet the demand and supply of the construction industry
with the RII of 3.535. Lastly, the dimension of mandate from the
government to adopt GBT for sustainable infrastructure development as
less influencing in the decision-making of GBT with the RII of 3.488.
Table 2 also reveals that behavioral factor related to stakeholders was
ranked lowest among all four behavioral economic factors pertaining the
decision-making of GBT. This indicates that the construction stakeholders
perceived that training-information interface with and average index of
3.26 was less considered in GBT decision-making as GBT development in
Malaysia is still at its infant stage, the reliance upon its information and the
training activities of GBT implementation is still at its infant stage. In this
case, the dimension of communication (RII = 3.558) was highly considered
in GBT decision-making as the nature of any kind of decision-making
requires sufficient information for validation purposes. This is followed by
the dimension of learning (RII = 3.256) and justifications (RII = 2.953).
However, the adoption of GBT should enhance environmental awareness
through education and training developed by the government (Zuo & Zhao,
2014; Tan, Shen, & Yao, 2011).
Table 3. Behavioral economics domains and sustainability factors correlations
Behavioral Behavioral Economic

Economics Society Stakeholder Environment
Energy Domain
Factors Domain Domain Domain
Awareness - Training - Technology - Demand -

Experience Information Innovation Supply
Sustainability
Interface Interface Interface Interface
Factors
Sustainable Infrastructure r = 0.91 r = 0.80 r = 0.82 r = 0.81

Interface p = 0.03 p = 0.10 p = 0.09 p = 0.09
* Correlation is significance at p< 0.05 level.

One of the important requirement of GBT successful implementation is

skilled labor with sufficient training to ensure their skills, knowledge and
ability. For sustainable infrastructure development, GBT adoption requires
specific training and education to enrich the knowledge and experience of
those who are involved in the design and implementation of GBT adoption
(Hostetler, Allen, & Meurk, 2011; Kevern, 2010).
In order to further investigate the influence of behavioral factors on
GBT decision-making for sustainable infrastructure development,
correlation test was performed to determine whether sustainable
infrastructure interface is related to any of the behavioral economic factors
of GBT decision-making. This is presented in a correlation matrix as
presented by Table 3.
Table 3 presents correlations between sustainability factors and
behavioral economics factors. The correlation coefficient, r is 0.91 and
p=0.03 can be considered as statistically significant (p<0.05). Based on
Table 3, the results show that there is a positive relationship with a
significant value between Awareness-Experience Interface and Sustainable
Infrastructure Interface. This condition indicates that the correlation is in
fact significant, which reports correlations between Sustainability factors
and the three (3) items of society domain (Knowledge, Support and
Values). Other domains such as stakeholder, energy and environment
tended to find an insignificant correlation, because these domains were not
regarded as major supporting factors in GBT decision-making due to the
early stage of GBT adoption in the construction industry of Malaysia.
However, there were no statistically significant correlations between
sustainability measures and stakeholder, energy and environment
measures. The initial statistical analysis revealed that only one behavioral
economics factor was capturing the relationship with sustainability aspect
in GBT decision-making and that the correlations between them was
significant. It is important to note that most of these estimates are based on
simple correlations. Given the clear endogeneity between society and
sustainability (when the knowledge, support and values of society
pertaining GBT adoption is rising, the infrastructure development for
sustainability by adopting GBT will also rise), decision-makers might be
uncertain that such correlations estimates would understate the true impact
of behavioral economics factors on the decision-making of GBT adoption.
DECISION-MAKING MODEL OF GBT ADOPTION
Generally, not all decision process can be considered as analytically

complex with quantitative justifications as it also depends on the influence
of GBT adoption nature, GBT issues and behavioral economics context on
decision-makers themselves. Generally, in GBT adoption, decision-makers
in the construction industry are subjected to the internal factors of
organizational elements and the external factors of policy changes, price
movements, competition and technology innovation. Based on the tested
framework of GBT decision-making as in Section 6.1 and the development
of the case study presented in Section 6.3, a decision-making model of
GBT adoption is developed. Hence, it is important to visualize the
interaction process of decision-making process, GBT adoption and
behavioral economics influences in the form of a decision-making model
of GBT adoption, as shown in Figure 3.
Figure 3, presents the model of GBT decision-making according to the
influence of behavioral economic factors on GBT decision-making for
sustainable infrastructure development in a hierarchical manner. It also
offers a conceptual frame of reference for further research on the decision-
making of GBT adoption in construction project to attain sustainable
infrastructure development based on the domain of society, energy,
environment and stakeholder (top part of Figure 3).
Firstly, the society domain and its hierarchical items emerged as an
essential dimension in GBT decision-making according to the interface of
awareness-experience of society according to their knowledge, support and
values on GBT. Based on the behavioral economic factors of society
domain, it can be capitalized to further understand the current situation of
GBT adoption by exploring the society’s knowledge level of GBT, their
support towards GBT and their values on GBT that also influence the
decision-making of GBT adoption. This can be applied not only in the
Malaysian scenario, but can also be applied in various countries where

societal issues are considered as a barrier in the adoption of GBT.
Figure 3. Decision-making model of GBT adoption.
Consequently, understanding the current situation of GBT adoption

based on the Malaysian scenario, can be the means to comprehend
transformational strategies of GBT adoption in the future, with the
consideration of energy domain according to the interface of technology
and innovation. In order to develop GBT growth and adoption, it is
important to consider the dimensions of technology quality, the creativity
of adaptation and the level of productivity pertaining GBT to enhance its
adoption. Additionally, with the stimulation of sustainable construction
practices to remain competitive in the industry, it is also important to
consider the domain of physical environment in terms of the demand-
supply interface. Hence, GBT can be considered as a competitive tool
which can also serves as a business opportunity for sustainable

infrastructure development.
Moreover, many governments worldwide have been mandating GBT
as a part of their sustainable construction practices. Finally, as stakeholders
play their vital roles in the construction industry, it is also important to
consider the interface of training and information among stakeholders in
GBT adoption. In this case, the domains of communication among
stakeholders, the learning process of GBT adoption and their justifications
in GBT adoption should be considered in GBT decision-making.
This model is expected to offer innovative value propositions based on
sustainability domain to ensure the governance of sustainable infrastructure
according to the trend of GBT, its growth and performance in the
construction industry. In order to tackle the double externality problems,
i.e., the societal related issues on GBT adoption and the requirement of
sustainability that are inherent in the adoption of GBT, society awareness
must be established to support sustainable infrastructure development, vice
versa, as illustrated by the dotted arrow (bottom right part of Figure 3).
As this study reveals, the elements of behavioral economic factors
which are significant in the decision-making of GBT adoption verify that
sustainability also plays a significant role in GBT adoption. Therefore, the
enhancement of project performance through a more sustainable
construction practice upholds an ideal case of GBT adoption as a
substitution of conventional construction. The main justification for such a
research agenda is that it connects two disciplines, namely research in
behavioral economic perspective and strategic sustainable construction
pertaining GBT adoption. Thus, connecting these two areas creates mutual
research and practice viewpoints, as they can be explored from the
integration of technology, economy and humans in the construction
industry (Wennersten, Sun, & Li, 2015). Starting with sustainable
infrastructure governance, this model is expected to be an appropriate first
step towards a research agenda for technology adoption model based on
behavioral economic factors.
According to Glimcher and Fehr (2013); Smelser and Swedberg
(2010), the neoclassical method of decision-making can be used as a
conceptual framework which also acts as a fundamental to explain

decision-making and prediction-making processes from the perspective of
economic and non-economic conducts.
FUTURE OUTLOOK
In the Malaysian construction industry, from the case study, it shows

that the participants who represented the construction industry’s
stakeholders were receptive towards the influence of behavioral economics
factors in the decision-making process of GBT adoption. The participants
also highlighted that a number of these factors particularly society domain
and energy domain were regarded as important in GBT adoption decisions.
Furthermore, the Malaysian construction industry has been initiating GBT
adoption to ensure that its development and growth are compatible to
aspiration of the Construction Industry Transformation Plan Malaysia
2016-2020.
Consequently, by exploring the knowledge and nature of technology
adoption that are related to the construction industry from behavioral
economics perspective, GBT decision-making can be understood from a
dynamic process. In a short term, the way construction stakeholders
evaluate the process of GBT decision-making is according to the nature of
organizational or project environment but in a long term, it is important to
consider other external influences such as behavioral economics factors.
According to the findings, it is also revealed that in the setting of the
construction industry, based on behavioral economics perspective,
preferences on GBT adoption were subjected to the available choices of
building technology as substitutions, other than GBT.
In understanding the process of technology adoption, like GBT in
particular, exploration on its decision-making process with the
consideration of behavioral economics influences can be expected to make
some contributions such as:
 First, the involvement of the construction stakeholders in the case

study has generated a new paradigm in understanding not only
their knowledge and involvement in GBT adoption projects, but
also the nature of their decision-making process pertaining GBT
adoption.
 Second, findings from the case study have generated not only
awareness on behavioral economics influences on GBT decision-
making, but also offers deeper insights on the topic based on an
empirical study of decision research.
 Third, from the outlook of research methodology, as it is based on
a quantitative method, this study provides a foundation in the
construction industry to understand the application of behavioral
economics aspects in the study of decision-making governance
using a qualitative method.
 Fourth, the case study development, contents and outcomes from
the outlook of behavioral economics can be used as a foundation to
make further or advance exploration on other decision-making
governance underpinning technology adoption issues.
Applying behavioral economics study in the construction industry

settings has also revealed the limitations of rational choice model, thus
verifying the contribution of economic science in the process of decision-
making. This finding is also supported by the studies conducted by Felin et
al., (2014); Hodgson (2012) and Jaeger et al., (2013). Therefore, in an
exceptional way, economic field can be enriched through the application of
behavioral economics as a basis of synthesizing psychological value as an
intrinsic element and economic analysis as an external element (Etzioni,
2011b; Santos, 2011).
Therefore, behavioral economics area provides the construction
stakeholders with a new set of tools and policy pertaining the decision-
making of GBT adoption, instead of depending on the normal tools of
decision-making, either using quantitative or qualitative techniques. By
exploring into the decision-making process of GBT technology adoption
from behavioral economics perspective, this can assist not only decision-
makers, but also policy makers to obtain the right information for
generating technology decisions that involves huge capital investment,
besides other cost constraints. In this case, it is not only on the
consideration of technology costs, but with information inputs from
behavioral economics perspectives. It may reduce the costs and time of
making right decisions. Further, the synthesis of these two elements can be
used as a ground work to explore other economic elements related to GBT
decision-making such as time discounting factor, cost-benefit analysis and
opportunity costs.
As the future of the construction industry is facing uncertainties and
various challenges to ensure sustainable infrastructure development,
decisions must be made on the basis of wise and cost-effective basis. Thus,
it is to ensure that information on green technology decision is presented in
a way that requires the least math or numerical inputs, but with the
consideration of sustainability aspects such as environmental, social,
technological as well as management aspects it can reach its optimum.
Moreover, it is also vital to figure out what the ‘right’ decision is,
pertaining the adoption of GBT as the one a rational well-informed person
would make for sustainable infrastructure development. In this case, GBT
decision-making from behavioral economics perspectives can prevent the
stakeholders of construction projects from offering options that would
result in consumers making the ‘wrong’ decision on GBT adoption.
CONCLUSION
The respective application of behavioral economics in exploring and

understanding GBT decision-making can be enhanced using the integration
of a practical monetary basis and rational psychological foundation that
influence a decision-maker. It can be concluded that the field of behavioral
economics can assist the decision-makers of GBT adoption to avoid
making serious blunders when they have to consider not only the economic
gains of infrastructure development, but also the sustainability accomplish-
ments. Thus, in a real world setting of the construction industry, the
integration of these two aspects will lead to a more realistic understanding

of decision-making practices.
This study has also verified the conceptual model of GBT decision-
making that was theoretically developed using the ‘3S, 2E’ framework.
Besides several evidences and findings obtained from this study, a
decision-making model underpinning GBT adoption for sustainable
infrastructure development is presented with the highlights of behavioral
economics factors, which can be used and tested in other technology
implementations or other industry settings.
Based on these justifications, it can be substantiated that in
understanding technology adoption decisions, specifically GBT
development and progress, the field of behavioral economics can be
considered and applied in the research of economic choices and the human
cognitive approach. This study can also be applied to further clarify the
adaptability and practicality of the decision-making model of GBT
adoption for examining other types of technology adoption decisions in the
construction industry with great efficacy.
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ABOUT THE AUTHOR
Sharifah Akmam Syed Zakaria, PhD, is a senior lecturer at the School

of Civil Engineering, Universiti Sains Malaysia where she has been a
school member since 2001. Sharifah completed her PhD in Construction
Management (Building) at the University of Newcastle, Australia and her
undergraduate studies in Malaysia. She received awards from both The
Australian Institute of Building (AIB) Chapter President’s Research Award
(2015) and The Chartered Institute of Building Australasia (CIOBA)
Excellent Building Research Postgraduate Award (2015). She currently
teaches Project Finance, Disaster Management and Construction
Technology for undergraduate level and Engineering Management for
postgraduate level. Her research focuses on the managerial and behavioral
aspects associated with built environment in the context of project,
construction and disaster management. Specifically, her main area of
research are construction technology management, sustainable
infrastructure developments, behavioral economics, decision governance
and engineering education. She has authored 3 books, besides published
and edited over 50 scholarly pieces of work including journal papers,
conference proceedings, teaching modules and scholarly magazine articles.
Sharifah has presented her work in various forms including conferences,
workshops, seminars and invited presentations.
ABOUT THE EDITOR
Tansif ur Rehman has a PhD in European Studies with an M. Phil.
(European Studies) and M.S. Management Sc. (HRM) degree. He also
completed six different Masters in the respective field of Social Sciences,
i.e., MA (Economics), MA (International Relations), MA (Philosophy),
MA (Political Sc.), MA (Sociology), M.Sc. (Gender & Women Studies).
Along with his degrees, he has also been able to complete 56
(Certification/Credit Courses), 11 (Miscellaneous Diplomas), 08 (Trainings
- Government of Pakistan), 04 (Certification Courses and Diploma -
Deutsch, English, Italian, and Russian Language).
Dr. Rehman is a Commissioned Class-1 Gazetted Officer, currently
appointed as the Head of Sociology department at a respective government
degree college in Karachi (Pakistan). He is also working on various
projects along with working as a visiting faculty at the Department of
Criminology (University of Karachi), and has seventeen years of teaching
experience and eleven years of research experience.
INDEX
80, 81, 82, 83, 84, 85, 86, 87, 88, 92, 93,
A
94, 95, 96, 98, 99, 100, 101, 103, 104,
105, 106, 107, 108, 109, 110, 112, 113,
applications, vii, 1, 8, 29, 34, 73, 118, 119,
115, 116, 117, 118, 119, 120, 121, 122,
120, 122
123, 124, 125, 126, 127
DLPFC (dorsolateral prefrontal cortex), 16,
B 25, 44, 48
behavioral economics, 1, iii, vii, ix, 1, 2, 3,

4, 5, 6, 7, 8, 11, 13, 14, 15, 16, 17, 21, E
25, 26, 27, 28, 29, 32, 33, 34, 41, 45, 46,
economic games, 34, 59
51, 53, 55, 59, 67, 68, 69, 70, 71, 72, 73,
emotions, 34, 37, 41, 42, 43, 44, 45, 52, 54,
74, 75, 76, 89, 92, 93, 95, 96, 98, 100,
59, 60, 65, 74, 76, 116, 126, 127
102, 103, 104, 107, 108, 109, 110, 111,
ER (emotion regulation), 32, 44, 45, 55, 58,
112, 113, 116, 120, 127, 128
60, 62
C
F
CIDB (Construction Industry Development
fairness, 13, 31, 32, 33, 34, 35, 36, 37, 38,
Board), 68, 69, 73
40, 41, 43, 45, 46, 47, 48, 49, 50, 51, 52,
53, 54, 57, 58, 60, 61, 62, 63, 64, 65
D fMRI (functional magnetic resonance
imaging), 16, 24, 28, 44, 48, 56
decision-making, vii, 29, 30, 31, 32, 33, 34, franchising, 15, 16
37, 41, 42, 45, 46, 48, 53, 56, 59, 61, 62, frontiers, vii, 15, 16, 55, 59, 60
64, 67, 68, 71, 73, 74, 75, 76, 77, 78, 79,
132 Index
G O
gains, vii, 31, 32, 34, 45, 46, 47, 48, 49, 50, OFC (orbitofrontal cortex), 16, 26, 30
51, 52, 53, 55, 65, 89, 109 organizational behavior, 32, 45, 53, 54, 56,
GBI (green building index), 68, 91, 111 57, 60, 62, 63, 65, 116, 121, 125, 126
GBT (green building technology), vii, 67,
68, 69, 70, 71, 72, 73, 75, 76, 77, 78, 79,
P
80, 81, 82, 83, 84, 85, 86, 87, 88, 89, 90,
92, 93, 94, 95, 96, 97, 98, 99, 100, 101,
PET (positron emission tomography), 16, 24
103, 104, 105, 106, 107, 108, 109, 110
philosophy, vii, 1, 3, 4, 59, 72, 76, 129
green technology, 68, 69, 70, 72, 87, 88, 89,
pro-social behaviors, 34, 48, 51
90, 91, 93, 98, 109, 116, 119, 120, 127
Q
I
QRE (quantal response equilibrium), 16, 18
inequity aversion, 36, 37, 54
R
J
relational factors, 32, 41, 50, 51, 52, 53
judgments, 20, 32, 33, 36, 37, 43, 51, 52,
RII (relative importance index), 68, 98, 100,
58, 74
101
ROR (return on revenue), 16, 17
L
S
LIP (lateral intraparietal cortex), 16, 25
loss aversion, 2, 46, 47, 48, 56
social decision, 32, 33, 34, 35, 52, 53, 62,
losses, vii, 5, 31, 32, 33, 34, 37, 45, 46, 47,
64, 126
48, 49, 50, 51, 52, 53, 55, 61, 65
social distance, 40, 56, 60, 64
sustainability, 68, 69, 72, 76, 79, 80, 83, 87,
M 89, 90, 91, 92, 93, 99, 100, 102, 103,
106, 109, 111, 112, 114, 115, 117, 119,
MEG (magnetoencephalography), 16, 24 120, 121, 122, 123, 124, 125, 126, 127
neuroeconomics, 13, 15, 16, 23, 25, 26, 28,

30, 59, 117
Index 133
T U
themes, vii, 1, 3, 55 UB (ultimatum game), vii, 30, 31, 32, 34,

TMS (transcranial magnetic stimulation), 37, 46, 54, 55, 56, 57, 59, 60, 61, 62, 63,
16, 24 64, 65

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ECONOMIC ISSUES, PROBLEMS AND PERSPECTIVES

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Published by Nova Science Publishers, Inc. † New York

This book distills knowledge gained through a long academic career.

THEMES, PHILOSOPHY AND APPLICATIONS

Behavioral economics has come across as a vibrant subdiscipline of

Keywords: behavioral economics, applications, philosophy, themes

Behavioral economics can be completely defined by the most

Comparatively, behavioral economists made it a foundation to

THEMES AND PHILOSOPHY OF BEHAVIORAL ECONOMICS

Behavioral economics relate demonstrating of methodical absconds in

philosophy might be considered deductively modest, or it could be

1) Speculations ought to be checked (by accurateness of their

The tentatively decided philosophy to behavioral economics reported

1) Explicitly showing focuses on the restriction of discernment,

not an alternate economic discipline. It is a school of thought, which is

BEHAVIORAL PATHS NOT TAKEN

similar to these get leave the neoclassical conversion? A conceivable reply

METHODOLOGY OF BEHAVIORAL ECONOMICS

The frameworks used as a piece of behavioral economics are identical

Behavioral economists have forwarded previous investigation and got a

Macroeconomics and Saving

Various notions in macroeconomics inherit a behavioral underpinning

A central point in macroeconomics is programmed unemployment. A

work and paramount to the associations. To create all fascinating analysis,

In finance, the typical concept of valuing of advantage expects that

focused around the psychology of representativeness, had their measurable

Mullainathan, S., & Thaler, R. (2000). Behavioral economics: Entry in

FRONTIERS OF BEHAVIORAL ECONOMICS

Behavioral economics can be best viewed as a branch of cognitive

Keywords: behavioral economics, franchising, frontiers, neuroeconomics

DLPFC Dorsolateral Prefrontal Cortex

FRONTIERS OF BEHAVIORAL ECONOMICS

The respective content is related to the few novel backwoods in

FRANCHISING OF BEHAVIORAL ECONOMICS

A great part of the force of monetary examination originates from

The focal theory of money-related economics throughout the previous

structure’s wastefulness (recognizably utilizing economically procured

theory is expected with the respective investigation (Campbell and

The concept of game theory is an experimental classification of

harmony theory may apply at different levels of dissection, particularly

Labor and Organizational Economics

Labor economics in all of its dimensions is absolutely prepared for the

Besides, including extraneous motivating forces could be destructive in

Behavioral public finance inquires in what way restrains and

The aim and purpose of the subject matter of behavioral economics is

counts which embody impartiality limits. Although these concepts are

A decent illustration that highlights enthusiasm towards is time

IMPORTING ‘NEW’ PSYCHOLOGY

The early researchers demonstrate that a thin scope of cognitive

Consideration is maybe a definitive rare cognitive asset. A couple of

Neuroeconomics is the creation of microeconomics in purpose of

totally where in the cerebrum reckonings jump out at making expectations

Results Consistent with Rational Choice

Results Consistent with Behavioral Economics

The additional neural evidence is at the present inexplicably consistent

and clash determination territories (i.e., front cingulate). The activity

New Constructs and Ideas

The impact of neuroeconomics will surely not start apparently from

offer is likewise initiated by substantial distresses like torment and

ISBN: H%RRN