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on Cognitive and Behavioural Economics |
| By: | Floris Heukelom (Universiteit van Amsterdam) |
| Abstract: | The most important financial source for behavioral economics is the Russell Sage Foundation (RSF). The most prominent behavioral economists among the RSF’s twenty-six member Behavioral Economics Roundtable (BER) are Kahneman, Tversky, Thaler, Camerer, Loewenstein, Rabin, and Laibson. The theoretical core of behavioral economics made up of the work of these seven researchers is positioned in opposition to Adam Smith/Hayek type of economics, as exemplified by experimental economists Vernon Smith and Plott; and what is referred to as ‘mainstream’ or ‘traditional’ economics, meaning the neoclassical economics that roughly builds on Samuelson. On the basis of an overview of the work of these seven behavioral economists, a theoretical division can be observed within behavioral economics. The first branch considers human decision-making to be a problem of exogenous uncertainty, which can be analyzed with decision theory. It employs traditional economics as a nor! mative benchmark and favors a normative-descriptive(-prescriptive) distinction for economics. The second branch considers human decision-making to be a problem of strategic interaction, in which the uncertainty is endogenous. Its main tool is game theory. It rejects traditional economics both positively and normatively. |
| Keywords: | Behavioral economics; Russell Sage Foundation; experimental economics; Kahneman; Tversky; Thaler; Laibson; Loewenstein; Rabin; Camerer |
| JEL: | A12 B21 B31 D0 |
| Date: | 2007–02–12 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20070020&r=cbe |
| By: | Stephen V. Burks (University of Minnesota, Morris, and IZA); Jeffrey Carpenter (Middlebury College and IZA); Lorenz Götte (Federal Reserve Bank of Boston and IZA); Kristen Monaco (California State University, Long Beach); Kay Porter (Cooperating Motor Carrier); Aldo Rustichini (University of Minnesota) |
| Abstract: | The Truckers and Turnover Project is a statistical case study of a single firm and its employees which matches proprietary personnel and operational data to new data collected by the researchers to create a two-year panel study of a large subset of new hires. The project’s most distinctive innovation is the data collection process which combines traditional survey instruments with behavioral economics experiments. The survey data include information on demographics, risk and loss aversion, time preference, planning, non-verbal IQ, and the MPQ personality profile. The data collected by behavioral economics experiments include risk and loss aversion, time preferences (discount rates), backward induction, patience, and the preference for cooperation in a social dilemma setting. Subjects will be followed over two years of their work lives. Among the major design goals are to discover the extent to which the survey and experimental measures are correlated, and whether and how much predictive power, with respect to key on-the-job outcome variables, is added by the behavioral measures. The panel study of new hires is being carried out against the backdrop of a second research component, the development of a more conventional indepth statistical case study of the cooperating firm and its employees. This is a high-turnover service industry setting, and the focus is on the use of survival analysis to model the flow of new employees into and out of employment, and on the correct estimation of the tenureproductivity curve for new hires, accounting for the selection effects of the high turnover. |
| Keywords: | field experiment, risk aversion, loss aversion, time preference, IQ, MPQ, numeracy, U.S. trucking industry, for-hire carriage, truckload (TL), driver turnover, employment duration, survival model, tenure-productivity curve |
| JEL: | C81 C93 L92 J63 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2789&r=cbe |
| By: | Sebastian J. Georg (BonnEconLab, University of Bonn); Werner Güth (Max Planck Institute of Economics Jena, Strategic Interaction Unit); Gari Walkowitz (BonnEconLab, University of Bonn); Torsten Weiland (Max Planck Institute of Economics Jena, Strategic Interaction Unit) |
| Abstract: | Does geographic distance or the perceived social distance between subjects significantly affect proposer and responder behavior in ultimatum bargaining? To answer this question, subjects play a one-shot ultimatum game with three players (proposer, responder, and a passive dummy player) and asymmetric information (only the proposer knows what can be distributed). Treatments differ in their geographic scope by involving either one or three different locations in Germany. Observed behavior reflects the robust stylized facts of this class of ultimatum experiments and can be adequately explained by other-regarding preferences. While responder behavior does not condition on co-players' location of residence, self-interest of proposers varies significantly with the latter. Altogether, we do not detect strong discrimination based on geographic distance. |
| Keywords: | ultimatum bargaining, cross-cultural experiments, social preferences |
| JEL: | C78 C91 Z13 |
| Date: | 2007–05–16 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2007-016&r=cbe |
| By: | Muñoz, Félix-Fernando (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.); Encinar, María-Isabel (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.) |
| Abstract: | An important challenge to evolutionary economics consists of how to tackle with the dramatic tension between purposeful human action and the ‘blindness’ of evolutionary processes. On the one hand, economic action, if rational, has to be planned (which implies purposeful ordering of the means used to achieve objectives). On the other hand, an evolutionary process involves both the emergence of novelties (both intended innovations and unintended consequences of actions) and properties that manifest at meso and macro levels. Some recent papers have insisted on these issues. However, few analytical tools are yet available to cope with both, the analysis of intended dynamic action and ‘blind’ evolution. In this paper we propose the so-called ‘action plan approach’, a theoretical framework which could be useful for this task. The development of tools that permit us to analyze how individuals construct their plans, the projective (conjectural) and interactive nature of action, and the learning processes involved in ‘planning and acting’, may help us identifying and understanding new sources of complexity of economic processes. The close relationship of the ‘action plan approach’ with other systemic conceptual approaches is also highlighted. |
| Keywords: | connections, action plans, novelty, intentionality, evolutionary economic process |
| JEL: | B41 B52 D89 O10 O31 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:uam:wpaper:200707&r=cbe |
| By: | Lena Nekby (Stockholm University and IZA); Peter Skogman Thoursie (Stockholm University); Lars Vahtrik (Stockholm University) |
| Abstract: | Using a large running race in Sweden, this study shows that there are male-dominated environments in which the selection of women who participate are more likely to be confident/competitive and that, within this group, performance improves equally for both genders. |
| Keywords: | overconfidence, competitiveness, gender differences |
| JEL: | J2 J16 J71 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2794&r=cbe |
| By: | Giovanni Dosi; Alfonso Gambardella; Marco Grazzi; Luigi Orsenigo |
| Abstract: | In this work we discuss the impact of the new ICT techno-economic paradigm upon the vertical and horizontal boundaries of the firm and ask whether the change in the sources of competitive advantage has resulted in changes in the size distribution of firms and also in the degree of concentration of industries. Drawing both on firm-level and national statistical data we assess the evolution of the overall balances between the activities which are integrated within organizations and those which occur through market interactions. While the new paradigm entails ``revolutionary'' changes in the domain of technology, the modification in industrial structures has been somewhat more incremental. Certainly, the vertical and horizontal boundaries of firms have changed and together one is observing a turnover in the club of biggest world firms accounting also for a shift in the relative importance of industrial sectors. Nonetheless, we do not observe an abrupt fading of the Chandlerian multidivisional corporation in favour of smaller less-integrated firms. |
| Keywords: | New techno-economic paradigm; Organizational change; Vertical integration; Boundaries of the firm; Visible hand. |
| Date: | 2007–05–14 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2007/12&r=cbe |
| By: | Olga Bourachnikova (LaRGE (Laboratoire de Recherche en Gestion et en Economie),FSEG, ULP, Université de Strasbourg I, Pôle Européen de Gestion et d’Economie.) |
| Abstract: | The Behavioral Portfolio Theory (BTP) developed by Shefrin and Statman (2000) considers a probability weighting function rather than the real probability distribution used in Markowitz’s Portfolio Theory (1952). The optimal portfolio of a BTP investor, which consists in a combination of bonds and lottery ticket, can differ from the perfectly diversified portfolio of Markowitz. We found that this particular form of portfolio is not due to the weighting function. In this article we explore the implication of weighting function in the portfolio construction. We prove that the expected wealth criteria (used by Shefrin and Statman), even if the objective probabilities were deformed, is not a sufficient condition for obtaining significantly different forms of portfolio. Not only probabilities but also future outcomes have to be transformed. |
| JEL: | G11 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:07-011&r=cbe |
| By: | Cools, E.; Van den Broeck, H. |
| Abstract: | There is currently considerable interest in the key elements of person-environment fit to understand vocational behaviour and to develop strategic human resource management practices. In the light of this interest, we wanted (1) to investigate with the new Cognitive Style Indicator whether people within similar functions have similar cognitive styles, and (2) to examine the consequences of cognitive (mis)fit on three work attitudes. We used two large-scale databases (N = 24,267 and N = 2,182) to address these issues. We identified mainly a knowing-oriented cognitive climate in finance, information technology (IT), and research and development (R&D) functions; a planning-oriented cognitive climate in administrative and technical and production functions; and a creating-oriented cognitive climate in sales and marketing functions and general management. Furthermore, our findings demonstrated that people with a creating style show more job search behaviour and intention to leave than people with a planning style, irrespective of the cognitive climate they are working in. We contribute to increased understanding of the influence of cognitive styles on organisational behaviour and work attitudes. This study is relevant for selection and recruitment policies of organisations and in the context of training, job design, and workforce planning. |
| Date: | 2007–04–23 |
| URL: | http://d.repec.org/n?u=RePEc:vlg:vlgwps:2007-14&r=cbe |
| By: | HIROTA Shinichi; KUBO Katsuyuki; MIYAJIMA Hideaki |
| Abstract: | Corporate culture does matter. Using Japanese firms' data from 1987-2000, we have shown that the strength of corporate culture significantly affects corporate policies such as employment policy, management structure, and financial structure. We have also confirmed that the culture and its embedding contribute to better corporate performance. These culture effects are found to be considerable in magnitude and at least as large as those of other factors. We suggest that it is important to recognize the existence of the culture for understanding corporate policies and performance. |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:07030&r=cbe |