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on Cognitive and Behavioural Economics |
| By: | Douglas A. Hershey (Oklahoma State University); Kène Henkens (Netherlands Interdisciplinary Demographic Institute, The Hague); Hendrik P. van Dalen (Erasmus Universiteit Rotterdam) |
| Abstract: | This study explored the psychological mechanisms that underlie the retirement planning and saving tendencies of Dutch and American workers. Participants were 988 Dutch and 429 Americans, 25-64 years of age. Analyses were designed to: (a) examine the extent to which structural variables were related to planning tendencies, and (b) develop culture-specific path analysis models to identify the mechanisms that underlie perceived financial preparedness for retirement. Findings revealed striking differences across the Netherlands and the United States not only among structural variables predictive of key psychological and retirement planning constructs, but also in the robustness of the path models. These findings suggest that policy analysts should take into account both individual and cultural differences in the psychological predispositions of workers when considering pension reforms that stress individual responsibility for planning and saving. |
| Keywords: | retirement; pensions; financial planning; psychology; saving; uncertainty |
| JEL: | D14 D91 J26 P52 |
| Date: | 2006–04–06 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20060038&r=cbe |
| By: | David Masclet (CNRS, CREM, University of Rennes 1); Marie-Claire Villeval (GATE (CNRS, University of Lyon 2, ENS-LSH) and IZA Bonn) |
| Abstract: | Cooperation among people who are not related to each other is sustained by the availability of punishment devices which help enforce social norms (Fehr and Gächter, 2002). However, the rationale for costly punishment remains unclear. This paper reports the results of an experiment investigating inequality aversion and negative emotions as possible determinants of punishment. We compare two treatments of a public good game, one in which costly punishment reduces the immediate payoff inequality between the punisher and the target, and one in which it does not affect inequality. We show that while inequality-aversion prevents some subjects from punishing in the equal cost treatment, negative emotions are the primary motive for punishment. Results also indicate that the intensity of punishment increases with the level of inequality, and reduces earnings inequality over time. |
| Keywords: | inequality aversion, negative emotions, free-riding, cooperation, experiment |
| JEL: | A13 C92 D63 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2119&r=cbe |
| By: | Casari, Marco; Luini, Luigi |
| Abstract: | This paper experimentally studies peer punishment under three alternative technologies. We find that the choice of peer punishment technology has a substantial impact on group performance. First, under technology where at least two subjects in the group must agree before another group member can be punished, group cooperation and group net earnings are the highest. Second, outcomes are similar regardless of whether punishment choices are simultaneously or sequential. These results suggest that punishment is not perceived as a second-order public good but is instead an emotional reaction unresponsive to changes in the strategic environment. |
| Keywords: | decentralized punishment ; public goods ; other-regarding preferences ; team production ; experiments |
| JEL: | C91 C92 D23 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:pur:prukra:1176&r=cbe |
| By: | Casari, Marco; Luini, Luigi |
| Abstract: | Punishing the free-riders of a team can promote group efficiency but is costly for the punisher. For this reason, economists see punishment as a second-order public good. We show in an experiment that subjects do not value punishment for its deterrence but instead for the satisfaction of retaliating. Punishment choices are made with little strategic reasoning. |
| Keywords: | experiments ; public goods ; informal punishment ; emotions ; legal systems |
| JEL: | C91 C92 D23 |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:pur:prukra:1188&r=cbe |
| By: | Alberto Fogale; Paolo Pellizzari; Massimo Warglien (Department of Applied Mathematics, University of Venice) |
| Abstract: | We study a modified version of the coordination game presented in [van Huyck et al., 1994], where a representative selection dynamics was proposed to explain experimental data. Assuming that the agents adjust their moves in the direction of the best response, we derive a formal analysis of the stability of the equilibria. We show by simulation that the interior equilibrium is robustly reached even when considerable heterogeneity is allowed among the agents. Our truly multi-agent game is capable of approximating quite well both the ãmedianä game convergence and the experimental data. |
| Keywords: | Coordination game, Equilibrium selection, Best reply dynamics |
| JEL: | C71 D83 C63 C15 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:vnm:wpaper:135&r=cbe |
| By: | Maarten C.W. Janssen (Erasmus Universiteit Rotterdam) |
| Abstract: | This paper argues that the notion of focal points is important in understanding bargaining processes. Recent literature confines a discussion of the usefulness of the notion to coordination problems and when bargaining experiments result in outcomes that are inconsistent with a straightforward interpretation of economic theory, some notion of ‘fairness’ is invoked. This paper uses symmetry requirements to formalize the notion of focal points. By doing so, it explains the focality of equal split division and it re-interprets recent experimental evidence in bargaining games. Experimental economists should try to empirically disentangle the importance of focal points from other explanatory factors (such as fairness). One way to do so, would be to study modal (instead of average) responses more systematically. Future theoretical research should focus on the strategic implications of proposing a frame (focal point) to conceive of the bargaining problem. |
| Keywords: | Bargaining; Game Perceptions; Focal Points |
| JEL: | C78 C91 |
| Date: | 2006–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20060040&r=cbe |
| By: | Yves Alarie; Georges Dionne |
| Abstract: | The aim of this paper is to propose a model of decision-making for lotteries. Lottery qualities are the key concepts of the theory. Qualities allow the derivation of optimal decision-making processes and are taken explicitly into account for lottery evaluation. Our contribution explains the major violations of the expected utility theory for decisions on two-point lotteries and shows the necessity of giving explicit consideration to lottery qualities. Judged certainty equivalent and choice certainty equivalent concepts are discussed in detail along with the comparison of lotteries. Examples are provided by using different test results in the literature. |
| Keywords: | Lottery choice, common ratio, preference reversal, pricing, lottery test, cognitive process, certainty equivalent |
| JEL: | D81 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:lacicr:0617&r=cbe |
| By: | Giorgio Fagiolo; Paul Windrum; Alessio Moneta |
| Abstract: | This paper addresses the problem of finding the appropriate method for conducting empirical validation in agent-based (AB) models, which is often regarded as the Achilles’ heel of the AB approach to economic modelling. The paper has two objectives. First, to identify key issues facing AB economists engaged in empirical validation. Second, to critically appraise the extent to which alternative approaches deal with these issues. We identify a first set of issues that are common to both AB and neoclassical modellers and a second set of issues which are specific to AB modellers. This second set of issues is captured in a novel taxonomy, which takes into consideration the nature of the object under study, the goal of the analysis, the nature of the modelling assumptions, and the methodology of the analysis. Having identified the nature and causes of heterogeneity in empirical validation, we examine three important approaches to validation that have been developed in AB economics: indirect calibration, the Werker-Brenner approach, and the history-friendly approach. We also discuss a set of open questions within empirical validation. These include the trade-off between empirical support and tractability of findings, the issue of over-parameterisation, unconditional objects, counterfactuals, and the non-neutrality of data. |
| Keywords: | Empirical validation, agent-based models, calibration, history-friendly modelling |
| Date: | 2006–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2006/14&r=cbe |
| By: | Mangematin, V.; Blanco, S.; Deschamp, B.; Genet, C.; Kahane, B. |
| Abstract: | The paper explores project management in action in a large public research organisation – NLAT which decided to change its internal organisation from team-based to project-based organisation a few years ago. A systematic and comparative analysis of 8 projects reveals that adherence to the ISO 9000’s standardized rules of project management - specific staffing and project leaders, definition of milestones ex ante, procedure manuals, and formalized learning accumulation mechanisms - had little to do with the organisations success over recent years: Looking for explanations for this success, the paper focuses on the process of transferring from one project to another, enhancing organisational learning through rules breaking. We identify three elements which encourage the accumulation of knowledge and competencies, as organisational learning: low project core staffing levels which stimulates the circulation of engineers and researchers between projects and blurs project boundaries, implementing and managing thematic projects which build on specific competencies developed in dedicated projects and encouraging ‘bricolage’ to hybridise project management with traditional hierarchical management practices. |
| Keywords: | PROJECT MANAGEMENT;R&D;HIGH TECH;MANAGEMENT PRACTICES |
| JEL: | D21 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:gbl:wpaper:200604&r=cbe |
| By: | Jim Engle-Warnick; Nurlan Turdaliev |
| Abstract: | We experimentally test whether a class of monetary policy decision rules describes decision making in a population of inexperienced central bankers. In our experiments, subjects repeatedly set the short-term interest rate for a computer economy with inflation as their target. A large majority of subjects learn to successfully control inflation. We find that Taylor-type rules fit the choice data well, and are instrumental in characterizing heterogeneity in decision making. Our experiment is the first to begin to organize data experimentally with an eye on monetary policy rules for this, one of the most widely watched and analyzed decisions in economics. <P>Nous avons mené une étude expérimentale dans le but de savoir si les règles de décision en matière de politique monétaire sont utilisées par les banquiers inexpérimentés au sein des banques centrales. Au cours de nos expériences, des sujets établissaient un taux d’intérêt à court terme dans un contexte d’économie informatisée dans le but de maîtriser l’inflation. Une grande majorité des sujets ont appris à maîtriser efficacement l’inflation. Nous sommes d’avis que les règles du type Taylor correspondent bien aux données liées aux choix et contribuent grandement à établir l’hétérogénéité du processus de décision. Notre étude est la première à recourir à l’organisation expérimentale des données sans, pour autant, perdre de vue les règles liées à la politique monétaire qui fait le plus l’objet de surveillance et d’analyse dans le domaine de l’économie. |
| Keywords: | experimental economics, monetary policy, repeated games, Taylor rule, économie expérimentale, jeux répétés, politique monétaire, règle Taylor |
| JEL: | C91 E42 |
| Date: | 2006–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2006s-05&r=cbe |
| By: | Andersson, Henrik (VTI); Svensson, Mikael (Örebro University) |
| Abstract: | This study investigates whether or not the scale bias found in contingent valuation (CVM) studies on mortality risk reductions is a result of cognitive constraints among respondents. Scale bias refers to insensitivity and non near-proportionality of the respondents' willingness to pay (WTP) to the size of the risk reduction. Two hundred Swedish students participated in an experiment where their cognitive ability was tested before they took part in a CVM-study where they were asked about their WTP to reduce bus-mortality risk. The results imply that WTP answers from respondents with a higher cognitive ability are less flawed by scale bias. |
| Keywords: | Cognitive Ability; Contingent Valuation; Mortality Risk; Near-proportionality; Scale Bias |
| JEL: | D80 I10 Q51 |
| Date: | 2006–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:vtiwps:2006_002&r=cbe |
| By: | Schmeling, Maik |
| Abstract: | Using a new data set on investor sentiment we show that institutional and individual sentiment proxy for smart money and noise trader risk, respectively. First, using bias-adjusted long-horizon regressions, we document that institutional sentiment forecasts stock market returns at intermediate horizons correctly, whereas individuals consistently get the direction wrong. Second, VEC models show that institutional sentiment forecasts mean-reversion whereas individuals forecast trend continuation. Finally, institutional investors take into account expected individual sentiment when forming their expectations in a way that higher (lower) expected sentiment of individuals lowers (increases) institutional return forecasts. Individuals neglect the information contained in institutional sentiment. |
| Keywords: | investor sentiment, predictive regressions, noise trader, smart money |
| JEL: | G11 G12 G14 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:han:dpaper:dp-337&r=cbe |