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on Cognitive and Behavioural Economics |
| By: | Stéphane Mahuteau (Department of Economics, Macquarie University) |
| Abstract: | We investigate to what extent reciprocity, exhibited by employers and employees, lead to stable gift exchange practices in the labour contract, giving rise to non-compensating wage differentials among industries and firms. We use the concept of Sequential Reciprocity Equilibrium (Dufwenberg and Kirchsteiger 1998, 2004) to incorporate players’ preferences for reciprocity in their utility function. We show that successful gift exchange practices may arise if both players actually care for reciprocity. We test the predictions of the model using a matched employer-employee French dataset. Our results show that French employers and employees’ decisions are influenced by reciprocity concerns. |
| Keywords: | reciprocity, fairness, sequential game, cheap-talk, efficiency wages |
| JEL: | C72 J33 J41 |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:mac:wpaper:0609&r=cbe |
| By: | Larry G. Epstein (University of Rochester); Igor Kopylov (UC Irvine) |
| Abstract: | Individuals often lose con.dence in their prospects as they approach the 'moment of truth.' An axiomatic model of such individuals is provided. The model adapts and extends (by relaxing the Independence axiom) Gul and Pesendorfer's model of temptation and self-control to capture an individual who changes her beliefs so as to become more pessimistic as payoff time approaches. In a variation of the model, the individual becomes more optimistic at an ex post stage in order to feel better about her available options. |
| Keywords: | pessimism, optimism, cold feet, temptation, self-control, moment of truth, temporal proximity, confidence |
| JEL: | D80 D81 |
| Date: | 2007–01 |
| URL: | http://d.repec.org/n?u=RePEc:roc:rocher:533&r=cbe |
| By: | Gordon Menzies; Daniel Zizzo |
| Abstract: | We present a macroeconomic market experiment on the financial determination of exchange rates, and consider whether the assumption that belief formation be treated as a classical hypothesis test, which we label inferential expectations, can explain the effect of uncertainty on exchange rates. In a non-stochastic environment, exchange rates closely follow standard predictions. In our stochastic environment, inferential expectations with a low test size alpha (conservative inferential expectations) predict exchange rates better than rational expectations in ten sessions out of twelve. Belief conservatism appears magnified rather than diminished at the market level, and the degree of belief conservatism seems connected to the failure of uncovered interest rate parity regressions. |
| JEL: | C91 D84 E50 F31 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:pas:camaaa:2007-02&r=cbe |
| By: | Becker, Sascha O.; Wößmann, Ludger |
| Abstract: | Max Weber attributed the higher economic prosperity of Protestant regions to a Protestant work ethic. We provide an alternative theory, where Protestant economies prospered because instruction in reading the Bible generated the human capital crucial to economic prosperity. County-level data from late 19th-century Prussia reveal that Protestantism was indeed associated not only with higher economic prosperity, but also with better education. We find that Protestants’ higher literacy can account for the whole gap in economic prosperity. Results hold when we exploit the initial concentric dispersion of the Reformation to use distance to Wittenberg as an instrument for Protestantism. |
| Keywords: | Human capital; Protestantism; economic history |
| JEL: | N33 Z12 I20 |
| Date: | 2007–01 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:1366&r=cbe |