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on Cognitive and Behavioural Economics |
| By: | Michael T. Kiley |
| Abstract: | Consumption growth is predictable, a basic violation of the permanent-income hypothesis. This paper examines three possible explanations: rule-of-thumb behavior, in which households allow consumption to track per-period income flows rather than permanent income; habit persistence; and non-separability in preferences over consumption and leisure. The data appear most consistent with non-separable preferences over consumption and leisure. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2007-48&r=cbe |
| By: | Stephen Leider; Markus M. Möbius; Tanya Rosenblat; Quoc-Anh Do |
| Abstract: | We conduct field experiments in a large real-world social network to examine why decision-makers treat their friends more generously than strangers. Subjects are asked to divide a surplus between themselves and named partners at varying social distances, but only one of these decisions is implemented. We decompose altruistic preferences into baseline altruism towards strangers, and directed altruism towards friends. In order to separate the motives that are altruistic from the ones that anticipate a future interaction or repayment, we implement an anonymous treatment in which neither player is told at the end of the experiment which decision was selected for payment, and a non-anonymous treatment where both players are told the outcome. Moreover, in order to distinguish between different future interaction channels—including signaling one’s propensity to be generous and enforced reciprocity, where the decision-maker grants the partner a favor because she expects it to be repaid in the future—the experiments include games where transfers both increase and decrease social surplus. We find that decision-makers vary widely in their baseline altruism, but pass at least 50 percent more surplus to friends as opposed to strangers when decision-making is anonymous. Under non-anonymity, transfers to friends increase by an extra 24 percent relative to strangers, but only in games where transfers increase social surplus. This effect increases with the density of the social network structure between both players. Our findings are well explained by enforced reciprocity, but not by signaling or preference-based reciprocity. We also find that partners’ expectations are well attuned to directed altruism, but that they completely ignore the decision-makers’ baseline altruism. Partners with higher baseline altruism have friends with higher baseline altruism and, therefore, are treated better by their friends. |
| Keywords: | Altruism |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbwp:07-11&r=cbe |
| By: | Giuseppe De Marco (Università di Napoli Parthenope); Jacqueline Morgan (Università di Napoli Federico II and CSEf) |
| Abstract: | We introduce a refinement concept for Nash equilibria (slightly altruistic equilibrium) defined by a limit process and which captures the idea of reciprocal altruism as presented in Binmore (2003). Existence is guaranteed for every finite game and for a large class of games with a continuum of strategies. Results and examples emphasize the (lack of) connections with classical refinement concepts. Finally, it is shown that under a pseudo-monotonicity assumption on a particular operator associated to the game it is possible, by selecting slightly altruistic equilibria, to eliminate those equilibria in which a player can switch to a strategy that is better for the others without leaving the set of equilibria. |
| Date: | 2007–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:185&r=cbe |
| By: | Christopher J. Tyson (Queen Mary, University of London) |
| Abstract: | A theory of decision making is proposed that offers an axiomatic basis for the notion of “satisficing” postulated by Herbert Simon. The theory relaxes the standard assumption that the decision maker always fully perceives his preferences among the available alternatives, requiring instead that his ability to perceive any given preference be decreasing with respect to the complexity of the choice problem at hand. When complexity is aligned with set inclusion, this exercise is shown to be equivalent to abandoning the contraction consistency axiom of classical choice theory. |
| Keywords: | Choice function, Perception, Revealed preference, Threshold |
| JEL: | D01 D11 D80 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:wp614&r=cbe |
| By: | Stefano Demichelis; Jörgen W. Weibull |
| Abstract: | Language is arguably a powerful coordination device in real-life interactions. We here develop a game-theoretic model of two-sided pre-play communication that generalizes the cheap-talk approach by way of introducing a meaning correspondence between messages and actions, and postulating two axioms met by natural languages. Deviations from this correspondence are called dishonest and players have a lexicographic preference for honesty, second to material payoffs. The model is first applied to finite and symmetric two-player games and we establish that, in generic and symmetric n x n -coordination games, a Nash equilibrium component in such a lexicographic communication game is evolutionarily stable if and only if it results in the unique Pareto efficient outcome of the underlying game. We discus Aumann’s (1990) example of a Pareto efficient equilibrium that is not self-enforcing. We also extend the approach to one-sided communication. |
| Keywords: | Communication, coordination, language, honesty, evolutionary stability. |
| JEL: | C72 C73 D01 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:cca:wpaper:61&r=cbe |