Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2016:35: Strategic Decisions: Behavioral Differences Between CEOs and Others

Håkan J. Holm (), Victor Nee () and Sonja Opper ()
Additional contact information
Håkan J. Holm: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Victor Nee: Department of Sociology, Cornell University
Sonja Opper: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

Abstract: Differences in strategic decision making between CEOs and other people are interesting since CEOs make important economic decisions and impact values and norms in society. Our study combines a large stratified random sample of 199 CEOs of medium-size firms with a carefully selected control group of 200 comparable people. All subjects participated in three different incentivized strategic games — Prisoner’s Dilemma, Chicken, Battle-of-the-Sexes. We report substantial and robust differences in both behavior and beliefs between the CEOs and the control group. The CEOs are closer to the socially optimal strategy profile in all games. Hence, as a group the CEOs out-competes the control-group members and thereby receives higher average earnings, but not by being smarter (in the narrow “rationalistic” sense) or more selfish, but by being more cooperative and less aggressive.

Keywords: Strategies; Efficiency; Nash equilibrium; Incentivized behavior; CEOs

JEL-codes: C70; C93; D22; L26

104 pages, December 13, 2016

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