nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2006‒01‒01
ten papers chosen by
Marco Novarese
Universita del Piemonte Orientale

  1. Bounded Rationality, Cognitive Maps, and Trial and Error Learning By Richard R. Nelson
  2. Informational Complexity and the Flow of Knowledge across social boundaries By Olav Sorenson; Jan W. Rivkin; Lee Fleming
  3. Routines and Communities of Practice in Public Environmental Procurement Processes By Katarina, Larsson; Svane, Örjan
  4. Affect as a Source of Motivation in the Workplace: A New Model of Labor Supply, and New Field Evidence on Income Targeting and the Goal Gradient By Lorenz Goette; David Huffman
  5. Do Emotions Improve Labor Market Outcomes? By Lorenz Goette; David Huffman
  6. Inequality Aversion in Ultimatum Games with Asymmetric Conflict Payoffs - A Theoretical and Experimental Analysis - By Sven Fischer
  7. ?Surprise Gift? Purchases of Small Electric Appliances: A Pilot Study By Vanhamme, J.; Bont, C.J.P.M. de
  8. Localized Learning and Social Capital: The Geography Effect in Technological and Institutional Dynamics By Mark Lorenzen
  9. Buying Organic Food in France : Shopping Habits and Trust By Lucie Sirieix; Brigitte Schaer
  10. Bases biologiques du traitement cognitif de l'information. Pour repenser l'éducation. By Geneviève Vens-Wagner; Monique Le Guen

  1. By: Richard R. Nelson
    Abstract: The term "bounded rationality" is meant to connote the reasoning capabilities of an actor who, on the one hand, has a goal to achieve and an at least partially formed theory as to how to achieve it, and on the other hand, that the theory is somewhat crude, likely will be revised in the course of the effort, and that success is far from assured. This article presents a theory of how trial and error learning interacts with theory modification in the course of problem solving under bounded rationality. The empirical focus is on efforts to advance a technology, especially medical practice, but the analysis is quite general. A central question explored is what makes progress in a field hard or easy.
    Keywords: Bounded Rationality, Search, Progress
    Date: 2005–12–21
  2. By: Olav Sorenson; Jan W. Rivkin; Lee Fleming
    Abstract: Scholars from a variety of backgrounds – economists, sociologists, strategists, and students of technology management – have sought a better understanding of why some knowledge disperses widely while other knowledge does not. In this quest, some researchers have focused on the characteristics of the knowledge itself (e.g., Polanyi, 1966; Reed and DeFillippi, 1990; Zander and Kogut, 1995) while others have emphasized the social networks that constrain and enable the flow of knowledge (e.g., Coleman et al., 1957; Davis and Greve, 1997). This chapter examines the interplay between these two factors. Specifically, we consider how the complexity of knowledge and the density of social relations jointly influence the movement of knowledge. Imagine a social network composed of patches of dense connections with sparse interstices between them. The dense patches might reflect firms, for instance, or geographic regions or technical communities. When does knowledge diffuse within these dense patches circumscribed by social boundaries but not beyond them? Synthesizing social network theory with a view of knowledge transfer as a search process, we argue that knowledge inequality across social boundaries should reach its peak when the underlying knowledge is of moderate complexity. To test this hypothesis, we analyze patent data and compare citation rates across three types of social boundaries: within versus outside the firm, geographically near to versus far from the inventor, and internal versus external to the technological class. In all three cases, the disparity in knowledge diffusion across these borders is greatest for knowledge of an intermediate level of complexity.
    Keywords: evolutionary economics, informational complexity, knowledge flow, social boundaries
    Date: 2005–09
  3. By: Katarina, Larsson (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Svane, Örjan (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: Environmental procurement has received increasing attention as a policy tool promoting change towards sustainable consumption and production. The successful implementation of public environmental procurement policy requires the establishment of new routines for user-producer-supplier relationships that enable the integration of environmental aspects. The aim of the study is to analyse the roles of different communities of practice and learning patterns in environmental procurement processes. Building on experiences from the procurement of ecological food and sustainable construction in Stockholm, the paper identifies learning patterns and codes of practice when environmental criteria are introduced into existing routines for economic and technical specifications in public procurement processes.
    Keywords: Public environmental procurement; routines and codes of practice; procedural and declarative knowledge; vertical and horizontal learning; City of Stockholm
    JEL: D83 Q28 Q55
    Date: 2005–12–28
  4. By: Lorenz Goette (University of Zurich, CEPR and IZA Bonn); David Huffman (IZA Bonn)
    Abstract: In this chapter we propose a new, dual-process model of labor supply, which incorporates both cognitive and affective aspects of decision-making. Consistent with evidence from neuroscience, the worker may experience conflicting cognitive and affective motivations during the workday. In particular, the affective system values effort more highly as long the worker’s performance is below a personal goal, or income target, and becomes increasingly aroused as the goal approaches. As a result, affect can distort effort decisions relative to a fully cognitive benchmark, in a way that is consistent with evidence on loss aversion, and with the so-called goal-gradient effect, a tendency for animals and humans to increase effort as a goal approaches. In contrast to a standard model of labor supply, our model can predict a goal gradient, and predicts that workers may actually lower total daily effort in response to a temporary increase in the wage. Also, within-day windfall gains may have an impact on a worker's effort profile over the workday. The second part of the chapter tests this latter prediction using data from two bicycle messenger firms. At both firms, a windfall gain in the morning has the predicted impact. A lucky messenger works harder than other messengers over the first part of the afternoon, and the difference is increasing, consistent with a goal gradient. Later in the afternoon, a lucky messenger works significantly less hard than the others, consistent with having surpassed a personal earnings goal earlier in the day and having less affective motivation.
    Keywords: affect, emotion, labor supply, loss aversion, income targeting, goal gradient
    JEL: J22 L2 B49
    Date: 2005–12
  5. By: Lorenz Goette (University of Zurich and CEPR and IZA Bonn); David Huffman (IZA Bonn)
    Abstract: This chapter argues that the neglect of emotion in economic models explains their inability to predict important aspects of the labor market. We focus on one example: firms frequently cut real wages, increasing nominal wages by less than the inflation rate, but they very seldom cut nominal wages. This pattern suggests that workers exhibit a special resistance to nominal wage cuts, which is hard to explain if they are purely rational as assumed in standard economic models. We argue that resistance to nominal wage cuts is best understood in terms of a model where salient features of a situation trigger emotional responses and sway judgment of the entire situation. Since a cut in the nominal wage leads to a very salient reduction in pay, we argue that the reaction of workers is dominated by emotions. On the other hand, an increase in the nominal wage may produce a more deliberative evaluation, because there is no immediately salient feature. The individual needs to compare the inflation rate to the wage change before it becomes clear whether the change increases or decreases utility, thus producing a more measured response. We present evidence from experiments showing that self-reported emotions respond strongly to nominal wage cuts, but not to decreases in the real wage achieved through increasing the nominal wage by less than the inflation rate. Although emotions may benefit individual workers, by strengthening their bargaining position and preventing wage cuts, they may also lead to worse outcomes, in the form of higher unemployment.
    Keywords: wage rigidity, affect, emotions, money illusion, loss aversion
    JEL: E24 E31 E32 B49
    Date: 2005–12
  6. By: Sven Fischer
    Abstract: Assuming inequality averse subjects as modeled by Fehr and Schmidt (1999) or in the ERC model by Bolton and Ockenfels (2000) in ultimatum games with asymmetric conflict payoffs allows to make predictions especially concerning responder acceptance thresholds. These predictions are tested in a laboratory experiment eliciting proposer offers and respondent's acceptance thresholds using the strategy vector method. By and large both models make good predictions. However, they are unable to convincingly explain the observed selfishness on behalf of responders in ultimatum games favoring them in conflict. Overall, observed behavior gives rise to a context dependent interpretation of inequality aversion and to Knez and Camerer's 1995 observation that subjects form 'egocentric assessments of fairness'.
    Date: 2005–10
  7. By: Vanhamme, J.; Bont, C.J.P.M. de (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Understanding decision-making processes for gifts is of strategic importance for companies selling small electrical appliances as gifts account for a large part of their sales. Among all gifts, the ones that are surprising are the most valued by recipients. However, research about decision-making processes involved in surprise gift purchases is lacking. This article shows, for example, that design and money back guarantees are more important for the purchase of surprise gifts than other gifts. The brand name, however, appears to be less important. Also, surprise gifts are more often bought on the spot, without extended information search (similar to impulse purchases).
    Keywords: Surprise;Small Electrical Appliances;Decision-Making Process;Panel Data;Logistic Regression;Gift Purchase;
    Date: 2005–12–19
  8. By: Mark Lorenzen
    Abstract: Providing a concise working definition of social capital, this conceptual paper analyses why social capital is important for learning and economic development, why it has a regional dimension, and how it is created. It argues that with the rise of the Knowledge Economy, social capital is becoming valuable because it organizes markets, lowering business firms’ costs of coordinating and allowing them to flexibly connect and reconnect. Thus, it serves as a social framework for localized learning in both breadth and depth. The paper suggests that a range of social phenomena such as altruism, trust, participation, and inclusion, are created when a matrix of various social relations is combined with particular normative and cognitive social institutions that facilitate cooperation and reciprocity. Such a matrix of social relations, plus facilitating institutions, is what the paper defines as “social capital”. The paper further suggests that social capital is formed at the regional (rather than national or international) level, because it is at this level we find the densest matrices of social relations. The paper also offers a discussion of how regional policies may be suited for promoting social capital.
    Keywords: Social capital; knowledge economy; regional dimension
    JEL: D83 Z13
    Date: 2005
  9. By: Lucie Sirieix (Agro.M ; UMR MOISA ; Montpellier, France); Brigitte Schaer (Ecozept ; Montpellier, France)
    Abstract: In this paper we attempt to compare the responses of consumers and professionals to questions related to organic food retailing, in order to highlight the differences and the similarities of viewpoints between them and to understand the links between consumer perception of organic food and the sales channel. In order to do this, we analyse the results of three studies, two of them conducted with consumers, the third one with professionals. The first study deals with the links between consumer trust orientations and the frequentation of the different sales channels where organic food can be found. The results of this study conducted in France and Germany show that consumers in organic food stores put trust in their store but are neither the heaviest nor the most trusting consumers. Consumers in hypermarkets or supermarkets do not really trust the store, and only really trust the label. In the second study, respondents were asked what their preferred outlet for organic products would be and why. Results show that organic food consumers like being something more than an anonymous consumer when shopping. They seem to appreciate markets particularly, and appear to attach no particular value to organic food stores, nor to the acknowledged greater convenience of shopping in supermarkets. This study also raises interesting questions relating to the experience of purchasing in terms of shop image and atmosphere, and factors that contribute to consumer trust in organic foods. The third study is based upon two surveys (autumn 2003 and autumn 2004) among organic food stores in France, on market development and on actors’ perception of their situation and their customers. According to shopkeepers, customers of organic food stores are looking more for quality and competence, than for attractive prices, and attach more and more value to traceability and trustworthiness. This paper both shows important similarities and differences of viewpoints between consumers and organic food stores shopkeepers, and gives researchers and professionals a better insight into the links between consumer perception of organic food and the sales channel.
    Keywords: Organic food, consumer behaviour, sales channel, trust
    JEL: P Q Z
    Date: 2005–12–19
  10. By: Geneviève Vens-Wagner; Monique Le Guen (MATISSE)
    Abstract: How to facilitate how we learn ? How to improve and generalize knowledge transfers ? How to increase our creativity ? These questions are the economic stakes of the 21st century. In this article we present how the brain development is the result of evolutionary process of the alive, and how the brain development is itself dependent on its surrounding environment. We will further explain the plasticity of the brain that allows us to acquire new knowledge and skills through instruction or experience - without brain plasticity and its capacity to change with learning any learning, nor memorization, nor memories, nor cultural experiences would be possible. Finally, we will demonstrate how the development of mathematical logic relies on perceptive memories that have been embedded as potential memories in our innate or acquired neuronal connectivity thanks to individual mental pictures. With this recent learning in neurobiology, the path that leads to the cognitive neuropedagogy is now opened.
    Keywords: Brain, brain plasticity, cognitive science, cognitive neuropedagogy, mental images, learning, multiple intelligence, education, re-mediation.
    JEL: C00 I20 D83
    Date: 2005–12

This nep-cbe issue is ©2006 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.
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