nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2007‒07‒13
eleven papers chosen by
Marco Novarese
University of the Piemonte Orientale

  1. Learning Spillover and Analogy-based Expectations: a Multi-Game Experiment By Philippe Jehiel; Steffen Huck; Tom Rutter
  2. Risk attitude in real decision proBLEMs By Fabrizio Botti; Anna Conte; Daniela T. Di Cagno; Carlo D'Ippoliti
  3. Redistributional Preferences and Imposed Institutions By Alberto Chong; Mark Gradstein
  4. Voting on a sharing norm in a dictator game By Christoph Vanberg
  5. A Non-Bayesian Approach to (Un)Bounded Rationality By Werner Güth
  6. Valuation of Self-Insurance and Self-Protection under Ambiguity: Experimental Evidence By Ozlem Ozdemir
  7. Social Memory and Evidence from the Past By Luca Anderlini; Dino Gerardi; Roger Lagunoff
  8. Entrepreneurial Behavior : New Perspectives gained through the Critical Incident Technique By Nandram, Sharda; Samsom, Karel
  9. The Entrepreneurship-Philanthropy Nexus: Nonmarket Source of American Entrepreneurial Capitalism By Zoltan J. Acs; David Audretsch; Ronnie J. Phillips; Sameeksha Desai
  10. Small Sample Properties of the Wilcoxon Signed Rank Test with Discontinuous and Dependent Observations By Nadine Chlaß; Jens J. Krüger
  11. Process Based Management and the Central Role of Dialogical Collective Activity in Organizational Learning. The Case of Work Safety in the Building Industry By Lorino, Philippe

  1. By: Philippe Jehiel; Steffen Huck; Tom Rutter
    Date: 2007
  2. By: Fabrizio Botti (LUISS Guido Carli); Anna Conte (University of Rome II “Tor Vergata”, University of Rome I “La Sapienza”, and LUISS Guido Carli); Daniela T. Di Cagno (LUISS Guido Carli); Carlo D'Ippoliti (University of Rome I “La Sapienza”, and LUISS Guido Carli)
    Abstract: Experimental economics focuses on eliciting preferences, studying individuals one at a time to take into account their heterogeneity. Experiments have the appealing property of collecting enough observations to perform such an analysis. In real word, and in natural experiments, individuals cannot be observed according to experimenters’ needs. We propose a method that aggregates over individuals taking into account their heterogeneity. Using data from a natural experiment, we estimate three models of decision making under risk: Expected Utility, Rank-Dependent Expected Utility and Regret-Rejoice. Our results show that individual-wise analyses can be substituted by pooled approaches without losing information about individual heterogeneity.
    Keywords: Panel Data, Unobserved heterogeneity, Choice under risk
    JEL: C15 C23 C25 D81
  3. By: Alberto Chong (Inter-American Development Bank); Mark Gradstein (Ben Gurion University/CEPR/CESifo/IZA)
    Abstract: To what extent do imposed institutions shape preferences? We consider this issue by comparing the market-versus-state attitudes of respondents from a capitalist country, Finland, and an ex-communist group of Baltic countries, and by arguing that the period of communist rule can be viewed as an “experiment” in institutional imposition. We find that, consistent with some earlier related work, citizens from ex-communist countries tend to be more supportive of state ownership than respondents from capitalist economies. However, they also favor increasing inequality and competition as the means to enhance incentives. We conclude that, in some important relevant dimensions, institutional imposition (which lasted for about 50 years) had a limited effect on preferences. The lessons for Latin America are straightforward.
    Keywords: Institutions; markets versus state; redistributional preferences
    JEL: P30 P51 D30 D02 I31
    Date: 2006–10
  4. By: Christoph Vanberg (Max Planck Institute of Economics, Jena, Germany.)
    Abstract: I conduct an experiment to assess whether majority voting on a non- binding sharing norm affects subsequent behavior in a dictator game. In a baseline treatment, subjects play a one shot dictator game. In a voting treatment, subjects are ï¬rst placed behind a 'veil of ignorance' and vote on the amount that those chosen to be dictators 'should' give. The outcome of the vote is referred to as a 'non-binding agreement.' The results show that a norm established in this fashion does not induce more 'fairness' on the part of those subsequently chosen to be dictators. In fact, dictators were signiï¬cantly more likely to offer nothing under the treatment. I outline a simple model to account for this 'crowding out' effect of a norm that may demand ‘too much’ of some subjects.
    Keywords: Dictator game, communication, voting, promises, agreements, behavioral economics, guilt aversion, reciprocity, fairness, obligations
    JEL: C91 C92 D63 D64 D70
    Date: 2007–07–06
  5. By: Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group)
    Abstract: Can one define and test the hypothesis of (un)bounded rationality in stochastic choice tasks without endorsing Bayesianism? Similar to the state specificity of assets, we rely on state-specific goal formation. In a given choice task, the list of state-specific goal levels is optimal if one cannot increase the goal level for one state without having to decrease that for other states. We show that this allows to relate optimality more easily to bounded rationality where we interpret goal levels as aspirations. If for the latter there exist choices satisfying all state-specific aspirations and if one such choice is used, we speak of satisficing which may or may not be optimal.
    Keywords: Satisficing, bounded rationality, optimality
    JEL: B4 D81 D10
    Date: 2007–07–06
  6. By: Ozlem Ozdemir (Yeditepe University)
    Abstract: This experimental study, first, compares the individual valuations of two risk reduction mechanisms: self-insurance and self-protection. Second, it investigates these valuations when the loss amount is ambiguous, and compare these values with valuations when loss amounts are known. results confirm that there exists no "framing effect" due to the two risk reduction mechanisms. Ambiguity in the loss amount has a weak impact on the valuation, and using different representations of ambiguity does not change the valuation. Moreover, the mean ratios of ambiguous to risky bids are greater than one for low loss amounts indicating ambiguity aversion. These ratios are not significantly different from one for high loss amounts regardless of the probability of loss levels. Finally, 28 percent of the sample behaved consistent with the predictions of "anchoring and adjustment", while only 6 percent supported the "maximin" predictions.
    Keywords: self-insurance, self-protection, risk, uncertainty
    JEL: C91 D81
    Date: 2007–07–06
  7. By: Luca Anderlini; Dino Gerardi; Roger Lagunoff (Department of Economics, Georgetown University)
    Abstract: Examples of repeated destructive behavior abound throughout the history of human societies. This paper examines the role of social memory --- a society's vicarious beliefs about the past --- in creating and perpetuating destructive conflicts. We examine whether such behavior is consistent with the theory of rational strategic behavior. We analyze an infinite-horizon model in which two countries face off each period in an extended Prisoner's Dilemma game in which an additional possibility of mutually destructive ``all out war'' yields catastrophic consequence for both sides. Each country is inhabited by a dynastic sequence of individuals who care about future individuals in the same country, and can communicate with the next generation of their countrymen using private messages. The two countries' actions in each period also produce physical evidence; a sequence of informative but imperfect public signals that can be observed by all current and future individuals. We find that, provided the future is sufficiently important for all individuals, regardless of the precision of physical evidence from the past there is an equilibrium of the model in which the two countries' social memory is systematically wrong, and in which the two countries engage in all out war with arbitrarily high frequency. Surprisingly, we find that degrading the quality of information that individuals have about current decisions may ``improve'' social memory so that it can no longer be systematically wrong. This in turn ensures that arbitrarily frequent all out wars cannot take place. Classification-JEL Codes: C72, C79, D80, D83, D89
    Keywords: Social Memory, Private Communication, Dynastic Games, Physical Evidence
  8. By: Nandram, Sharda; Samsom, Karel (Nyenrode Business Universiteit)
    Abstract: Responding to criticism of the trait approach in studying entrepreneurship, a process and context oriented methodology was applied using the Critical Incident Technique (CIT) in predicting success and failure. The actions of entrepreneurs were subsequently translated into (1) dynamic traits with a subdivision in attitudes, sentiments and ergs; (2) abilities and (3) temperaments. The CIT blends qualitative and quantitative approaches in the study of entrepreneurial behaviour. A material difference among incidents appeared in the various life cycle phases investigated. The researchers further found that specific questions combined with using the CIT generated more differentiated outcomes than the use of general questions.
    Date: 2007
  9. By: Zoltan J. Acs (George Mason University); David Audretsch (Indiana University and Max Planck Institute of Economics, Jena); Ronnie J. Phillips (Kauffman Foundation and Colorado State University); Sameeksha Desai (George Mason University)
    Abstract: What differentiates American capitalism from all other forms of industrial capitalism is a historical focus on both the creation of wealth (entrepreneurship) and the reconstitution of wealth (philanthropy). Philanthropy has been part of the implicit American social contract that continuously nurtures and revitalizes economic prosperity. Much of the new wealth created historically has been given back to the community to build many of the great social institutions that have paved the way for future economic growth. This entrepreneurship-philanthropy nexus has not been fully explored by either economists or the general public. The purpose of this paper is to suggest that American philanthropists-particularly those who have made their own fortunes-create foundations that, in turn, contribute to greater and more widespread economic prosperity through knowledge creation. Analyzing philanthropy sheds light on our current understanding of how economic development has occurred, as well as the roots of American economic domi- nance.
    Keywords: entrepreneurship, philanthropy, capitalism, knowledge
    JEL: D64 M13 M14
    Date: 2007–07–02
  10. By: Nadine Chlaß (Max Planck Institute of Economics, Strategic Interaction Group); Jens J. Krüger (Friedrich-Schiller-University Jena, Department of Economics)
    Abstract: This Monte-Carlo study investigates sensitivity of the Wilcoxon signed rank test to certain assumption violations in small samples. Emphasis is put on within-sample-dependence, between-sample dependence, and the presence of ties. Our results show that both assumption violations induce severe size distortions and entail power losses. Surprisingly, these consequences do vary substantially with other properties the data may display. Results provided are particularly relevant for experimental settings where ties and within-sample dependence are frequently observed.
    Keywords: Wilcoxon signed rank test, ties, dependent observations, size and power
    JEL: C12 C14 C15
    Date: 2007–07–05
  11. By: Lorino, Philippe (ESSEC Business School)
    Abstract: The notion of “process”, which describes the cooperation of heterogeneous practices and competences for a given output, has gained a major position in managerial practices for the last twenty years. This paper presents three ideas about organizational dynamics and processes and tests their applicability in the case of work safety improvement in a building company. The first idea is that the success of the process notion shows the central role of “conjoint” (as opposed to “common”) collective activity in organizational learning. Conjoint collective activity is dialogical (“acts speak”) and mediated by the utilization of semiotic systems (languages and technical and managerial tools). The second idea is that organizational learning is neither based on the actors’ individual subjectivity nor on the technological and objective artefacts engaged in the processes, but rather on the reflexive understanding and ongoing redesign of processes by the process actors themselves, in the frame of a reflexive inquiry, a “collective activity about collective activity” which is triggered and kept in motion by axiological judgments (process evaluation). The third idea is that the possibilities to configure processes in a given organization are multiple. The reflexive inquiry enacts a specific social, spatial and time configuration of the process, its “chronotope” in Bakhtin’s vocabulary, which plays a major role in the way actors can make sense of their collective activity and transform it. A longitudinal case study about work safety on the building yards shows that it is difficult to “control out” risk at work once designs have been established, in the frame of the “project execution” process, but it is easier to “design out” risk, when the actors of the process collectively design and redesign their collective activity, from the very first phases of a building project to the end. Therefore a major way to improve safety consists in extending the chronotope of the collective activity under consideration, overcoming the traditional separation between “design / planning” and “execution”. The conclusion summarizes the main theoretical, epistemological and practical issues involved in this research about conjoint collective activity.
    Keywords: Business Process; Chronotope; Collective Activity; Collective Sense Making; Dialogism; Inquiry; Process-based Management; Safety Management
    JEL: Z00
    Date: 2007–05

This nep-cbe issue is ©2007 by Marco Novarese. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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