Ernst Fehr’s research examines the determinants of individuals’ preferences, social norms and the cultures of groups. In addition, he studies the causal consequences of trust and social norms for economic and social behavior. In recent work, Fehr studied whether business cultures facilitate excessive risk taking which seems to have been a serious problem in the financial industry that contributed to the financial crisis in 2008. In other, related work, he has shown that many individuals display countercyclical risk aversion – a finding that can partially explain the large price volatility of financial assets: in financial market booms, individuals become more risk seeking which further feeds the boom while in financial busts they become more risk averse, which further contributes to declining asset prices.
In other recent work, Fehr developed a “high-frequency” measure of social cooperation norms that enable him to study the determinants and the causal consequences of social norms. In this work he shows that a social norm to cooperate completely unravels over time unless it is backed by peer sanctioning – a finding with important consequences for organizations that want to establish a sound cooperative culture. Finally, Fehr also examined the interaction between trust and social institutions. This work shows that in the absence of suitable legal or informal institutions that enable parties to commit to their promises an increase in trust has little consequences, implying that trust alone is not enough to establish a productive and efficient exchange in organizations and markets. However, this work also shows that institutional rules and commitment devices alone are not enough. Both, trust and good institutions are needed to achieve efficient outcomes.
Ernst Fehr’s research examines the determinants of individuals’ preferences, social norms and the cultures of groups. In addition, he studies the causal consequences of trust and social norms for economic and social behavior. In recent work, Fehr studied whether business cultures facilitate excessive risk taking which seems to have been a serious problem in the financial industry that contributed to the financial crisis in 2008. In other, related work, he has shown that many individuals display countercyclical risk aversion – a finding that can partially explain the large price volatility of financial assets: in financial market booms, individuals become more risk seeking which further feeds the boom while in financial busts they become more risk averse, which further contributes to declining asset prices.
In other recent work, Fehr developed a “high-frequency” measure of social cooperation norms that enable him to study the determinants and the causal consequences of social norms. In this work he shows that a social norm to cooperate completely unravels over time unless it is backed by peer sanctioning – a finding with important consequences for organizations that want to establish a sound cooperative culture. Finally, Fehr also examined the interaction between trust and social institutions. This work shows that in the absence of suitable legal or informal institutions that enable parties to commit to their promises an increase in trust has little consequences, implying that trust alone is not enough to establish a productive and efficient exchange in organizations and markets. However, this work also shows that institutional rules and commitment devices alone are not enough. Both, trust and good institutions are needed to achieve efficient outcomes.
