Decision processes brown bag, 2001-2002

12-1:30 PM, Mondays, 217 SHDH (University of Pennsylvania)

Sept 17 Tanya Chartrand, O.S.U. Mystery Moods and Perplexing Performance: Consequences of Succeeding or Failing at a Nonconscious Goal
Oct 1 Norbert Schwarz, Michigan When Debiasing Backfires: Accessible Content and Accessibility Experiences in Hindsight
Oct 8 Yuval Rottenstreich, Chicago On the affective psychology of risk and value
Oct 15 Alan Durell, Dartmouth Uncertainty, intentions, and reciprocity
Oct 22 John Merz, Penn Research on Institutional Review Boards: A Draft Agenda
Oct 29 Nicholes Souleles, Penn Do liquidity constraints and interest rates matter for consumer behavior? Evidence from credit card data (with David Gross)
Nov 5 Kathleen Valley, Harvard It takes two: Social distance and improvisations in negotiation
Nov 12 Barbara Kahn, Penn The impact of assortment structure and variety on consumption quantities
Nov 19 NO DP - JDM Meeting
Nov 26 No DP - Thanksgiving
Dec 3 Boaz Keysar, Chicago Communication and miscommunication: When people don't do what they "should"
Dec 10 Noah Gans, Penn Experimental tests of choice behavior in bandit problems
Jan 14 Jared Curhan, MIT Understanding negotiations from a dynamic social perspective
Jan 21 No talk
Jan 28 John List, University of Maryland The effect of market experience on the WTA/WTP disparity: Evidence from the field
Feb 4 Ilana Ritov, Hebrew University The effect of time on the evaluation of decision outcomes
Feb 11 Sean Nicholson, University of Pennsylvania How Much Do Medical Students Know About Physician Income? Accuracy, Bias, and Implications for Career Decisions
Feb 18 Jon Baron, University of Pennsylvania The rational voter: Moralistic values in judgments about political behavior.
Feb 25 Francisco Gil-White, University of Pennsylvania In the Ultimatum Game, the proposer offers more when the responder is an outgroup ethnic
Mar 4 Jennifer Lerner, Carnegie Mellon University Beyond valence: Toward a Model of Emotion-Specific Effects on Judgment and Choice
Mar 11 Spring Break - no seminar
Mar 18 Terrence Odean, University of California, Berkeley All that Glitters: The Effect of Attention on the Buying Behavior of Individual and Institutional Investors
Mar 20
Charles Plott, Distinguished Speaker, Cal Tech Markets and Other Information Aggreation Tools: Applications of Laboratory Experimental Methods in Economics
Mar 25 Chip Heath, Stanford University Emotional Selection in Memes: Urban Legends and Mad Cow Disease
Apr 1 Liz Gelfand Miller, University of Pennsylvania But, I don't want to go: When Wait Management Strategies Exacerbate Stress
Apr 8 Russell Korobkin, UCLA Aspirations and Settlement
Apr 15 Tom Gilovich, Cornell University Anchoring in egocentric social judgment and beyond

Other relevant events on campus

Applied economics workshop

Past years



Spring 1999

Jonathan Baron, web page maintainer


When Debiasing Backfires: Accessible Content and Accessibility Experiences in Hindsight

Norbert Schwarz, University of Michigan

After the outcome of an event is known, people feel that they "knew all along" that this was going to happen -- often to the extent of misremembering their own earlier predictions as having been closer to the outcome than was actually the case. Theoretically, hindsight biases emerge because we "update" our mental models of the event in light of the outcome knowledge. Drawing on these models to determine what we would have predicted prior to the event, we arrive at "predictions" that are too close to the actual outcome. Accordingly, the most commonly suggested remedy is that we should think of ways in which the event could have turned out otherwise to guard against the impact of outcome knowledge. Empirically, this remedy is rarely successful. Worse, it may often backfire, leaving us all the more convinced that they "knew it all along." The reported research addresses the underlying processes and identifies the conditions under which counterfactual thoughts (a) attenuate hindsight, (b) increase hindsight, or (c) induce a bias in the opposite direction, leaving decision makers with the impression that the event was less likely than they had actually predicted prior to the event.

Specifically, hindsight is (a) attenuated when we try to come up with only a few counterfactual thoughts, but is (b) increased when we try to generate many counterfactual thoughts. Finding it difficult to think of many ways in which the event could have turned out otherwise, we conclude there aren't many and hence consider the event as having been even more inevitable. These findings are consistent with the observation that the implications of accessible content ("what" comes to mind) are qualified by the ease or difficulty with which it can be brought to mind (Schwarz, 1998). The observed backfire effect of debiasing attempts is (c) eliminated when the informational value of the experienced difficulty is undermined through (mis)attribution manipulations. In this case, we draw on the many counterfactual thoughts we generated, despite the fact that they were hard to think of, resulting in a bias in the opposite direction (Sanna, Schwarz, & Stocker, 2001). Ironically, (d) trying to think of many ways that made the event inevitable is most efficient in reducing hindsight, provided that this task is experienced as difficult.

Sanna, L.J., Schwarz, N., & Stocker, S.L. (2001). When debiasing backfires: Accessible content and accessibility experiences in debiasing hindsight. Manuscript under review.

Schwarz, N. (1998). Accessible content and accessibility : The interplay of declarative and experiential information in judgment. Personality and Social Psychology Bulletin, 2, 87-99.

Yuval Rottenstreich
"On the Affective Psychology of Risk and Value"

Prospect theory's S-shaped weighting function is often said to reflect the psychophysics of chance. We propose an affective rather than psychophysical deconstruction of the weighting function resting on two assumptions. First, preferences depend on the affective reactions associated with potential outcomes of a risky choice. Second, even controlling for their monetary values, some outcomes are relatively affect-rich and others relatively affect-poor. Although the psychophysical and affective approaches are complementary, the affective approach has one novel implication: weighting functions will be more S-shaped for lotteries involving affective-rich than affect-poor outcomes. That is, people will be more sensitive to departures from impossibility and certainty but less sensitive to intermediate probability variations for affect-rich outcomes. We corroborate this prediction by observing probability-outcome interactions: an affect-poor prize is preferred over an affect-rich prize under certainty, but the direction of preference reverses under low probability. We suggest that the assumption of probability-outcome independence, adopted by both expected utility and prospect theory, may hold across outcomes of different monetary values, but not different affective values.

Alan Durell
Uncertainty, intentions, and reciprocity

Reciprocity has been shown to be a important determinant of behavior in bargaining and labor market settings. People will often sacrifice their own payoffs to reward those who have been kind to them and to punish those who have been unkind to them. This study aims to understand how intentions are attributed to others and how strongly these attributions influence reciprocal behavior. Uncertainty about others' intentions is a potentially important determinant of reciprocity. If one is uncertain about another's payoffs or actions, interpreting her behavior as kind or unkind is more difficult. A series of ultimatum game results show that responders' reciprocal behavior varies with uncertainty about proposers' intentions and that proposers' behavior is influenced by responders' uncertainty as well.

John Merz
Research on Institutional Review Boards: A Draft Agenda

Institutional Review Boards (IRBs) are the committees charged with protecting the rights and welfare of human beings used in research. In this informal presentation and discussion, I will give an overview of what IRBs are supposed to do, what we know about what they in fact do, and present a research agenda for better understanding and improving IRB functioning.

Nicholas Souleles
Do liquidity constraints and interest rates matter for consumer behavior? Evidence from credit card data (with David Gross)

This paper utilizes a unique new dataset of credit card accounts to analyze how people respond to changes in credit supply. The data consist of a panel of thousands of individual credit card accounts from several different card issuers, with associated credit bureau data. We estimate both marginal propensities to consume (MPCs) out of liquidity and interest-rate elasticities. We also evaluate the ability of different models of consumption to rationalize our results, distinguishing the Permanent-Income Hypothesis (PIH), liquidity constraints, precautionary saving, and behavioral models. We find that increases in credit limits generate an immediate and significant rise in debt, counter to the PIH. The average 'MPC out of liquidity' (dDebt/dLimit) ranges between 10%-14%. The MPC is much larger for people starting near their limits, consistent with binding liquidity constraints. However, the MPC is significant even for people starting well below their limit. We show this response is consistent with buffer-stock models of precautionary saving. Nonetheless there are other results that conventional models cannot easily explain, e.g. why so many people are borrowing on their credit cards, and simultaneously holding low yielding assets. Unlike most other studies, we also find strong effects from changes in credit cards, and simultaneously holding low yielding assets. Unlike most other studies, we also find strong effects from changes in account-specific interest rates. The long-run elasticity of debt to the interest rate is approximately -1.3. Less than half of this elasticity represents balance-shifting across cards, with most reflecting net changes in total borrowing. The elasticity is larger for decreases in interest rates than for increases, which can explain the widespread use of temporary promotional rates. The elasticity is smaller for people starting near their credit limits, again consistent with liquidity constraints.

The Impact of Assortment Structure and Variety on Consumption Quantities
Barbara E. Kahn and Brian Wansink

Consumers are frequently in situations where they must decide how much to consume. At home, consumers are often faced with a wide array of breakfast, lunch and snack options. At parties, they are often invited to make selections from trays of hors d'oeuvres or fancy desserts, or to help themselves from bowls of nuts or candy. At restaurant or breakfast buffets, customers are presented with a plate and allowed to take as much food as they want. In these circumstances, how do people decide how much to consume?

Sensory specific satiety research has shown that when assortments offer few different items, increasing the number of available options can increase consumption (Inman 2001; Rolls 1986). Indeed, the basic economic assumption of diminishing utility implies that consuming a second helping of an item would be less preferred than consuming a different, but equally preferred alternative (Hursh et al 1988; Rolls et al 1981). In this research, we are interested in whether simply changing the perception of variety -- but holding the actual number of options offered constant -- can also change consumption. If it does, there are a wide range of environmental factors that could be unknowingly stimulating consumption.

We believe that there are several ways to increase perceived variety that do not involve increasing the actual number of different alternatives offered. For example, changing the organization of a buffet layout, changing the entropy of the assortment, and changing the number of duplicate dishes all might influence perceptions of variety without actually increasing the number of different consumption alternatives. If such perceptual changes stimulate consumption quantities, the explanation for the increases cannot simply be explained by preference differences or sensory specific satiety, since those aspects are held constant. Furthermore, by manipulating high levels of actual variety in different ways, we can determine whether there can be "too much variety" (Iynegar and Lepper 2001). Consistent with the notion of information overload (Malhotra 1982) and cognitive complexity (Huffman and Kahn 1998), we show that there can be a point where further increasing the variety of an assortment can decrease one's perception of variety and as a result decrease consumption quantities.

Boaz Keysar
Communication and miscommunication: When people don't do what they "should"

The dominant view in the study of language use makes strong normative assumptions. It assumes that when people understand language they should use their common ground with the speaker, and that they indeed do just that. Research from my laboratory suggests that language users do not do what they "should." Instead of relying on common ground, people often process language egocentrically, they anchor on their own perspective and make insufficient adjustment to the other's perspective, and they overestimate their ability to communicate their intention because they experience an illusion of transparency. Such processing suggests that miscommunication is partially systematic.

Noah Gans and Rachel Croson
Experimental Tests of Choice Behavior in Bandit Problems

Multi-armed bandits are a common means of modeling a person's repeated, discrete choices under uncertainty. In this setting, various Bayesian models of decision-making lead to a similar characterization of aggregate choice behavior: the expected time until a subject switches arms should be convex and increasing in current arm's "quality". At the same time, the models' predictions concerning a person's choice at any single trial of a Bandit problem may differ.

In these experiments, we have collected data on subjects' choice behavior in a set of two-armed, Bernoulli bandit problems. We present preliminary analysis which suggests that, in fact, the subjects' choice behavior conforms to the aggregate characterization described above. We also describe our approach to analyzing how well the various models predict subjects' individual choices.

Jared Curhan
Understanding Negotiations from a Dynamic Social Perspective

I will present two lines of research, illustrating the impact of social factors on negotiator preferences, negotiation processes, and negotiated outcomes. The first research project, entitled "Dynamic Valuation," concerns how negotiators' preferences change in the context of a face-to-face negotiation. Theoretical underpinnings include dissonance reduction and reactance theory. The second research project concerns the impact of relational norms and organizational culture on negotiation processes and negotiated outcomes.

John List
The effect of market experience on the WTA/WTP disparity: Evidence from the field

A bulk of recent evidence suggests that important disparities exist between willingness to pay and compensation demanded for the same good. This paper extends and refutes the generality of these findings by examining individual trading decisions in two well-functioning marketplaces: a sportscard market and a pin trading market. In support of the received literature, field evidence from both markets suggests an inefficiently low number of trades occur for na´ve traders, consistent with reference-dependent preferences. In contrast, this anomaly is not evident for consumers that have obtained significant trading experience. To test whether the observed effects are due to treatment or selection, in a third field experiment I return to the sportscard market one year after the original experiment and examine trading decisions from the same group of subjects that participated in the first experiment. Empirical results from panel data models confirm that experience has a significant role in eliminating the endowment effect. As a robustness test, in a fourth field experiment I obtain statements of explicit value revelation in actual auctions on the floor of a sportscard show and find sharp support of the results in the first three field studies. These findings uncover important successes and failures of the theoretical literature, and provide challenges for both neoclassical and reference-dependent theorists.

Ilana Ritov, Hebrew University of Jerusalem, Israel
The effect of time on the evaluation of decision outcomes

Over the past two decades ample research showed that in evaluating the outcome of their choice, people are affected not only by the utility of the outcome itself, but also by other factors, including the known or imagined outcomes of forgone options, and the route through which the outcome was obtained (through action or inaction). On the other hand, different findings (e.g. Gilovich and Medvec, 1995) suggest that the evaluation of recently obtained outcomes may differ considerably from the long term evaluation of outcomes. Although these latter findings do not offer an opportunity to examine a temporal change in the evaluation of a particular outcome, they raise the possibility that factors affecting short term evaluation may not be as potent in the long term.

In my talk I shall discuss the possible long term effect of the factors influencing outcome evaluation. I shall present some reseach concerning the time course of decision evaluation by examining satisfaction with specific real choices made by participants at varied times in the past. In two studies evaluation of a small gift immediately following the gift's selection was compared to the evaluation of the gift one to two months later. Two other studies examined evaluation of important real decisions: the retaking of an exam in introductory psychology class in order to improve one's grade point average, and the choice of the undergraduate major. Taken together, the results of these studies indicate that under some conditions the impact of forgone options on the evaluation of decision outcomes does not diminish, and may even increase with time. Augmented regret for omissions in the distant past can be viewed as a special case of this general effect.

Chip Heath
Emotional Selection in Memes: Urban Legends and Mad Cow Disease

Our models of decision makers typically assume that individuals learn or develop attitudes through direct experience with the environment. However, it's clear that much of our information and many of our attitudes and beliefs are inherited from the social marketplace of ideas. I'm interested in whether we can identify aspects of ideas that allow them to survive more successfully in the marketplace of ideas. If ideas succeed in the marketplace for reasons other than their truth or utility, then decision makers may exhibit correlated mistakes as they individually and collectively make decisions based on biased public information.

My talk will examine two cases where ideas seem to succeed in the marketplace of ideas based on emotional selection (i.e., a meme's ability to evoke emotions like anger, fear, or disgust). If ideas undergo emotional selection, then truth need not win out in the marketplace of ideas: In the case of urban legends, many of the ideas that succeed are false, and in the case of Mad Cow disease, the ideas that succeed are, at the very least, exaggerated.

In the work on urban legends (with Chris Bell and Emily Sternberg) we explore how much urban legends succeed based on emotional selection and on informational selection (i.e., truth or a moral lesson). We focus on the emotion of disgust because it is the least intuitive form of emotional selection and its elicitors have been precisely described. In Study 1, controlling for informational factors like truth, people were more willing to pass along stories that elicited stronger disgust. Study 2 randomly sampled legends and created versions that varied in disgust; people preferred to pass along versions that produced the highest level of disgust. In Study 3, we coded legends for individual story motifs that produce disgust (e.g., ingestion of a contaminated substance); legends that contained more disgust motifs were distributed more widely on urban legend web sites. We discuss implications of emotional selection for the social marketplace of ideas.

I'll also talk about some work in process with Marwan Sinaceur on Mad Cow disease in France. We show that the fear-inducing emotional label, "mad cow," is much more pervasive than its less-emotional scientific equivalent, "bovine spongiform encephalopathy" in popular newspapers, and we also show that the prevalence of the emotional label in newspaper articles has a more dramatic correlation with behaviors like beef consumption and legislative activity than the rational label-even though the articles where the emotional label appears are, in many ways other than the label, less emotionally arousing than the articles where the rational label appears.

Francisco Gil-White
In the Ultimatum Game, the proposer offers more when the responder is an outgroup ethnic.

An Ultimatum Game with an ethnicity manipulation (Mongols and Kazakhs) run in the province of Hovd, in the Republic of Mongolia, found that proposers made higher offers when the opponent was an outgroup ethnic, and responders were equally likely to punish coethnics for low offers as they were to punish outgroup ethnics. The theories usually invoked to explain discriminatory effects (Realistic Conflict Theory, and Social Identity Theory) cannot easily account for these results. Theories that consider ethnic boundaries as coextensive with *norm* boundaries, and which grant that actors must have adaptations to deal with this social reality, can easily account for the observations.

Sean Nicholson
How Much Do Medical Students Know About Physician Income? Accuracy, Bias, and Implications for Career Decisions
Health care systems department<

Labor economists typically assume that people have unbounded rationality; they use all available information to form unbiased income expectations. In this paper I test this assumption by examining how knowledgeable medical students are about an important component of their information set: the contemporaneous income of physicians in six specialties. I examine how accurately students estimate contemporaneous physician income, whether estimates are unbiased, the determinants of income estimation errors, how much the students learn about market income during medical school, and whether misinformation about physician income causes medical students to choose the "wrong" specialty.

I use a unique longitudinal data set that contains information on 28 cohorts of medical students who attended Jefferson Medical College between 1971 and 1998. In the 1970s medical students substantially overestimated contemporaneous physician income, but now they underestimate market income by 25 percent, on average. This degree of inaccuracy suggests there are large search costs associated with learning about market income, students receive biased information, and/or students systematically misinterpret the information they receive. Medical students are 16 percent more accurate when estimating contemporaneous physician income in their fourth year relative to their first year, which implies that a considerable amount of learning about market income occurs during medical school. Although many medical students had a poor understanding of what physicians earn in various specialties, I found no relationship between the degree to which students overestimated the contemporaneous income in the specialty they ultimately entered and the desire to choose a different specialty if they could revisit the specialty decision.

Jennifer Lerner
Beyond valence: Toward a Model of Emotion-Specific Effects on Judgment and Choice

This talk will be based on two papers. The first is "Emotion and Perceived Risks of Terrorism: A National Field Experiment." The abstract is:

The aftermath of September 11th highlights the need to understand how emotion affects citizens' risk judgments and policy preferences regarding terror. It also provides an opportunity to test current theories of such effects. Consistent with appraisal-tendency theory, anger and fear have opposite effects. In a nationally representative sample of Americans (ages 13-88), fear increased risk estimates and plans to take precautionary measures; anger did the opposite. These patterns emerged with both naturally occurring and experimentally induced emotions. Males' risk estimates were less pessimistic than females, largely because males were angrier and less fearful. Emotions also predicted diverging public policy preferences.

The second paper is in the library electronic journals, specifically, Lerner, J., and Keltner, D. (2001). Fear, anger, and risk. Journal of Personality and Social Psychology, 81(1),146-159.

Drawing on an appraisal-tendency framework (Lerner & Keltner, 2000), we predicted and found that fear and anger have opposite effects on risk perception. Whereas fearful people expressed pessimistic risk estimates and risk-averse choices, angry people expressed optimistic risk estimates and risk-seeking choices. These opposing patterns emerged for naturally occurring and experimentally induced fear and anger. Moreover, estimates of angry people more closely resembled those of happy people than those of fearful people. Importantly, appraisal tendencies accounted for these effects: appraisals of certainty and control moderated and (in the case of control) mediated the emotion effects. As a complement to studies that link affective valence to judgment outcomes, the present studies highlight multiple benefits of studying specific emotions.

Tom Gilovich
Anchoring in egocentric social judgment and beyond

People's estimates of uncertain quantities are commonly influenced by irrelevant values. These anchoring effects were originally explained as insufficient adjustment away from an initial anchor value. The existing literature provides little support for the postulated process of adjustment, however, and a consensus that none takes place seems to be emerging. We argue that this conclusion is premature, and we present evidence that insufficient adjustment produces anchoring effects when the anchors are self-generated. In Study 1, participants' verbal reports made reference to adjustment only from self-generated anchors. In Studies 2 and 3, participants induced to accept values by nodding their heads gave answers that were closer to an anchor (i.e., they adjusted less) than participants induced to deny values by shaking their heads-again, only when the anchor was self-generated. These results suggest it is time to reintroduce anchoring and adjustment as an explanation for some judgments under uncertainty.

The relevant article is Epley, N., and Gilovich, T. (2001) Putting adjustment back in the anchoring and adjustment heuristic: Differential processing of self-generated and experimter-provided anchors. Psychological Science, 12 (5), 391-396. It is available on-line for Penn people as part of the library's electronic journals. You can type "Psychological Science" in the search box, but you might want to see what else is available, first.

Jon Baron
The rational voter: Moralistic values in judgments about political behavior

I distinguish four types of goals: self-interested, altruistic, moralistic, and moral. Moralistic goals are those that people attempt to impose on others, regardless of the others' true interests. These may become prominent in political behavior such as voting because such behavior has relatively little effect on self-interested goals. I argue (sometimes with experimental evidence) that common decision biases concerned with allocation, protected values, and parochialism often take the form of moralistic values. Because moralistic values are often bundled together with other values that are based on false beliefs, they can be reduced through various kinds of reflection or ``de-biasing.'' I discuss implications for law.

Terrence Odean, University of California, Berkeley
All that Glitters: The Effect of Attention on the Buying Behavior of Individual and Institutional Investors
Brad Barber and Terrence Odean

We test the hypothesis that individual investors are more likely to be net buyers of attention- grabbing stocks than are institutional investors. We speculate that attention-based buying is a result of the difficulty that individual investors have searching the thousands of stocks they can potentially buy. Individual investors don't face the same search problem when selling, because they tend to sell only a small subset of all stocks--those they already own. We look at three indications of how likely stocks are to catch investors' attention: daily abnormal trading volume, daily returns, and daily news. We calculate net order imbalances for more than 66,000 individual investors with accounts at a large discount brokerage, 647,000 individual investors with accounts at a large retail brokerage, 14,000 individual investor accounts at a small discount brokerage, and 43 professional money managers. Individual investors tend to be net purchasers of stocks on high attention days--days that those stocks experience high abnormal trading volume, days following extreme price moves, and days on which stocks are in the news. Institutional investors are more likely to be net buyers on days of low abnormal trading volume than on those with high abnormal trading volume. Their reaction to extreme price moves depends upon their investment style. The tendency of individual investors to be net buyers of attention-grabbing stocks is greatest on days of negative returns. We speculate that this tendency may contribute to momentum in small stocks with losses.

Charles R. Plott
California Institute of Technoloty
Markets and Other Information Aggregation Tools: Applications of Laboratory Experimental Methods in Economics

Experimental economics research suggests that markets and similar competitive systems have an amazing capacity to gather scattered information like a vacuum cleaner, process it like a statistician, and publicize the results. By reading the signs of system behavior, an "outsider" can detect what "insiders" know. The idea is reflected almost daily, for example, in newspaper accounts that the stock market has "anticipated" profit reports, court decisions, political events, actions of the Federal Reserve, etc. The lecture will focus on how the phenomenon is studied, under what conditions it might happen, how it might happen, and how "market-like" systems can be designed to harness this ability and apply it to managerial problems.

Elizabeth Gelfand Miller
But, I don't want to go: When Wait Management Strategies Exacerbate Stress

Consumers often purchase services (and sometimes products) that they find stressful, such as medical or dental services, funeral services, insurance, etc. As with many consumers services, there is often a waiting period involved. The traditional services and wait management literature generally focuses on services that are either neutral (e.g., waiting in line for bank services) or pleasant (e.g., waiting for a restaurant) but has failed to consider wait management strategies when the services themselves are negative or stressful. We suggest that in these negative situations, there are two sources of stress: that associated with having to wait, and that associated with the event itself. We argue that interventions designed to attenuate waiting time stress may have unintended negative consequences on the stress due to the event. In particular, both laboratory and field data show that providing duration information -- one common prescription for reducing wait stress -- can actually exacerbate the stress associated with the negative event. We also explore the process behind these effects. Based on these results, we argue that marketers should consider the characteristics of their service or good, as well as the emotional state of their customers, when determining the best way to manage delays.

Russell Korobkin
Aspirations and Settlement

Negotiation scholars routinely claim that high "aspirations," or goals, can improve bargaining outcomes. The legal-academic literature on litigation settlement, however, never suggests that litigant aspirations affect the outcomes of settlement negotiations and, in fact, this literature implies that aspirations should be irrelevant. This article develops a series of hypotheses as to how these conflicting views about the role of aspirations might be reconciled, and then it reports the results of experimental tests of these hypotheses. The experimental results support the claim that litigant aspirations can indirectly affect settlement outcomes by directly affecting a range of variables identified as relevant to outcomes by the settlement literature including litigant reservation prices, perceptions of fairness, patience in bargaining, and willingness to risk impasse. This perspective on how aspirations affect settlement bargaining suggests that litigants with high aspirations should achieve more desirable bargaining outcomes (compared to litigants with low aspirations) when agreement is reached, but that high aspirations probably carry with them a greater risk of impasse and a lower level of litigant satisfaction.