Magical Thinking in Competition, Poster 4

This research will examine the causal relationship between magical thinking and competition. Magical thinking, or any behaviors that reflect an erroneous perception of control over an ultimately uncontrollable event, appears... [ view full abstract ]

This research will examine the causal relationship between magical thinking and competition. Magical thinking, or any behaviors that reflect an erroneous perception of control over an ultimately uncontrollable event, appears in many different forms across multiple competitive environments. Financial markets provide an excellent setting in which magical thinking behaviors arise that can affect the rational decision making of investors. This research project makes use of a randomized controlled trial, in which subjects participate in a stock trading activity, which involves random fluctuations in the stock market. To elicit a sense of the illusion of control, or magical thinking, members in one group will be allowed to select a stock portfolio with which to complete the experiment, and members of the other group will be assigned perfectly corresponding portfolios. The groups will be further subdivided into a group competing for an additional prize and a group that is not engaged in any competition. The former manipulation, the introduction of choice, serves to elicit the irrational confidence that subjects can control the random shocks in the stock market, otherwise known as magical thinking. The latter manipulation allows for the assessment of the causal relationship between competition engagement and magical thinking.