nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2005‒05‒29
seven papers chosen by
Marco Novarese
Universita del Piemonte Orientale

  1. Moral Framing in Dictator Games by Short Sentences. By Pablo Brañas Garza; Antonio Morales
  2. I do not play lotteries By Pablo Brañas Garza; Nikolaos Georgantzis; Pablo Guillen
  3. Choice from Lists By Ariel Rubinstein; Yuval Salant
  4. Illusionary Finance and Trading Behavior By Malika, HAMADI; Erick, RENGIFO; Diego SALZMAN
  5. Pareto Damaging Behaviors By Ray Fisman; Shachar Kariv; Daniel Markovits
  6. Some are Punished and Some are Rewarded: A Study of the Impact of Performance Pay on Job Satisfaction By W.D. McCausland; K. Pouliakas; I. Theodossiou
  7. Using Experimental Economics to Measure Social Capital And Predict Financial Decisions By Dean S. Karlan

  1. By: Pablo Brañas Garza (Department of Economic Theory and Economic History, University of Granada); Antonio Morales (Universidad de Málaga)
    Abstract: Recent papers on double-blind dictator games have obtained significant generous behavior when information regarding recipient is provided. But the lack of information disincentives other-regarding behavior and then, the subject’s behavior closely approximates the game theoretic prediction based on the selfishness assumption. This paper conducted four treatment of dictator games. We used one-room design, between-subjects anonymity and extra-credit point as rewards. Two treatments were used as baseline whereas the other two were aimed at reinforcing the recipient powerlessness and positive reciprocity. To promote these environments we include a “non—neutral” sentence to the instructions. Our baseline and modified DG are statistically di fferent from each other, indicating that the additional sentences promote other—regarding behaviour. In fact, pure-selfish behavior vanishes.
    Keywords: dictator game, framing e ffect, social issues, fairness, reciprocity.
    JEL: D63 D64 C91
  2. By: Pablo Brañas Garza (Department of Economic Theory and Economic History, University of Granada); Nikolaos Georgantzis (Universidad Jaume I); Pablo Guillen (Harvard Business School)
    Abstract: We study individual decision making in a lottery-choice task performed by three subject populations: gamblers under psychological treatment (“addicts”), gamblers’ relatives (“victims”), and normal (as far as gambling is considered) individuals. We find that addicts are willing to take less risk than normal individuals, but the large majority of victims reports themselves unwilling to take any risk at all. Furthermore, both addicts and victims maintain their choices invariant across di fferent scenarios concerning the risk-return tradeoff.
    Keywords: risky decision making, pathological gambling, attraction and re-pulsion to chance.
    JEL: C91
    Date: 2005–05–16
  3. By: Ariel Rubinstein; Yuval Salant
    Date: 2005–05–21
  4. By: Malika, HAMADI; Erick, RENGIFO; Diego SALZMAN
    Abstract: One important aspect of financial market is that there might be some traders that intentionally mislead other market participants by creating illusions in order to obtain a profit. We call this new concept illusionary finance. We present an analysis of how illusions can be created and disseminated in financial markets based on certain psychological principles that explain agents’ decisions under time pressure and polysemous signals. We develop a simple model that incorporates the illusions in the price formation process. Furthermore, using powerful simulations, we show how illusions can be incorporated, directly or indirectly, in the expected prices of the traders.
    Keywords: Illusionary Finance; Behavioral Finance; Evolutionary Finance; Neuroeconomics
    JEL: C32 C35 G10
    Date: 2004–09–15
  5. By: Ray Fisman; Shachar Kariv; Daniel Markovits
    Date: 2005–05–21
  6. By: W.D. McCausland (University of Aberdeen); K. Pouliakas (University of Aberdeen); I. Theodossiou (University of Aberdeen)
    Abstract: Using an econometric procedure that corrects for both self-selection of individuals into their preferred compensation scheme and wage endogeneity, this study investigates whether significant differences exist in the job satisfaction of individuals receiving performance- related pay (PRP) compared to those on alternative compensation plans. Using data from four waves of the British Household Panel Survey (BHPS), it is found that PRP exerts a positive effect on the mean job satisfaction of (very) high-paid workers only. A potential explanation for this pattern could be that for lower-paid employees PRP is perceived to be controlling, whereas higher-paid workers derive a utility benefit from what they regard as supportive reward schemes. Using PRP as an incentive device in the UK could therefore be counterproductive in the long run for certain low-paid occupations.
    Keywords: Performance-related pay, job satisfaction, self-selection
    JEL: J28 J33
    Date: 2005–05–24
  7. By: Dean S. Karlan (Economic Growth Center, Yale University and Princeton University)
    Abstract: Questions remain as to whether results from experimental economics games are generalizable to real decisions in non-laboratory settings. Furthermore, important questions persist about whether social capital can help solve seemingly missing credit markets. I conduct two experiments, a Trust game and a Public Goods game, and a survey to measure social capital. I then examine whether behavior in the games predicts repayment of loans to a Peruvian group lending microfinance program. Since the structure of these loans relies heavily on social capital to enforce repayment, this is a relevant and important test of the games, as well as of other measures of social capital. I find that individuals identified as "trustworthy" by the Trust game are in fact less likely to default on their loans. I do not find similar support for the Trust game as a measure of trust.
    Keywords: trust game, experimental economics, microfinance
    JEL: B4 C9 D8 O1
    Date: 2005–04

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