nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2006‒12‒16
fifteen papers chosen by
Marco Novarese
Universita del Piemonte Orientale

  1. Affective and rational consumer choice modes: The role of intuition, analytical decision-making, and attitudes to money By Andersson, Patric; Engelberg, Elisabeth
  2. Communication and Punishment in Voluntary Contribution Experiments By Olivier Bochet; Talbot Page; Louis Putterman
  3. Can Endogenously Chosen Institutions Mitigate the Free-Rider Problem and Reduce Perverse Punishment? By Arhan Ertan; Talbot Page; Louis Putterman
  4. Trust, Communication and Contracts: Experimental Evidence By Avner Ben-Ner; Louis Putterman
  5. Altruism with Social Roots: An Emerging Literature. By Pablo Brañas-Garza; Maria Paz Espinosa
  6. Democracy, Rationality and Morality By Dennis C. Mueller
  7. Fairness in Urban Land Use: An Evolutionary Contribution to Law & Economics By Christian Schubert
  8. The Emergence of Institutions By Santiago Sanchez-Pages; Stephane Straub
  9. Learning by Similarity in Coordination Problems By Jakub Steiner; Colin Stewart
  10. A Simple Test of Learning Theory? By Jim Engle-Warnick†; Ed Hopkins
  11. Aspiration Levels and Educational Choices<br> An experimental study By Lionel Page; Louis Lévy-Garboua; Claude Montmarquette
  12. Satisficing in sales competition: experimental evidence By Siegfried Berninghaus; Werner Güth; M. Vittoria Levati; Jianying Qiu
  13. An investment game with third-party intervention By Gary Charness; Ramón Cobo-Reyes; Natalia Jiménez
  14. Group and individual risk preferences : a lottery-choice experiment By David Masclet; Youenn Loheac; Laurent Denant-Boemont; Nathalie Colombier
  15. Regional development: contribution of evolutionary biology By Lucie Vaskova

  1. By: Andersson, Patric (Dept. of Business Administration, Stockholm School of Economics); Engelberg, Elisabeth (Dept. of Business Administration, Stockholm School of Economics)
    Abstract: This paper was motivated by a paucity of research addressing how consumer decision-making is related to beliefs about money and different modes of reasoning. To investigate this issue, data were collected from 142 participants, who filled out questionnaires involving scales aimed to measure affective and rational purchase approaches, intuitive and analytical decision-making styles, as well as money attitudes. One finding was that consumers interchangeably rely on affective and rational approaches when interacting with the marketplace. Another finding was that those approaches were not only related to either intuitive or analytical decision-making styles but also to money attitudes. The findings are argued to provide an impetus to continuous investigation of the role of decision-making styles and money beliefs for consumer choice modes.
    Keywords: affect; attitudes to money; consumer choice; decision-making; intuition; shopping orientation; reasoning
    Date: 2006–01–03
  2. By: Olivier Bochet; Talbot Page; Louis Putterman
    Date: 2005
  3. By: Arhan Ertan; Talbot Page; Louis Putterman
    Date: 2005
  4. By: Avner Ben-Ner; Louis Putterman
    Date: 2006
  5. By: Pablo Brañas-Garza (Universidad de Granada); Maria Paz Espinosa (Universidad del País Vasco)
    Abstract: This paper analyzes the emerging literature on the determinants of giving within a social network. We propose two main explanatory variables for previous experimental results on the friendship e¤ect. The first is social integration, which has a positive impact on giving. The second variable is strategic and is based on reciprocity: the possibility of ex-post favors. Econometric analysis shows that both variables play a positive (and significant) role.
    Keywords: giving, social networks, reciprocity, social integration.
    JEL: C91 D64 Z13
    Date: 2006–12–05
  6. By: Dennis C. Mueller
    Abstract: The fundamental, underlying assumption in economics, public choice, and increasingly in political science and other branches of the social sciences is that individuals are rational actors. Many people have questioned the realism of this assumption, however, and considerable experimental evidence seems to refute it. This paper builds on recent findings from the field of evolutionary psychology to discuss the evolution of rational behavior in humans. It then goes on to relate this evolutionary process to the evolution of political institutions and in particular of democratic institutions. Length 58 pages
    Date: 2006–11
  7. By: Christian Schubert
    Abstract: Markets for complex, multi-faceted goods normally require a complex institutional framework to function properly, i.e., to lead to patterns of outcomes that are deemed acceptable by the individuals involved. This paper examines the institutional underpinnings of the market for urban land use rights, taking both German and U.S. public and private land use law as a case in point. Apart from efficiency considerations that have been discussed in the literature, the individuals' preferences regarding the fairness of (i) the contents of urban land use rights and (ii) the distribution of costs and benefits induced by innovative land uses have been largely neglected. It is argued that investigating the impact of these preferences (and the underlying informal fairness norms) on the legal treatment of land use rights provides a key opportunity to construct an alternative Law & Economics approach that is compatible with an evolutionary perspective on economic land use decisions.
    Keywords: externalities, takings, land use law, distributive fairness, procedural fairness
    JEL: K11 R13 R14
    Date: 2006–12
  8. By: Santiago Sanchez-Pages; Stephane Straub
    Abstract: This paper analyzes how institutions aimed at coordinating economic interactions may appear. We build a model in which agents play a prisoners’ dilemma game in a hypothetical state of nature. Agents can delegate the task of enforcing cooperation in interactions to one of them in exchange for a proper compensation. Two basic commitment problems stand in the way of institution formation. The first one is the individual commitment problem that arises because an agent chosen to run the institution may prefer to renege ex post. The second one is a “collective commitment” problem linked to the lack of binding agreements on the fee that will be charged by the centre once it is designated. This implies first that a potentially socially efficient institution may fail to arise because of the lack of individual incentives, and second that even if it arises, excessive rent extraction by the institution may imply a sub-optimal efficiency level, explaining the heterogeneity of observed institutional arrangements. An institution is less likely to arise in small groups with limited endowments, but also when the underlying commitment problem is not too severe. Finally, we show that the threat of secession by a subset of agents may endogenously solve part of the second commitment problem.
    Keywords: Institution, Coordination, State of nature, Secession.
    JEL: C72 D02 O17 Z13
  9. By: Jakub Steiner; Colin Stewart
    Abstract: We study a learning process in which subjects extrapolate their experience from similar past strategic situations to the current decision problem. When applied to coordination games, this learning process leads to contagion of behavior from problems with extreme payoffs and unique equilibria to very dissimilar problems. In the long-run, contagion results in unique behavior even though there are multiple equilibria when the games are analyzed in isolation. Characterization of the long-run state is based on a formal parallel to rational equilibria of games with subjective priors. The results of contagion due to learning share the qualitative features of those from contagion due to incomplete information, but quantitatively they differ.
    Keywords: Similarity, learning, contagion, case-based reasoning, global games, coordination, subjective priors.
  10. By: Jim Engle-Warnick†; Ed Hopkins
    Abstract: We report experiments designed to test the theoretical possibility, first discovered by Shapley (1964), that in some games learning fails to converge to any equilibrium, either in terms of marginal frequencies or of average play. Subjects played repeatedly in fixed pairings one of two 3 × 3 games, each having a unique Nash equilibrium in mixed strategies. The equilibrium of one game is predicted to be stable under learning, the other unstable, provided payoffs are sufficiently high. We ran each game in high and low payoff treatments. We find that, in all treatments, average play is close to equilibrium even though there are strong cycles present in the data.
    Keywords: : Games, Learning, Experiments, Stochastic Fictitious Play, Mixed Strategy Equilibria.
    JEL: C72 C73 C92 D83
  11. By: Lionel Page; Louis Lévy-Garboua; Claude Montmarquette
    Abstract: The explanation of social inequalities in education is still a debated issue in economics. Recent empirical studies tend to downplay the potential role of credit constraint. This article tests a different potential explanation of social inequalities in education, specifically that social differences in aspiration level result in different educational choices. Having existed for a long time in the sociology of education, this explanation can be justified if aspiration levels are seen as reference points in a Prospect Theory framework. In order to test this explanation, this article applies the method of experimental economics to the issue of education choice and behaviour. One hundred twenty-nine individuals participated in an experiment in which they had to perform a task over fifteen stages grouped in three blocks or levels. In order to continue through the experiment, a minimum level of success was required at the end of each level. Rewards were dependent on the final level successfully reached. At the end of each level, participants could either choose to stop and take their reward or to pay a cost to continue further in order to possibly receive higher rewards. To test the impact of aspiration levels, outcomes were either presented as gains or losses relative to an initial sum. In accordance with the theoretical predictions, participants in the loss framing group choose to go further in the experiment. There was also a significant and interesting gender effect in the loss framing treatment, such that males performed better and reached higher levels. <P>Expliquer les inégalités sociales en éducation demeure un défi pour les économistes. Des études récentes tendent à indiquer que les contraintes de crédit ne joueraient pas un rôle déterminant dans l’explication. Notre étude examine l’importance de niveaux d’aspirations sociales différentes pour expliquer les différences observées dans les choix éducationnels. Cette explication trouve sa logique en associant les aspirations sociales à des points de référence dans le cadre de la théorie des perspectives (prospect theory). Notre article mobilise l’économie expérimentale pour étudier la question des choix éducationnels dans ce contexte. Cent trente-neuf sujets ont participé à une expérience dans laquelle ils devaient réaliser une tâche distribuée sur quinze étapes regroupées en blocs ou niveaux. Pour poursuivre l’expérience, un minimum de succès dans les tâches réalisées devait être atteint. À la fin de chaque niveau, les participants choisissaient d’arrêter et d’encaisser leurs gains acquis ou de poursuivre contre un tarif donné pour espérer réaliser des gains supérieurs. Pour tester l’impact des différents niveaux d’aspirations, les résultats étaient mesurés comme des gains ou des pertes relativement à un montant donné. En conformité avec les prédictions théoriques, les participants dans le traitement perte ont choisi de poursuivre plus souvent l’expérience que ceux dans le traitement gain. Nous avons également noté un effet lié au genre du participant dans le traitement perte, avec les hommes performant mieux que les femmes et atteignant des niveaux supérieurs.
    Keywords: education inequality, prospect theory, experimental economics, inégalité en éducation, théorie de la prospective, économie expérimentale
    JEL: I21 D80 J24 C91
    Date: 2006–12–01
  12. By: Siegfried Berninghaus; Werner Güth; M. Vittoria Levati; Jianying Qiu
    Abstract: In a stochastic duopoly market, sellers must form state-specific aspirations expressing how much they want to earn given their expectations about the other's behavior. We define individually and mutually satisficing sales behavior for given individual beliefs and aspiration profiles. In a first experimental phase, whenever satis¯cing is not possible, beliefs or aspirations have to be adapted, or other strategy profiles must be found. In a second phase, participants are free to select non-satisficing sales profiles. The results reveal that most people are satisficers who, either mandatorily or deliberately, tend to adjust aspiration levels if they cannot be satisfied.
    Keywords: Satisficing behavior, bounded rationality, duopoly
    JEL: C72 C92 D43
    Date: 2006–12
  13. By: Gary Charness (University of California Santa Barbara); Ramón Cobo-Reyes (Department of Economic Theory and Economic History, University of Granada.); Natalia Jiménez (Department of Economic Theory and Economic History, University of Granada.)
    Abstract: This paper explores the effect of the possibility of third-party intervention on behavior in a variant of the Berg, Dickhaut, and McCabe (1995) “Investment Game”. A third-party’s material payoff is not affected by the decisions made by the other participants, but this person may choose to punish a responder who has been overly selfish. The concern over this possibility may serve to discipline potentially-selfish responders. We also explore a treatment in which the third party may also choose to reward a sender who has received a low net payoff as a result of the responder’s action. We find a strong and significant effect of third-party punishment, in both punishment regimes, as the amount sent by the first mover is more than 60% higher when there is the possibility of third-party punishment. We also find that responders return a higher proportion of the amount sent to them when there is the possibility of punishment, with this proportion slightly higher when reward is not feasible. Finally, third parties punish less when reward is feasible, but nevertheless spend more on the combination of reward and punishment when these are both permitted than on punishment when this is the only choice for redressing material outcomes.
    Keywords: Trust, punishment, third-party intervention, responsibility-alleviation
    JEL: A13 B49 C91 D63
    Date: 2006–12–14
  14. By: David Masclet (CREM - Centre de Recherche en Economie et Management - [CNRS : UMR6211] - [Université Rennes I][Université de Caen], CIRANO - [Centre Interuniversitaire de Recherche en ANalyse des Organisations]); Youenn Loheac (CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I]); Laurent Denant-Boemont (CREM - Centre de Recherche en Economie et Management - [CNRS : UMR6211] - [Université Rennes I][Université de Caen]); Nathalie Colombier (CREM - Centre de Recherche en Economie et Management - [CNRS : UMR6211] - [Université Rennes I][Université de Caen])
    Abstract: This paper focuses on decision making under risk, comparing group and individual risk preferences in a lottery-choice experiment inspired by Holt and Laury (2002). The experiment presents subjects with a menu of unordered lottery choices which allows us to measure risk aversion. In the individual treatment, subjects make lottery choices individually ; in the group treatment, each subject was placed in an anonymous group of three, where unanimous lottery choice decisions were made via voting. Finally, in a third treatment, called the choice treatment, subjects could choose whether to be on their own or in a group. Our main findings are that groups are more likely than individuals to choose safe lotteries for decisions with low winning percentages. Moreover, groups converge toward less risky decisions because subjects who were relatively less risk averse were more likely to change their vote in order to conform to the group average decision ; more risk-averse individuals were less likely to change their preferences. Finally our results reveal a positive relationship between preference for risk and willingness to decide alone.
    Keywords: Experiment, decision rule, individual decision, group decision.
    Date: 2006–12–07
  15. By: Lucie Vaskova (LET - Laboratoire d'économie des transports - [CNRS : UMR5593] - [Université Lumière - Lyon II] - [Ecole Nationale des Travaux Publics de l'Etat])
    Abstract: This paper tries to set out a potential of application of some evolutionary biology concepts to the issue of regional development. The objective is to show that employment of these concepts or at least inspiration by them may enrich some theories of regional development and enhance the explanatory framework of regional evolution.<br />First, the views of institutional economics and geography on evolutionary biology contribution are summarised, then some evolutionary concepts are applied to the path dependence concept e. g., in effort to find a possible way of classification of this phenomenon. However, we discuss some other evolutionary concepts, as coevolution, adaptation, preadaption, general approach to comprehension of evolution, etc. in connexion with some chosen theories and problems of regional development.
    Keywords: Regional development ; evolutionary biology ; path dependence ; theories of regional development
    Date: 2006–12–05

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