nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2007‒03‒24
ten papers chosen by
Marco Novarese
University of the Piemonte Orientale

  1. Emotions and International Conflicts: Sociological, Evolutionary and Rational Views By Khalil, Elias
  2. How to Sample Behavior and Emotions of Traders: By Andersson, Patric; Tour, Richard
  3. Interdisciplinary Trust Meta-Analysis By Ebert, Tara
  4. Give Trust a Chance--A Model of Trust in the Context of an IMF-Supported Program By Daouda Sembene
  5. Assigning Intentions when Actions are Unobservable: the Impact of Trembling in the Trust Game By James C. Cox; Cary A. Deck
  6. What do friends and media tell us? How different information channels affect women’s risk perceptions of age-related female infertility By Lampi, Elina
  7. Setting the Anchor: Price Communication, Level-n Theory and Communication By Wengström, Erik
  8. Obesity, Unhappiness, and The Challenge of Affluence : Theory and Evidence By Oswald, Andrew J; Powdthavee, Nattavudh
  9. Individual Well-Being in a Dynamic Perspective By Conchita D'Ambrosio; Joachim R. Frick
  10. Less Rationality, More Efficiency: a Laboratory Experiment on "Lemons" Markets. By Roland Kirstein; Annette Kirstein

  1. By: Khalil, Elias
    Abstract: In March 2005, riots erupted in South Korea against Japan for claiming sovereignty over some rocky uninhabited islets (0.23 km2). Five weeks earlier, riots did not erupt in South Korea when North Korea proved that it has nuclear weapons. How can we explain moral outrage in one case, when the expected net benefit is probably negative, but not in the other, when the expected net benefit is very large? This paper constructs answers using three possible approaches: sociological, evolutionary game, and standard rationality. It shows the limits of each approach and, hence, concludes with a call for a new way to think about emotions and rationality.
    Keywords: moral outrage; irrationality; threat-or-appease model; South Korea; Japan; North Korea; China; USA
    JEL: D01
    Date: 2007–03
  2. By: Andersson, Patric (Sonderforschungsbereich 504, Universität Mannheim & Center for Economic Psychology, Stockholm School of Economics); Tour, Richard (Center for Economic Psychology; Stockholm School of Economics)
    Abstract: This paper describes an empirical approach based on psychological methodology, which assumes that individual behaviour must be studied within its natural environment. This approach is called experience sampling (ESM). To illustrate the potentials of employing ESM in the stock-trading domain, we report on observations from an explorative pilot study designed to shed light on the following issues: how outcomes of trades are perceived by traders; the reasons traders associate with good and bad trades; and how traders’ moods fluctuate over a trading day.
    Date: 2005–09–27
  3. By: Ebert, Tara
    Abstract: A meta-analysis of approximately 800 trust articles written from 1966 to 2006 in A+, A, and B journals are structured and analyzed. Contributions from the number of published trust articles, multidisciplinarity, trust objects, trust interactions types, and occurrence of key variables in addition to the term trust - are deduced.
    Keywords: trust
    JEL: A30
    Date: 2007–03
  4. By: Daouda Sembene
    Abstract: This paper is an attempt to identify the determinants of trust between country authorities and IMF staff in the context of an IMF-supported program. Using an outcomes-based definition of trust, a game-theoretic model is developed to compute the level of trust between the two parties. The results and the analysis of trust-related issues emerging in a program context suggest that trust between country authorities and IMF staff exerts a positive impact on the likelihood of program success through its ability to improve the quality of the design, the efficiency of negotiation, and the effectiveness of implementation of an IMF-supported program. Some initiatives to secure such benefits and enhance trust in staff are proposed.
    Keywords: Trust , IMF-Supported Program , program design and implementation , negotiation , Fund-supported adjustment programs ,
    Date: 2007–02–26
  5. By: James C. Cox; Cary A. Deck
    Abstract: This paper reports laboratory experiments investigating behavior when players may make inferences about the intentions behind others’ prior actions based on higher- or lower-accuracy information about those actions. We investigate a trust game with first mover trembling, a game in which nature determines whether the first mover’s decision is implemented or reversed. The results indicate that second movers give first movers the benefit of the doubt. However, first movers do not anticipate this response. Ultimately, it appears that subjects are thinking on at least three levels when making decisions: they are concerned with their own material well being, the trustworthiness of their counterpart, and how their own actions will be perceived.
    JEL: C70 C91 D64 D84
    Date: 2006
  6. By: Lampi, Elina (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Based on a survey of a random sample of Swedish 20-40 year old females this paper investigates how different channels of information affect women’s perceptions of the general and the personal risks of age-related female infertility. We find that information from both media and friends and relatives matters for women’s risk perceptions. Just before the original survey was sent out, several Swedish newspapers reported that university students in Sweden tend to overestimate women’s chances of becoming pregnant. Therefore, we sent out another survey to a new sample of women two months later. Comparing responses immediately after the large media report with responses two months later, we cannot find any significant differences. Furthermore, women are most likely to want information from the health care system although, interestingly, women who highly underestimate the general risks for all age groups are less likely to want information from this source. <p>
    Keywords: Information; Media; Health care; Infertility; General risk; Personal risk
    JEL: D81 D83 I10 J13
    Date: 2007–03–16
  7. By: Wengström, Erik (Department of Economics, Lund University)
    Abstract: This paper analyzes communication from the viewpoint of the level-n theory of bounded rationality. It examines if communication can be understood by the effect it has on high-level types’ beliefs about the actions of simpleminded level-0 players. We present experimental evidence from a slightly perturbed price competition game designed to test this interpretation. The main finding is that communication affects subjects in a way that seems compatible with the level-n model, indicating that people lie in order to fool other players that they believe do less thinking. Moreover, the results indicate that the predictive power of the level-n model does crucially depend on the possibility for high level players to form homogenous beliefs about the behavior of the level-0 players.
    Keywords: Noncooperative Game Theory; Communication; Bounded Rationality; Experiments
    JEL: C72 C92 D84
    Date: 2007–03–20
  8. By: Oswald, Andrew J (Department of Economics, University of Warwick); Powdthavee, Nattavudh (Institute of Education, University of London)
    Abstract: Is affluence a good thing? The book The Challenge of Affluence by Avner Offer (2006) argues that economic prosperity weakens self-control and undermines human well-being. Consistent with a pessimistic view, we show that psychological distress has been rising through time in modern Great Britain. Taking over-eating as an example, our data reveal that half the British population view themselves as overweight, and that happiness and mental health are worse among fatter people in both Britain and Germany. A 10-point move up in body mass index (BMI) is associated in the cross-section with a drop in psychological health of approximately 0.3 GHQ points. Comparisons also matter. For a given level of BMI, we find that people who are educated or who have high income are more likely to view themselves as overweight. We discuss problems of inference and argue that longitudinal data on BMI are needed. We suggest a theory of imitation -- where utility depends on relative weight -- in which there can be obesity spirals after only small drops in the price of food.
    Keywords: Body mass index ; happiness ; mental health ; General Health Questionnaire ; GHQ scores ; BMI ; well-being ; obesity ; BHPS ; GSOEP ; imitation ; weight ; relative income ;comparisons
    JEL: D1 I12 I31
    Date: 2007
  9. By: Conchita D'Ambrosio; Joachim R. Frick
    Abstract: This paper explores the determinants of individual well-being as measured by self-reported levels of satisfaction with income. Making full use of the panel data nature of the German Socio-Economic Panel, we provide empirical evidence for well-being depending on absolute and on relative levels of income in a dynamic framework. This finding holds after controlling for other influential factors in a multivariate setting. The main novelty of the paper is the consideration of dynamic aspects: the individual's own history as well as the relative income performance with respect to the others living in the society under analysis do play a major role in the assessment of well-being.
    Keywords: Interdependent Preferences, Inequality Aversion, Status, Subjective Well-Being, SOEP
    JEL: D63 I31 D31
    Date: 2007
  10. By: Roland Kirstein; Annette Kirstein (Universität Karlsruhe)
    Abstract: In this paper we experimentally test a theory of boundedly rational behavior in a "lemons market." We analyzed two different market designs, for which perfect rationality implies complete and partial market collapse, respectively. Our empirical observations deviate substantially from these predictions of rational choice theory: Even after 20 repetitions, the actual outcome is closer to e±ciency than expected. Our bounded rationality approach to explaining these observations starts with the insight that perfect rationality would require the players to perform an in¯nite number of iterative reasoning steps. Boundedly rational players, however, carry out only a limited number of such iterations. We have determined the iteration type of the players independently from their market behavior. A significant correlation exists between the iteration types and the observed price offers.
    Keywords: guessing games, beauty contests, market failure, adverse selection, lemon problem, regulatory failure, paternalistic regulation,
    JEL: D8 C7 B4

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