nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2006‒05‒13
eight papers chosen by
Marco Novarese
Universita del Piemonte Orientale

  1. Toward Formal Representations of Search Processes and Routines in Organizational Problem Solving. An Assessment of the State of the Art. By Giovanni Dosi; Marco Faillo; Luigi Marengo
  2. From a Routine-Based to a Knowledge-Based View: Towards an Evolutionary Theory of the Firm By Fritz Rahmeyer
  3. Institutions and Development: What We (Think We) Know, What We Would Like to Know By Paul G. Hare; Junior R. Davis
  4. Age Structure of the Workforce and Firm Performance. By Grund, Christian; Westergård-Nielsen, Niels
  5. Individual’s religiosity enhances trust: Latin American evidence for the puzzle By Pablo Brañas-Garza; Maximo Rossi; Dyane Zaclicever
  6. Mutual Monitoring in Teams: Theory and Experimental Evidence on the Importance of Reciprocity By Jeffrey Carpenter; Samuel Bowles; Herbert Gintis
  7. Friendship in a Public Good Experiment By Marco Haan; Peter Kooreman; Tineke Riemersma
  8. Attitudes to economic risk taking, sensation seeking and values of economists specializing in finance By Sjöberg, Lennart; Engelberg, Elisabeth

  1. By: Giovanni Dosi; Marco Faillo; Luigi Marengo
    Abstract: This paper presents a critical overview of some recent attempts at building formal models of organizations as information-processing and problem-solving entities. We distinguish between two classes of models according to the different objects of analysis. The first class includes models mainly addressing information processing and learning and analyzes the relations between the structure of information flows, learning patterns, and organizational performances. The second class focuses on the relationship between the division of cognitive labor and search processes in some problem-solving space, addressing more directly the notion of organizations as repositories of problem-solving knowledge. Here the objects of analysis are the problem-solving procedures which the organization embodies. The results begin to highlight important comparative properties regarding the impact on problem-solving efficiency and learning of different forms of hierarchical governance, the dangers of lock-in associated with specific forms of adaptive learning, the relative role of “online” vs. “offline” learning, the impact of the “cognitive maps” which organizations embody, the possible trade-offs between accuracy and speed of convergence associated with different “decomposition schemes”. We argue that these are important formal tools towards the development of a comparative institutional analysis addressing the distinct properties of different forms of organization and accumulation of knowledge.
    Keywords: Division of labor, Mental models, Problem-solving, Problem decomposition.
    Date: 2006–05–02
  2. By: Fritz Rahmeyer (University of Augsburg, Department of Economics)
    Abstract: Evolutionary economics in the initial version of Nelson and Winter is concentrated on the analysis of the evolution of industries and markets and in that entrepreneurial innovation activities. But a theory of the firm beneath the level of the industry is not taken into account to a large extent. In order to widen its fundamental principles a resource-based, and as its extension, a knowledge-based view of the firm, both originated in the field of Business Strategy, are seen as promising candidates to close this gap within evolutionary economics. Industry dynamics as the evolution of a population of firms in this way is supplemented by a more detailed characterization of the internal structure of individual firms. It is the fundamental question with regard to the adequacy of an evolutionary interpretation of firm behaviour and development as to what extend a firm and its individual activities are considered to be capable of purposefully and actively influencing its environment, on the one hand, and are blindly selected by environmental pressure, on the other hand. In this way firms become intendedly heterogenous concerning market performance and organizational structure. Regarding the general topic of a theory of the firm, a unified approach will not be constructed, but more likely a hybrid one being composed of technological, institutional and efficiency-based elements.
    Keywords: economic evolution; resource-based view; knowledge-based view of the firm; theory of the firm management
    JEL: B52 D21 D83 L23
    Date: 2006–05
  3. By: Paul G. Hare; Junior R. Davis
    Abstract: This paper takes the form of an extended literature review, outlining the key ideas that will need to be developed further in the course of the IPPG Research Programme. After an extended introduction, the next two sections are conceptual, the former elucidating key concepts and definitions, the latter examining various approaches to the analysis of institutions relevant for economic growth. Then the paper reviews much of the available evidence linking institutions and growth and covers in some detail the evidence regarding economic institutions, confirming that institutions matter. However, the findings from different studies are far from consistent in terms of identifying exactly what it is that matters. Given the prevalence of weak or poorly functioning states amongst the poorest countries of the world, the paper also reviews literature on the political aspects of development, particularly in relation to the role of institutions. Likewise, the paper selectively illustrates the ideas of earlier sections through the discussion of two topics: trade policy and the institutions needed for it to work well; and institutions that make for a good business environment. The final section outlines some preliminary working hypotheses about institutions and development. While emphasising pro-poor growth throughout, the paper finds that growth itself is a fundamental, necessary condition for achieving pro-poor growth. Given that, a serious analysis of institutions and growth must pay attention to the need for institutions that foster and promote profit-seeking accumulation (without which little sustained growth is likely to occur).
    Keywords: institutions, pro-poor growth, weak states, cultural issues, institutional matrix, investment and accumulation
    JEL: O17
    Date: 2006
  4. By: Grund, Christian (Department of Business and Economics); Westergård-Nielsen, Niels (Department of Economics, Aarhus School of Business)
    Abstract: In this contribution, we examine the interrelation between corporate age structures and firm performance. In particular, we address the issues, whether firms with young rather than older employees are successful and whether firms with homogeneous or heterogeneous workforces are doing well. Several theoretical approaches are discussed with respect to these questions and divergent hypotheses are derived. Using Danish linked employer-employee data, we find that both mean age and dispersion of age in firms are inversely u-shaped related to firm performance.
    Keywords: Firm performance; Corporate age structures; Demographic change
    JEL: J21 L25 M54
    Date: 2005–01–01
  5. By: Pablo Brañas-Garza (Department of Economic Theory and Economic History, University of Granada); Maximo Rossi (Universidad de la República, Uruguay); Dyane Zaclicever (Universidad de la República, Uruguay)
    Abstract: This paper explores the effect of religious observance and affiliation to the dominant religion (Catholicism) on trust in institutions, towards others and market attitudes. The analysis is performed using a Latin American database of twenty thousand respondents from 2004 by means of ordered probit models. The most interesting results are: i) Trust toward others is positively correlated with religious observance and with Catholic affiliation. ii) There is a positive correlation between trust in the government, in the police, in the armed forces, in the judiciary and in the banking system and religious practice in general. Identical positive results are obtained for Catholic affiliation. iii) Correlations with attitudes toward the market, in general, are heterogeneous but never negative. In sum, individual’s level of religiosity crucially affects trust in institutions and toward peers. We also found that Catholicism encourages both trust in institutions and towards others. Thus, we found a positive effect of “religiosity” on social capital. In fact, we never found any negative (and significant) effect on the variables considered.
    Keywords: trust in institutions, economic behavior, religious practise, Catholics.
    JEL: Z12 Z13
    Date: 2006–05–05
  6. By: Jeffrey Carpenter (Middlebury College and IZA Bonn); Samuel Bowles (Santa Fe Institute and University of Siena); Herbert Gintis (Central European University and Santa Fe Institute)
    Abstract: Monitoring by peers is often an effective means of attenuating incentive problems. Most explanations of the efficacy of mutual monitoring rely either on small group size or on a version of the Folk theorem with repeated interactions which requires reasonably accurate public information concerning the behavior of each player. We provide a model of team production in which the effectiveness of mutual monitoring depends not on these factors, but rather on strong reciprocity: the willingness of some team members to engage in the costly punishment of shirkers. This alternative does not require small group size or public signals. An experimental public goods game provides evidence for the behavioral relevance of strong reciprocity in teams.
    Keywords: team production, public good, monitoring, punishment, experiment
    JEL: C92 H41 J41 J54 Z13
    Date: 2006–04
  7. By: Marco Haan (University of Groningen); Peter Kooreman (University of Groningen and IZA Bonn); Tineke Riemersma (University of Groningen)
    Abstract: We conduct a public good experiment with high school teenagers. Some groups exclusively consist of students that we know to be friends. Other groups exclusively consist of students that we know not to be friends, and that are mere classmates. We find that ‘friends’ contribute more to the public good than ‘classmates’ do. Contributions of ‘classmates’ sharply decrease in the last round, in line with the literature on public good experiments. However, contributions of ‘friends’ sharply increase in the last round.
    Keywords: experimental economics, public goods, friendship
    JEL: C91 C92 H41
    Date: 2006–04
  8. By: Sjöberg, Lennart (Center for Risk Research); Engelberg, Elisabeth (Center for Risk Research)
    Abstract: Financial decision making rarely follows models derived from economic theory which postulate that people are rational economic actors. Psychological alternatives abound. The Tversky-Kahneman heuristics approach is currently dominating, but it needs to be complemented with emotional and personality factors, since cognitive limitations by no means provide exhaustive explanations of the psychology of decision making. In this paper, attitudes to financial risk taking and gambling are related to sensation seeking, emotional intelligence, the perceived importance of money (money concern), and over-arching values, in groups of students of financial economics (N=93). Most of the students planned a career in finance. Comparative data were collected for a group of non-students. Data on values were also available from a random sample of the population for a comparison. It was found that a positive attitude to economic risk taking and gambling behavior were associated with a high level of sensation seeking, a lower level of money concern, and giving low priority to altruistic values concerning peace and the environment. The subgroup of participants planning a career in finance showed an even more pronounced interest in gambling and a lower level of emotional intelligence.
    Keywords: Decision making; finance; risk attitude; financial advice
    Date: 2006–03–31

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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