nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2005‒04‒03
seven papers chosen by
Marco Novarese
Universita del Piemonte Orientale

  1. The Void at the Heart of Rules: Routines in the Context of Rule-Following. By Bénédicte Reynaud
  2. Is There an "Iron Law of Happiness"? By Richard A. Easterlin
  3. Yes, Wall Street, There Is a January Effect! Evidence from Laboratory Auctions By Lisa R. Anderson; Jeffrey R. Gerlach; Francis J. DiTraglia
  4. Trust, Reciprocity, and Contract Enforcement: Experiments on Satisfaction Guaranteed By James Andreoni
  5. Trust, Trust Games and Stated Trust: Evidence from Rural Bangladesh By Johansson-Stenman, Olof; Mahmud, Minhaj; Martinsson, Peter
  6. Why Lying Pays: Truth Bias in the Communication with Conflicting Interests By Toshiji Kawagoe; Hirokazu Takizawa
  7. Unemployment and Right-Wing Extremist Crime By Armin Falk; Josef Zweimüller

  1. By: Bénédicte Reynaud
    Abstract: This paper is an attempt to understand how rules operate in organisations. I focus on the links between organisational routines and rules that are defined as incomplete when they come to their application. I analyse the role of routines in managing the incompleteness of rules. I present a case study where management introduced a productivity bonus in the middle of 1992. This allows to study in what extent the new rule modifies the prevailing routines of work organisation. Based on team observations, interviews, and statistics that I carried out over a period of nine years (1992-2000), I show that in an initial period, the productivity bonus has partially biased the tasks selec-tion process. In a second period - "the normal period"- our observations indicate that following the rules consists in translating the abstract rules into concrete reference points, and adding in what the rules have not specified. The first activity becomes a routine when the interpretation is stabi-lised. Routines provide a pragmatic, local, and temporary solution to the incompleteness of rules. Since routines emerge only in the course of action, they come with no guarantee of success. That constitutes their dynamic.
    Date: 2005
  2. By: Richard A. Easterlin
    Abstract: Contrary to the setpoint model of some psychologists, individual happiness does not tend to fluctuate around a constant level. Although the personality and genetic factors emphasized by setpoint theorists are important in explaining individual differences in happiness at a point in time, survey evidence demonstrates that over the life cycle economic circumstances, family life, health, and work are important in determining the course of happiness. However, life events do not necessarily dominate life cycle satisfaction in different domains, and economic theories of well-being would benefit from following psychologists’ lead by incorporating goals and adaptation.
    Keywords: Happiness, Aspirations, Adaptation
    JEL: D60 I31 A12
    Date: 2005–01
  3. By: Lisa R. Anderson (Department of Economics, College of William and Mary); Jeffrey R. Gerlach (Department of Economics, College of William and Mary); Francis J. DiTraglia (Department of Economics, College of William and Mary)
    Abstract: In the first experimental test of the January effect, we find an economically large and statistically significant result in two very different auction environments. After controlling for variables that could influence subjectsÕ bids such as differences in private values, cumulative earnings, and learning effects, the prices in the January markets were systematically higher than those in December. The results suggest that psychological factors may contribute to the well-documented January effect in empirical stock market data, a conclusion that clearly violates the efficient markets hypothesis.
    Date: 2005–03–28
  4. By: James Andreoni
    Date: 2005–03–18
  5. By: Johansson-Stenman, Olof (Department of Economics, School of Economics and Commercial Law, Göteborg University); Mahmud, Minhaj (Department of Economics, School of Economics and Commercial Law, Göteborg University); Martinsson, Peter (Department of Economics, School of Economics and Commercial Law, Göteborg University)
    Abstract: Levels of trust are measured by asking standard survey questions on trust and by observing the behaviour in a trust game using a random sample in rural Bangladesh. Follow-up questions and correlations between the sent amount in the trust game and stated expectations reveal that the amount sent in the trust game is a weak measure of trust. The fear of future punishment, either within or after this life, for not being sufficiently generous to others, was the most frequently stated motive behind the respondents’ behaviour, highlighting the potential importance of motives that cannot be inferred directly from people’s behaviour. <p>
    Keywords: Trust; trust game; social capital; field experiment; Bangladesh
    JEL: C93 Z13
    Date: 2005–03–31
  6. By: Toshiji Kawagoe; Hirokazu Takizawa
    Abstract: We conduct experiments of a cheap-talk game with incomplete information in which one sender type has an incentive to misrepresent her type. Although that Sender type mostly lies in the experiments, the Receiver tends to believe the Sender's messages. This confirms "truth bias" reported in communication theory in a oneshot, anonymous environment without nonverbal cues. These results cannot be explained by existing refinement theories, while a bounded rationality model explains them under certain conditions. We claim that the theory for the evolution of language should address why truthful communication survives in the environment in which lying succeeds.
    Date: 2005–03
  7. By: Armin Falk; Josef Zweimüller
    Abstract: Right-wing extremism is a serious problem in many societies. A prominent hypothesis states that unemployment plays a crucial role for the occurrence of right-wing extremist crime. In this paper we empirically test this hypothesis. We use a previously not used data set which includes all officially recorded right-wing criminal acts in Germany. These data are recorded by the German Federal Criminal Police Office on a monthly and state level basis. Our main finding is that there is in fact a significant positive relation between unemployment and right-wing criminal activities. We show further that the big difference in right-wing crime between East and West German states can mostly be attributed to differences in unemployment. This finding reinforces the importance of unemployment as an explanatory factor for right-wing crime and questions explanations based solely on the different socialization in former communist East Germany and the liberal West German states. Our data further allow us to separate violent from non-violent right-wing crimes. We show that unemployment is closely related to both types of crimes, but that the association with non-violent crimes is much stronger. Since right-wing crime is committed particularly by relatively young males, we also explore whether the youth unemployment rate is a better predictor for right-wing crime than total unemployment. This hypothesis can be rejected: given total unemployment, a higher share of youth unemployment does not affect right-wing extremist crime rates.
    Keywords: Hate crime, right-wing extremism, unemployment, cost of unemployment

This nep-cbe issue is ©2005 by Marco Novarese. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.