WHEN WORDS SPEAK LOUDER THAN ACTIONS - ANOTHERS EVALUATIONS CAN APPEAR MORE DIAGNOSTIC THAN THEIR DECISIONS

When making decisions we often infer the value of the alternatives from the behavior of others. In some domains, however, we fail to make such inferences. Stock trading is a case in point-investors appear to undervalue the significance of the behavior of those who are willing to trade. A simulated market was developed to test this claim. Subjects made a series of portfolio reallocations on the basis of reports they read. Subjects in the experimental conditions also saw the responses of another person who based their responses either on the same information as the subject (high redundant information) or on different but equally predictive information (low redundant information). In fact, the responses subjects observed were identical in both conditions. A normative argument suggests that another's decision is more diagnostic when it is based on information having low redundancy rather than high redundancy. The dependent measure was an index of the degree of conformity to the other's decision. Results show that people become more sensitive to the diagnosticity of another's responses when observing how the person evaluated their information rather than how the person acted on their information. A salience hypothesis is involved to account for the pattern of results. Additional studies were conducted to test various alternative explanations. Implications for the measurement of conformity and influence are discussed. (C) 1994 Academic Press, Inc.