nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2007‒05‒19
eleven papers chosen by
Marco Novarese
University of the Piemonte Orientale

  1. Building Micro-foundations for the Routines, Capabilities, and Performance Links By Peter Abel; Teppo Felin; Nicolai Foss
  2. Decentralized Organizational Learning: An Experimental Investigation By John Duffy; Andreas Blume; April Franco
  3. Transaction Cost Economics: An Introduction By Williamson, Oliver E.
  4. Experimental Evidence on English Auctions: Oral Outcry vs. Clock By Ricardo Gonçalves; John D Hey
  5. Symbolic Values, Occupational Choice, and Economic Development By Giacomo Corneo; Olivier Jeanne
  6. Another experimental look at reciprocal behavior: indirect reciprocity By Bonein, Aurélie; Serra, Daniel
  7. COOPERATION IN LARGE NETWORKS: AN EXPERIMENTAL By Juan Camilo Cárdenas P.; Christian R. Jaramillo H.
  8. Intentions, Insincerity, and Prosocial Behavior By Amegashie, J. Atsu
  9. Altruistic Versus Spiteful Behavior in a Public Good Game By Alexander Matros
  10. Rational Truth-Avoidance and Self-Esteem By David Andolfatto; Steeve Mongrain; Gordon Myers
  11. Crowding out in an indefinitely repeated Asymmetric Trust Game By Thomas Dirkmaat; Stephanie Rosenkranz; Vincent Buskens

  1. By: Peter Abel; Teppo Felin; Nicolai Foss
    Abstract: Micro-foundations have become an important emerging theme in strategic management. This paper addresses micro-foundations in two related ways. First, we argue that the kind of macro (or “collectivist”) explanation that is utilized in the capabilities view in strategic management - which implies a neglect of micro-foundations - is incomplete. There are no mechanisms that work solely on the macro-level, directly connecting routines and capabilities to firm-level outcomes. While routines and capabilities are useful shorthand for complicated patterns of individual action and interaction, ultimately they are best understood at the micro-level. Second, we provide a formal model that shows precisely why macro explanation is incomplete and which exemplifies how explicit micro-foundations may be built for notions of routines and capabilities and for how these impact firm performance.
    Keywords: Routines; Capabilities; Micro-foundations; Production function
    JEL: L2 M1
    Date: 2007
  2. By: John Duffy; Andreas Blume; April Franco
    Abstract: We experimentally study decentralized organizational learning. Our objective is to understand how learning members of an organization cope with the confounding effects of the simultaneous learning of others. Rather than inferring or postulating some heuristic organizational learning behavior, we experimentally test the optimal learning predictions of a stylized, rational agent model of organizational learning due to Blume and Franco [2007]. This model provides sharp testable predictions as to how learning members of an organization might cope with the simultaneous learning of others as a function of fundamental variables that characterize an organization, e.g., the firm size and the discounting of future payoffs. While the problem of learning while others are learning is quite difficult, we find support for the comparative static predictions of the unique symmetric equilibrium of the model.
    Date: 2007–05
  3. By: Williamson, Oliver E.
    Abstract: This overview of transaction cost economics is organized around the “Carnegie Triple” – be disciplined; be interdisciplinary; have an active mind. The first of these urges those who would open up the black box of economic organization to do so in a modest, slow, molecular, definitive way, with the object of deriving refutable implications and submitting these to empirical testing. The second recommends that the student of economic organization be prepared to cross disciplinary boundaries if and as this is needed to preserve veridical contact with the phenomena. The injunction have an active mind is implemented by being curious and asking the question “What is going on here?” The paper concludes with a discussion of operationalization.
    JEL: D2 D73 D86 L2
    Date: 2007
  4. By: Ricardo Gonçalves; John D Hey
    Abstract: This paper tests experimentally, in a common value setting, the equivalence between the Japanese English auction (or clock auction) and an open outcry auction, where bidders are allowed to call their own bids. We find that (i) bidding behaviour is different in each type of auction, but also that (ii) this difference in bidding behaviour does not affect significantly the auction prices. This lends some support to the equivalence between these two types of auction. The winner's curse is present: overbidding led to higher than expected prices (under Nash bidding strategies) in both types of auction.
    Keywords: English auctions, discrete bidding, winner's curse
    JEL: D44 C91 C50
    Date: 2007–05
  5. By: Giacomo Corneo (Free University of Berlin, CEPR, CESifo and IZA); Olivier Jeanne (International Monetary Fund and CEPR)
    Abstract: Channeling human resources into the right occupations has historically been a key to economic prosperity. Occupational choices are not only driven by the material rewards associated with the various occupations, but also by the esteem that they confer. We propose a model of endogenous growth in which occupations carry a symbolic value that makes them more or less attractive; the evolution of symbolic values is endogenous and determined by purposive transmission of value systems within families. The model sheds light on the interaction between cultural and economic development and identifies circumstances under which value systems matter for long-run growth. It shows the possibility of culturally determined poverty traps and offers a framework for thinking about the transition from traditional to modern values.
    Keywords: symbolic values, occupational choice, economic development, long-run growth
    JEL: D1 O1
    Date: 2007–04
  6. By: Bonein, Aurélie; Serra, Daniel
    Abstract: This paper highlights a new social motivation, the indirect reciprocity, through a three-player dictator-ultimatum game. Player 2 has the opportunity to reward or punish indirectly the player 1 by inciting – with her offer - player 3 to accept or to reject the division. We implement three treatments: in the first two we vary player 2’s available information whereas in treatment 3, players take part in a dictator game - as proposers - before being player 2s in the dictator-ultimatum game. Results show that 55% of subjects in treatment 2 and 28% in treatment 3 behave as indirect reciprocity predicts. Another reciprocal behavior - the generalized reciprocity - is investigated through a three-player dictator game. Our data show that 80% of players 2 act according to this reciprocal behavior. Finally, our findings confirm that the more complex the strategic interaction becomes the more self-regarding behavior is likely and the less other-regarding behaviors, such as reciprocity, dominate.
    Keywords: indirect reciprocity; generalized reciprocity; dictator game; ultimatum game; individual behavior
    JEL: D63 C72 C91
    Date: 2007–02
  7. By: Juan Camilo Cárdenas P.; Christian R. Jaramillo H.
    Abstract: We present a new design of a simple public goods experiment with a large number of players, where up to 80 people in a computer lab have the possibility to connect with others in the room to induce more cooperators to contribute to the public good and overcome the social dilemma. This experimental design explores the possibility of social networks to be used and institutional devices to create the same behavioral responses we observe with small groups (e.g. commitments, social norms, reciprocity, trust, shame, guilt) that seem to induce cooperative behavior in the private provision of public goods. The results of our experiment suggest that the structure of the network affects not only the players’ ability to communicate, but their willingness to do so as well. We also find that the local connectivity structure of the network has an important role as determinant of the willingness of the players to cooperate.
    Date: 2007–04–05
  8. By: Amegashie, J. Atsu
    Abstract: Consider a world with two people, 1 and 2, where person 1 (the proposer) may offer to help person 2 (the responder). The proposer may be altruistic towards the responder either out of a genuine desire to make her happy or out of guilt. The responder derives disutility from apparent acts of altruism motivated by guilt because she considers them to be insincere. She rejects some offers, depending on her beliefs about the proposer’s type. I model this social interaction as a game with interdependent preference types under incomplete information where the responder cares about the intentions behind the proposer’s prosocial behavior. I consider two recent formulations of endogenous guilt: simple guilt and guilt from blame. These formulations make the social interaction a psychological game. I find that the beliefs held by the players can lead to an equilibrium in which all offers are sincere and so no mutually beneficial trades are rejected, although the responder has incomplete information about the proposer’s type. Equilibria with insincere offers are possible under simple guilt but are impossible under guilt from blame. I discuss intrinsic and instrumental motivations for sincerity. I also discuss the implications of insincerity aversion for co-operation, altruism, political correctness, choice of identity, and trust.
    Keywords: guilt; intentions; insincerity; interdependent preference types; psychological game; social interaction.
    JEL: Z1 Z13
    Date: 2006–01–12
  9. By: Alexander Matros
    Abstract: This paper analyses an evolutionary version of the Public Good game of Eshel, Samuelson, and Shaked (1998) in which agents can choose between imitation and best-reply decision rules. We describe conditions under which altruistic and spiteful (maximizing) behavior arise: these conditions are established for any number of neighbors and any total number of agents in the population. Given mistake-free play, (short-run) outcomes are identical whether agents are constrained to employ an imitation rule only; or they can choose between imitation and best-reply rules. Given the possibility of mistakes, (long-run) outcomes vary across these two scenarios. The paper suggests how to provide public goods and gives an explanation of why we observe seemingly irrational cooperation - altruistic behavior - in the rational world.
    JEL: C70 C72 C73
    Date: 2006–12
  10. By: David Andolfatto (Simon Fraser University); Steeve Mongrain (Simon Fraser University); Gordon Myers (Simon Fraser University)
    Abstract: We assume that people have beliefs about their abilities, that these generate self-esteem, and that self-esteem is valued intrinsically. Individuals face two choices; one of which strictly dominates the other in a pecuniary sense, but necessarily involves gathering information concerning one's (unobserved) ability. We lay out the circumstances under which an individual may find it rational to reject the dominant choice; an act which, in social psychology is described as avoiding the situation, but which we label truth-avoidance. We find that the incentive to avoid the truth is increasing in income and decreasing in self-esteem, the perceived accuracy of one's self-assessment, and the role which luck plays in generating opportunities.
    Keywords: self-esteem, confidence, signal-extraction, truth-avoidance.
    JEL: D83 D1
    Date: 2007–05
  11. By: Thomas Dirkmaat; Stephanie Rosenkranz; Vincent Buskens
    Abstract: In this paper we introduce an alternative version of the trust game by Dasgupta (1988) and Kreps (1990) that allows for asymmetric information. We use this version to study the effect of checking on the trustee’s behaviour, checking is a control option the trustor can decide to use and that takes place after both trustor and trustee made their initial decisions. ‘Checking’ differs in this respect from the often in the literature found ‘monitoring’ that allows the trustor to control the trustee’s behaviour before the trustee makes his decision. The game theoretical analysis suggests that checking increases cooperation. The experimental results show that this is only true for the selfish part of the trustee population. Honest trustee react negatively to checking, which is more in line with crowding out theory.
    Keywords: Trust, Asymmetric Information, Experiment, Checking, Crowding Out
    JEL: C71 C91 D82
    Date: 2006–12

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