nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2007‒10‒13
twelve papers chosen by
Marco Novarese
University of the Piemonte Orientale

  1. A Computable Economist’s Perspective on Computational Complexity By K. Vela Velupillai
  2. Taming the Incomputable, Reconstructing the Nonconstructive and Deciding the Undecidable in Mathematical Economics By K. Vela Velupillai
  3. Are Routines Reducible to Mere Cognitive Automatisms? Some contributions from cognitive science to help shed light on change in routines By Nathalie Lazaric
  4. The dual process account of reasoning: historical roots, problems and perspectives. By Massimo Egidi
  5. The role of players’ identification in the population on the trusting and the trustworthy behavior an experimental investigation By Dimitri Dubois; Marc Willinger
  6. Cooperation without Punishment By Stefania Ottone; Ferruccio Ponzano
  7. Cooperation through Imitation and Exclusion in Networks By Mengel, Friederike; Fosco, Constanza
  8. Hiring People-like-Yourself: A Representation of Discrimination on the Job Market By Ariane Szafarz
  9. Starting-point bias and respondent uncertainty in dichotomous choice contingent valuation surveys By Emmanuel Flachaire; Guillaume Hollard
  10. A Comment on Ellsberg's two-color experiment,<br />portfolio inertia and ambiguity By Jean-Marc Tallon; Sujoy Mukerji; Norio Takeoka; Youichiro Higashi
  11. Reason, Emotion, and Information Processing in the Brain By Isabelle Brocas; Juan D Carrillo
  12. Is There a Pessimistic Bias in Individual Beliefs? Evidence from a Simple Survey By Elyès Jouini; Selima Ben Mansour; Clotilde Napp

  1. By: K. Vela Velupillai
    Abstract: A computable economist.s view of the world of computational complexity theory is described. This means the model of computation underpinning theories of computational complexity plays a central role. The emergence of computational complexity theories from diverse traditions is emphasised. The unifications that emerged in the modern era was codified by means of the notions of efficiency of computations, non-deterministic computations, completeness, reducibility and verifiability - all three of the latter concepts had their origins on what may be called "Post's Program of Research for Higher Recursion Theory". Approximations, computations and constructions are also emphasised. The recent real model of computation as a basis for studying computational complexity in the domain of the reals is also presented and discussed, albeit critically. A brief sceptical section on algorithmic complexity theory is included in an appendix.
    Date: 2007
  2. By: K. Vela Velupillai
    Abstract: It is natural to claim, as I do in this paper, that the emergence of non-constructivities in economics is entirely due to the formalization of economics by means of "classical" mathematics. I have made similar claims for the emergence of uncomputabilities and undecidabilities in economics in earlier writings. Here, on the other hand, I want to suggest a way of confronting uncomputabilites, and remedying non-constructivities, in economics, and turning them into a positive force for modelling, for example, endogenous growth, as suggested by Stefano Zambelli ([107], [108]). In between, a case is made for economics to take seriously the kind of mathematical methodology fostered by Feynman and Dirac, in particular the way they developed the path integral and the delta-function, respectively. A sketch of a "research program" in mathematical economics, analogous to the way Gödel thought incompleteness and its perplexities should be interpreted and resolved, is also outlined in the concluding section.
    Date: 2007
  3. By: Nathalie Lazaric
    Abstract: The aim of this article is to understand permanence and changes inside organizational routines. For this purpose, it seems important to explain how individual and collective memorisation occurs, so as to grasp how knowledge can be converted into routines. Although memorisation mechanisms imply a degree of durability, our procedural and declarative knowledge, and our memorisation processes, evolve so that individuals and organisations can project themselves into the future and innovate. Some authors highlight the necessity of dreaming and forgetting (Bergson 1896); others believe that emotions play a role in our memorisation processes (Damasio 1994). These dimensions are not only important at the individual level but also in an organisational context (Lazaric and Denis 2005; Reynaud 2005; Pentland and Feldman 2005).I review the individual dimension of these memorisation processes, with the Anderson’s distinction between procedural knowledge and declarative knowledge. I discuss the notion of cognitive automatisms in order to show why routines should be investigated beyond their first literal assumption (Bargh, 1997). This leads to a clear understanding of the micro level that underpins organisational flexibility and adaptation (notably the motivational triggers). Within organisations, the memorisation mechanisms are at once similar and diverse. Indeed, organisations use their own filters and mechanisms to generate organisational coordination. Organizational memory has its own dimension as it does not merely consist of the sum of individual knowledge and must be able to survive when individuals leave. Routines depend on the organisational memory implemented and on the procedural knowledge and representations of it (individual and collective representations).
    Keywords: Knowledge; memorisation; organizations; individuals
    JEL: D83 O31
    Date: 2007
  4. By: Massimo Egidi
    Abstract: Despite the great effort that has been dedicated to the attempt to redefine expected utility theory on the grounds of new assumptions, modifying or moderating some axioms, none of the alternative theories propounded so far had a statistical confirmation over the full domain of applicability. Moreover, the discrepancy between prescriptions and behaviors is not limited to expected utility theory. In two other fundamental fields, probability and logic, substantial evidence shows that human activities deviate from the prescriptions of the theoretical models. The paper suggests that the discrepancy cannot be ascribed to an imperfect axiomatic description of human choice, but to some more general features of human reasoning and assumes the “dual-process account of reasoning” as a promising explanatory key. This line of thought is based on the distinction between the process of deliberate reasoning and that of intuition; where in a first approximation, “intuition” denotes a mental activity largely automatized and inaccessible from conscious mental activity. The analysis of the interactions between these two processes provides the basis for explaining the persistence of the gap between normative and behavioral patterns. This view will be explored in the following pages: central consideration will be given to the problem of the interactions between rationality and intuition, and the correlated “modularity” of the thought.
    Date: 2007
  5. By: Dimitri Dubois; Marc Willinger
    Abstract: We study to what extent identification does matter for trustfulness and trustworthiness to emerge in a population of players. Our experimen- tal protocol is designed for isolating the effects of trustees’ identification. Trustees’ identification is a necessary condition for introducing a reputa- tion mechanism. We run three treatments. In each treatment groups 6 players interact repeatedly and randomly and play a 30 periods invest- ment game (Berg & al. 1995). In the first treatment players can’t identify each other, in the second one players can identify each other as trustee and in the third one players identify each other both as trustee and trustor. We show that, according to the expectation, trustees’ identification has a positive effect on reciprocity. However it doesn’t affect the average trust in the population. Trust is significantly higher than in the complete anony- mous treatment only when players identify each other in both roles. We show that this enhance of trust is the result of mutual trust-reciprocity relationships formation.
    Date: 2007–06
  6. By: Stefania Ottone; Ferruccio Ponzano
    Abstract: Our experiment is made by three treatments. The first one reproduces the classical public good game. The second environment represents a perfect competition market where the contribution of a representative player to the private good gives a positive rent if and only if it is not lower than the highest contribution of the other players in the group. In the third treatment we consider a winner-take-all market where we have only a winner per group. The aim is to test whether the level of cooperation is minimum under the hypothesis of perfect competition.
    Date: 2007–10
  7. By: Mengel, Friederike; Fosco, Constanza
    Abstract: We develop a simple model to study the coevolution of interaction structures and action choices in prisoners' dilemma games. Agents are boundedly rational and choose both actions and interaction partners via payoff-biased imitation. The dynamics of imitation and exclusion yields polymorphic outcomes under a wide range of parameters. Whenever agents hold some information beyond their interaction neighbors defectors and cooperators always coexist in disconnected components. Otherwise polymorphic networks can emerge with a center of cooperators and a periphery of defectors. Any stochastically stable state has at most two disconnected components. Simulations confirm our analytical results and show that the share of cooperators increases with the speed at which the network evolves, increases with the radius of interaction and decreases with the radius of information.
    Keywords: Game Theory; Cooperation; Imitation Learning; Network Formation.
    JEL: C70 C73 C72
    Date: 2007–10–10
  8. By: Ariane Szafarz (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels, and DULBEA, Université Libre de Bruxelles.)
    Abstract: This paper offers a new representation of discrimination on the job market based on the most recent findings in the socio-psychological academic literature about human behaviour. Put it simply, it is assumed that the agents prefer working with people like themselves. This "affinity" principle is modelled through a distance between an individual (the candidate for a job) and the staff of the firm. Contrary to the classical view according to which discrimination results from asymmetric information, this new model provides a rationale for the presence of discriminative attitudes on the job market even when full information is available on the skill levels of all candidates for a working position.
    Keywords: discrimination, affinity, skill
    JEL: J71 J70
    Date: 2007–10
  9. By: Emmanuel Flachaire (CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I]); Guillaume Hollard (OEP - [Universite de Marne la Vallee])
    Abstract: In this article, we develop a dichotomous choice model with follow-up questions that describes the willingness to pay being uncertain in an interval. The initial response is subject to starting point bias. Our model provides an alternative interpretation of the starting point bias in the dichotomous choice valuation surveys. Using the Exxon Valdez survey, we show that, when uncertain, individuals tend to answer "yes".
    Keywords: starting point bias ; preference uncertainty ; contingent valuation
    Date: 2007
  10. By: Jean-Marc Tallon (CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I], Ecole d'économie de Paris - Paris School of Economics - [Université Panthéon-Sorbonne - Paris I]); Sujoy Mukerji (Oxford University - [University of Oxford]); Norio Takeoka (Department of economics - [University of Rochester]); Youichiro Higashi (Department of economics - [University of Rochester])
    Abstract: The final step in the proof of Proposition 1 (p.311) of Mukerji and Tallon (2003) may not hold in general<br />because $\varepsilon>0$ in the proof cannot be chosen independently of $w,z$. We point out by a counterexample that the axioms they impose are too weak for Proposition 1. We introduce a modified set of axioms and re-establish the<br />proposition
    Keywords: ambiguity;bid ask spread;Ellsberg paradox
    Date: 2007–07
  11. By: Isabelle Brocas; Juan D Carrillo
    Date: 2007–01–07
  12. By: Elyès Jouini (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - [CNRS : UMR7534] - [Université Paris Dauphine - Paris IX]); Selima Ben Mansour (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - [CNRS : UMR7534] - [Université Paris Dauphine - Paris IX]); Clotilde Napp (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - [CNRS : UMR7534] - [Université Paris Dauphine - Paris IX])
    Abstract: It is an important issue for economic and finance applications to determine whether individuals exhibit a behavioral bias towards pessimism in their beliefs, in a lottery or more generally in an investment opportunities framework. In this paper, we analyze the answers of a sample of 1,540 individuals to the following question Imagine that a coin will be flipped 10 times. Each time, if heads, you win 10€. How many times do you think that you will win? The average answer is surprisingly about 3.9 which is below the average 5, and we interpret this as a pessimistic bias. We find that women are more pessimistic than men, as are old people relative to young. We also analyze how our notion of pessimism is related to more general notions of pessimism previously introduced in psychology.
    Keywords: pessimism, judged probability, lottery
    Date: 2006–12–01

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