The Influence of Culture on the Lure of Choice, Mental Accounting, and Overconfidence

Abstract

In the contemporary globalized landscape characterized by international and intercultural decision-making processes, interconnected supply chains, and diverse customer relations, susceptibility to biases and heuristics poses a substantial threat to the efficiency of decision making. This research explores the relatively understudied influence of culture on individuals’ susceptibility to concepts derived from behavioral economics. Employing the Individual Cultural Values Scale (CVSCALE), we examine the impact of culture on the allure of choice, mental accounting, and overconfidence among 837 participants from Australia (AU), China (CN), Germany (GE), and the United States (US) through logistic regression analysis. At the individual level, discernible interactions between power–distance, allure of choice, and overconfidence are observed. On the national scale, power–distance (AU, US), uncertainty avoidance (US), and masculinity (CN) significantly impact the allure of choice, while overconfidence is influenced by power–distance (US) and masculinity (US). Our analysis shows that culture plays a pivotal role in shaping susceptibility to biases and heuristics, thereby influencing decision-making processes. The findings advocate for a culturally differentiated approach to behavioral economics, emphasizing the need to tailor strategies and interventions based on cultural nuances.