1. Social Influence: A Neglected Issue in Social-Dilemma Research? Tommy Gärling Maria Andersson Ted Martin Hedesström Department of Psychology University of Gothenburg, Göteborg Sweden

2. Social Influence It is believed that sheep follow each other mindlessly. What about women? And men?

3. A Normal Day at the Stock Market In the stock market following others is referred to as herding. Conclusive market evidence of the existence and causes of herding is largely lacking. Experiments are conducted by asking participants to make choices in sequence such that in addition to private information each participant knows the choices made by the preceding participants.

4. Relationships to Social Dilemmas In social dilemmas under sequential protocol when participants know what others preceding them have contributed (taken), do they follow a majority of others due to their social influence ? And what role does interdependence play in stock markets?

5. Theories of Social Influence  Social influence creates conflict between the source and the target of influence.  Two ways of solving the conflict include: Conforming to a majority’s view: Majority influence Accepting a minority’s view: Minority influence  Dual-process theories assume there are qualitative differences between majority and minority influences.

6. Theories of Social Influence (cont.) Majority influence is associated with heuristic processing (either because one wants to belong to the majority – normative social influence; or because one believes the majority is correct – informative social influence) Minority influence is associated with systematic processing (critical assessment) Empirical studies (Erb, Bohner, Rank, & Einwiller, 2002; Martin, Hewstone, & Martin, 2007; Martin, Martin, Smith, & Hewstone, 2007; Tormala, DeSensi, & Petty, 2007) crossing source status and message processing give mixed results, some support dual-process theories and some do not. Several moderating factors.

7. Method Overview – “The Market” Upmarket mean = 12 Downmarket mean = 9 75%

8. Method Overview – Material (Upmarket) SignalParticipant AParticipant BParticipant C 1>10Up Down 2>10UpDownUp 3>10DownUp 4>10UpDown 5>10DownUpDown 6>10Down Up 7>10Up Down 8>10UpDownUp 9>10UpDown 10≤10DownUp 11≤10DownUpDown 12≤10Down Up

9. Method Overview - Design Participants: 60 undergraduates in different programs Design: A 3 (payoff: individual vs minority vs. majority) by 2 (market state: up vs. down) by 5 (4) x 12 (trials) factorial design with trial as a repeated-measures factor. Payoff schemes: Individual payoff: If correct prediction 4 SEK (EV of following majority/minority = 2 SEK, EV of following signal = 3 SEK) Majority/minority payoff: If correct prediction 2 SEK + 4 SEK if coinciding with the majority’s (minority´s) predictions (EV of following majority/minority = 3/1 SEK/EV of following signal = 3 SEK)

10. Hypotheses Several previous experiments we have conducted (see Andersson, 2009) have shown that a majority has a larger impact than a minority. The payoff for individual performance (not following the majority) compared to the payoff for following the majority is expected to counteract following the majority if it instigates systematic processing (and following the majority leads to worse performance). The paypoff for following the minority may have no effect because a minority already instigates systematic processing. Andersson, M. (2009). Social influence in the stock market. Doctoral dissertation, University of Gothenburg, Göteborg, Sweden.

11. Results No significant effects (  =.05) Percent Correct

12. Results (cont.) Main effect of payoff:F(2,54) = 4.46, p =.016, ω 2 partial =.06 Only the majority-payoff condition differs reliably from the other conditions. Follow signal Follow herd Index

13. Results of Additional Experiments Individual payoff had a larger effect in the absence of the herd (percent correct 74% vs. 65%) Only slightly less effect when majority payoff was eliminated (percent correct 69.7% vs. 60.6%, index.36 vs..17)

14. Discussion The results show that in the majority-payoff (and no bonus) condition(s) participants pay less attention to the signal and more attention to the others’ predictions than do participants in the other payoff conditions. An interpretation is that a majority is followed “mindlessly” (heuristic processing), whereas an individual payoff instigates systematic processing that lead to more accurate performance. In contrast a minority bonus had no effect because a minority already elicits systematic processing. (Not confirmed in consequent experiments.) In a social dilemma under sequential protocol, the interdependence certainly plays a role. Does social influence? If there is uncertainty and contributions are anonymous, informative social influence may dominate. If not anonymous normative social influence (reputation) would perhaps dominate. In the reverse, what does interdependence add to accounts of social influence (in stock markets)?

15. Thank you! Questions and comments?

16. Social Influence ”Almost mindlessly people follow others.” Anonymous thinker

17. Method overview - Task Task: Predict “upmarket” or “downmarket” Information in all conditions: - Before each trial, participants receive a signal. - The signal (ranging 5 to 16) is sampled from one of two distributions (upmarket or downmarket) - The predictions by 3 (fictitious) others

18. Method overview - Instructions  Probability of initial market state: upmarket/downmarket =.50  Maximum one change  Change on any trial after the twelfth (no change occurred)  Probability of market change =.50