nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2007‒09‒09
nine papers chosen by
Marco Novarese
University of the Piemonte Orientale

  1. Choice over Time By Paola Manzini; Marco Mariotti
  2. What Norms Trigger Punishment By Jeffrey Carpenter; Peter Hans Matthews
  3. Explaining Gift Behavior: Altruism or Social Norms? Theory and Evidence from Romania By Mitrut, Andreea; Nordblom, Katarina
  4. Allocation of Authority when a Person is not a Robot By Jianpei Li; Yanhui Wu
  5. Can Sustainable Consumption Be Learned? By G. Buenstorf; C. Cordes
  6. Hindsight Bias and Investment Performance By BIAIS, Bruno; WEBER, Martin
  7. TOURNAMENTS AND OFFICE POLITICS: Evidence from a real effort experiment By Jeffrey Carpenter; Peter Hans Matthews; John Schirm
  8. Methods to Elicit Forecasts from Groups: Delphi and Prediction Markets Compared By Green, Kesten C.; Armstrong, J. Scott; Graefe, Andreas
  9. Cheap Talk and Secret Intentions in a Public Goods Experiments By Werner Güth; M. Vittoria Levati; Torsten Weiland

  1. By: Paola Manzini (Queen Mary, University of London); Marco Mariotti (Queen Mary, University of London)
    Abstract: In the last twenty years a growing body of experimental evidence has posed a challenge to the standard Exponential Discounting Model of choice over time. Attention has focused on some specific 'anomalies', notably preference reversal and declining discount rates, leading to the formulation of the model of hyperbolic discounting which is finding increasing favour in the literature. In this paper we provide a survey of both the theoretical modelling and the experimental evidence relating to choice over time. As we will show, a careful analysis of the mapping between theoretical models and experimental investigations raises questions as to whether some of the most focused upon anomalies should be indeed classified as such, or whether they are really the most challenging ones for conventional theory. New developments are emerging both at the theoretical and empirical level, opening up new exciting avenues for investigation.
    Keywords: Time preference, Choice over time, Theory, Experiments
    JEL: C91 D9
    Date: 2007–09
  2. By: Jeffrey Carpenter; Peter Hans Matthews
    Abstract: Many experiments have demonstrated the power of norm enforcement-peer monitoring and punishment-to maintain, or even increase, contributions in social dilemma settings, but little is known about the underlying norms that monitors use to make punishment decisions. Using a large sample of experimental data, we empirically recover the set of norms used most often by monitors and show ?rst that the decision to punish should be modeled separately from the decision of how much to punish. Second, we show that absolute norms often ?t the data better than the group average norm often assumed in related work. Third, we ?nd that di?erent norms seem to in?uence the decisions about punishing violators inside and outside one’s own group.
    Keywords: public good, experiment, punishment, social norm, norm enforcement.
    JEL: C72 C92 H41
    Date: 2007–08
  3. By: Mitrut, Andreea (Department of Economics, School of Business, Economics and Law, Göteborg University); Nordblom, Katarina (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This paper examines the motives behind inter-household gift transfers. A theoretical model is developed where, besides altruistic income redistribution, social norms (related to e.g. customs and traditions) motivate gift giving. We apply the model to Romania, a country where private gifts are very important, and find evidence for social norms being the main motive for gift giving. However, different norms determine gift transfers to poor and non-poor households. Moreover, we find no crowding-out effects from public pensions on private gifts.<p>
    Keywords: Transfers; altruism; reciprocity; Romania; social norms
    JEL: D10 H55 I30 J14 R20 Z13
    Date: 2007–09–04
  4. By: Jianpei Li (Institut f. Wirtschaftstheorie I Humboldt Universität zu Berlin Spandauer Str. 1, 10099 Berlin, Germany; Yanhui Wu (Seminar for International Economics University of Munich Ludwigstr. 28 80539 Munich, Germany
    Abstract: We formalize a conception of authority, which is commonly defined as the right of controlling a person’s actions embedded in human assets in sociology. Due to the inalienable property of human assets, the contractible formal authority is hard to verify and enforce, while real authority usually diverges from formal authority. Inefficiency tends to arise when a task is not routine or can not be done by a robot. Using a framework of incomplete contract, we show that allocation of formal authority, as an instrument to mitigate the inefficiency, is determined by features of tasks and specificity of assets, and the relationship between the resources. Monitoring is then introduced to fine tune value of delegation.
    Keywords: Transaction of human assets, real authority, formal authority, delegation, monitor
    JEL: D23 J24 J41 L22
    Date: 2007–07
  5. By: G. Buenstorf; C. Cordes
    Abstract: This paper shows how sustainable consumption patterns can spread within a population via processes of social learning even though a strong individual learning bias may favor environmentally harmful products. We present a model depicting how the biased transmission of different behaviors via individual and social learning influences agents’ consumption behavior. The underlying learning biases can be traced back to evolved cognitive dispositions. Challenging the vision of a permanent transition toward sustainability, we argue that “green†consumption patterns are not self-reinforcing and cannot be “locked in†permanently.
    Keywords: Length 28 pages
    Date: 2007–08
  6. By: BIAIS, Bruno; WEBER, Martin
    Date: 2007–01
  7. By: Jeffrey Carpenter; Peter Hans Matthews; John Schirm
    Abstract: In many environments, tournaments can elicit more e?ort from workers, except perhaps when workers can sabotage each other. Because it is hard to separate effort, ability and output in many real workplace settings, the empirical evidence on the incentive effect of tournaments is thin. There is even less evidence on the impact of sabotage because real world acts of sabotage are often subtle manifestations of subjective peer evaluation or “o?ce politics.” We discuss a real e?ort experiment in which e?ort, quality adjusted output and o?ce politics are compared under piece rates and tournaments. Our results suggest that tournaments increase e?ort only in the absence of o?ce politics. Competitors are more likely to sabotage each other in tournaments and, as a result, workers actually provide less e?ort simply because they expect to be the victims of sabotage. Adjusting output for quality with the rating of an independent auditor shrinks the incentive e?ect of the tournament even further since output tends to become more slipshod. "The person who says ‘I’m not political’ is in great danger... Only the ?ttest will survive, and the ?ttest will be the ones who understand their offce’s politics." Jean Hollands, quoted in Playing Offce Politics, Newsweek, 16 September 1985
    Date: 2007–09
  8. By: Green, Kesten C.; Armstrong, J. Scott; Graefe, Andreas
    Abstract: Traditional groups meetings are an inefficient and ineffective method for making forecasts and decisions. We compare two structured alternatives to traditional meetings: the Delphi technique and prediction markets. Delphi is relatively simple and cheap to implement and has been adopted for diverse applications in business and government since its origins in the 1950s. It can be used for nearly any forecasting, estimation, or decision making problem not barred by complexity or ignorance. While prediction markets were used more than a century ago, their popularity waned until more recent times. As a consequence there is less evidence on their validity. Prediction markets need many participants. They need clear outcomes in order to determine participants’ pay-offs. Even so, relating their knowledge to market prices is not intuitive to everyone and constructing contracts that will provide a useful forecast may not be possible for some problems. It is difficult to maintain confidentiality with markets and they are vulnerable to manipulation. Delphi is designed to reveal panelists’ knowledge and opinions via their forecasts and the reasoning they provide. This format allows testing of knowledge and learning by panelists as they refine their forecasts. Such a process does not happen explicitly in prediction markets and may not happen at all. The reasoning provided as an output of the Delphi process is likely to be reassuring to forecast users who are uncomfortable with the “black box” nature of prediction markets. We consider that, half a century after its original development, Delphi is greatly under-utilized.
    Keywords: accuracy; forecasting methods; groups; judgment; meetings; structure
    JEL: C88 D84 C42 D82 C49 C44 D81 D83
    Date: 2007–08–31
  9. By: Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); M. Vittoria Levati (Max Planck Institute of Economics, Strategic Interaction Group); Torsten Weiland (Max Planck Institute of Economics, Strategic Interaction Group)
    Abstract: In a public goods experiment, subjects can vary over a period of stochastic length two contribution levels: one is publicly observable (their cheap talk stated intention), while the other is not seen by the others (their secret intention). When the period suddenly stops, participants are restricted to choose as actual contribution either current alternative. Based on the two types of choice data for a partners and a perfect strangers condition, we confirm that final outcomes strongly depend on the matching protocol. As to choice dynamics, we distinguish different types of adaptations.
    Keywords: Public goods game, Cheap talk communication, Real-time protocol
    JEL: C72 H41 D82 D83
    Date: 2007–08–20

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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