nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2007‒04‒14
six papers chosen by
Marco Novarese
University of the Piemonte Orientale

  1. Truth and Trust in Communication: An Experimental Study of Behavior under Asymmetric Information By Rode, Julian
  2. Social Norms By H. Peyton Young
  3. Rationality as a Barrier to Peace: Micro-Evidence from Kosovo By Sumon Kumar Bhaumik; Ira N. Gang; Myeong-Su Yun
  4. The Qualities of Leadership: Direction, Communication, and Obfuscation By Torun Dewan; David P. Myatt
  5. The Possible and the Impossible in Multi-Agent Learning By H. Peyton Young
  6. IT IS HOBBES, NOT ROUSSEAU: AN EXPERIMENT ON SOCIAL INSURANCE By Antonio Cabrales; Rosemarie Nagel; Jose V. Rodriguez Mora

  1. By: Rode, Julian (Universitat Pompeu Fabra)
    Abstract: The paper presents an experimental study of truth telling and trust in communication under asymmetric information. In a two-player Communication Game (cf., Gneezy, 2005), an informed “advisor” sends a message to an uninformed “decision maker”, who then has to decide whether to follow the advice. The advisor may gain more by lying in the message. In two treatments, either a cooperative or a competitive context is induced before participants play the Communication Game. Advisors are unaffected by this contextual variation. In contrast, decision makers in the competitive context trust the advice less than in the cooperative context. The data provide evidence that this change in trust is due to different perceptions of the incentive structure. Individual differences in behavior can be related to certain personal characteristics (field of studies, gender, personality test scores). The data are largely in line with Subjective Equilibrium Analysis (Kalai & Lehrer, 1995).
    Keywords: experimental economics; truth telling; trust; asymmetric information; individual differences; context effects; subjective beliefs
    JEL: D01 D80 Z13
    Date: 2007–04–10
  2. By: H. Peyton Young
    Abstract: The function of a social norm is to coordinate people`s expectations in interactions that possess multiple equilibria. Norms govern a wide range of phenomena, including property rights, contracts, bargains, forms of communication, and concepts of justice. Norms impose uniformity of behavior within a given social group, but often vary substantially among groups. Over time norm shifts may occur, prompted either by changes in objective circumstances or by subjective changes in perceptions and expectations. The dynamics of this process can be modeled using evolutionary game theory, which predict that some norms are more stable than others in the long run.
    Keywords: Norms, Institutions, Equilibrium Selection
    JEL: C73 B52 K0
    Date: 2007
  3. By: Sumon Kumar Bhaumik (Brunel University and IZA); Ira N. Gang (Rutgers University and IZA); Myeong-Su Yun (Tulane University and IZA)
    Abstract: Despite a significant expansion of the literature on conflicts and fragility of states, only a few systematic attempts have been made to link the theoretical literature on social conflicts to the available micro-level information about the people who are involved in these conflicts. We address this lacuna in the literature using a household-level data set from Kosovo. Our analysis suggests that it is individually rational for competing ethnic communities, Kosovo Albanians and Kosovo Serbs, to resist a quick agreement on a social contract to share the region’s resources.
    Keywords: conflict, individual rationality, economic deprivation, micro-evidence, Balkans, Kosovo
    JEL: I32 O12 J15
    Date: 2007–03
  4. By: Torun Dewan; David P. Myatt
    Abstract: Party activists wish to (i) advocate the best policy and yet (ii) unify behind a common party line. An activist`s understanding of his environment is based on the speeches of party leaders. A leader`s influence, measured by the weight placed on her speech, increases with her judgement on policy (sense of direction) and her ability to convey ideas (clarity of communication). A leader with perfect clarity of communication enjoys greater influence than one with a perfect sense of direction. Activists can choose how much attention to pay to leaders. A necessary condition for a leader to monopolize the agenda is that she is the most coherent communicator. Sometimes leaders attract more attention by obfuscating their messages. A concern for party unity mitigates this incentive; when activists emphasize following the party line, they learn more about their environment.
    Keywords: Leadership, Direction, Coordination, Communication, Oligarchy
    JEL: D7 D8 H1
    Date: 2007
  5. By: H. Peyton Young
    Abstract: The paper surveys recent work on learning in games and delineates the boundary between forms of learning that lead to Nash equilibrium and forms that lead to weaker notions of equiibrium (or none at all).
    Keywords: Equilibrium, Learning, Dynamics
    JEL: C7 D83
    Date: 2007
  6. By: Antonio Cabrales; Rosemarie Nagel; Jose V. Rodriguez Mora
    Abstract: We perform an experiment on social insurance to provide a laboratory replica of some important features of the welfare state. In the experiment, all individuals in a group decide whether to make a costly effort, which produces a random (independent) outcome for each one of them. The group members then vote on whether to redistribute the resulting and commonly known total sum of earnings equally amongst themselves. This game has two equilibria, if played once. In one of them, all players make effort and there is little redistribution. In the other one, there is no effort and nothing to redistribute. A solution to the repeated game allows for redistribution and high effort, by the threat to revert to the worst of these equilibria. Our results show that redistribution with high effort is not sustainable. The main reason for the absence of redistribution is that rich agents do not act differently depending on whether the poor have worked hard or not. There is no social contract by which redistribution may be sustained by the threat of punishing the poor if they do not exert effort. Thus, the explanation of the behavior of the subjects lies in Hobbes, not in Rousseau.
    Date: 2006–06

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