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on Cognitive and Behavioural Economics |
| By: | Graham Loomes (School of Economics, University of East Anglia); Chris Starmer (School of Economics, University of Nottingham); Robert Sugden (School of Economics, University of East Anglia) |
| Abstract: | Previous studies suggest that two otherwise robust ‘anomalies’ – preference reversals and disparities between buying and selling valuations – are eroded when respondents participate in repeated markets. We report an experiment which investigates whether this is true when factors neglected in previous studies are controlled, and which distinguishes between anomalies revealed in the behaviour of individual market participants and anomalies revealed in market prices. Our results confirm the decay of buy/sell disparities, but not of preference reversal. This raises doubts about the hypothesis that, in general, repeated markets reveal anomaly-free preferences, even among the marginal traders who determine prices. |
| Keywords: | preference reversal, willingness to accept, willingness to pay, repeated market. |
| JEL: | C91 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:cdx:dpaper:2007-10&r=cbe |
| By: | Marco Faravelli; Luca Stanca |
| Abstract: | This paper investigates single and multiple prize contests as incentive mechanisms for the private provision of public goods, under the assumptions of income heterogeneity and incomplete information about income levels. We compare experimentally a one-prize contest with a three-prize contest in a case where theory predicts that several prizes maximise revenues. We ¯nd that, contrary to the theoretical predictions, total contributions are signi¯cantly higher in the one-prize contest. In both treatments contribu- tions converge towards theoretical predictions over successive rounds, but the e®ects of repetition are di®erent: convergence is fast in the one-prize treatment, while gradual and with some undershooting in the three-prize treatment. Focusing on individual income types, the better performance of the single-prize contest is largely explained by the contributions of high- income individuals: a single larger prize provides a more e®ective incentive for richer individuals than three smaller prize |
| Keywords: | Auctions; Public Goods; Laboratory Experiments. |
| JEL: | C91 D44 H41 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:mib:wpaper:127&r=cbe |
| By: | Christiane Schwieren (Sonderforschungsbereich 504, University of Mannheim, Germany); Doris Weichselbaumer (Department of Economics, Johannes Kepler University Linz, Austria) |
| Abstract: | In this paper we experimentally test whether competing for a desired reward does not only affect individuals’ performance, but also their tendency to cheat. Recent doping scandals in sports as well as forgery and plagiarism scandals in academia have been partially explained by „competitive pressures“, which suggests a link between competition and cheating. In our experiment subjects conduct a task where they have the possibility to make use of illegitimate tools to better their results. We find that women react much stronger to competitive pressure by increasing their cheating activity while there is no overall sex difference in cheating. However, the effect of competition on women’s cheating behavior is entirely due to the fact that women, on average, are doing worse with respect to the assigned task. Indeed we find that it is the ability of an individual to conduct a particular task and not sex that crucially affects the reaction to competition. Poor performers significantly increase their cheating behavior under competition which may be a face-saving strategy or an attempt to retain a chance of winning. |
| Keywords: | competition; tournament; piece rate; cheating; experiment |
| JEL: | C91 J24 J31 M52 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:jku:econwp:2008_01&r=cbe |
| By: | Simon Gaechter (University of Nottingham); Benedikt Herrmann (University of Nottingham) |
| Abstract: | We report evidence from public goods experiments with and without punishment which we conducted in Russia with 566 urban and rural participants of young and mature age cohorts. Russia is interesting for studying voluntary cooperation because of its long history of collectivism, and a huge urban-rural gap. In contrast to previous experiments we find no cooperation-enhancing effect of punishment. An important reason is that there is substantial punishment of high contributors in all four subject pools. Thus, punishment can also undermine the scope for self-governance in the sense of high levels of voluntary cooperation that are sustained by sanctioning free riders only. |
| Keywords: | social norms, free riding, misdirected punishment, experiments |
| JEL: | H41 C91 D23 C72 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:cdx:dpaper:2007-11&r=cbe |
| By: | Thomas Chesney (Nottingham University Business School); Swee-Hoon Chuah (Nottingham University Business School); Robert Hoffmann (Nottingham University Business School) |
| Abstract: | We explore the scientific potential of virtual worlds for experimental economists. In particular, we report the results of a series of virtual world experiments designed to examine the suitability of (a) users as subjects and (b) the computer interface as an experimental platform. Formal results and informal observations from the sessions are discussed in terms of the methodological opportunities and challenges of virtual experimentation generally. |
| Keywords: | virtual worlds, laboratory experiments, human values survey |
| JEL: | C72 C88 C99 Z13 |
| Date: | 2007–12 |
| URL: | http://d.repec.org/n?u=RePEc:cdx:dpaper:2007-14&r=cbe |
| By: | Anne Spencer (Queen Mary, University of London); Judith Covey (University of Durham); Angela Robinson (University of East Anglia); Graham Loomes (University of East Anglia) |
| Abstract: | This paper sets out to explore the extent to which perceptions regarding the ‘badness’ of different types of deaths differ according to how those deaths are ‘labelled’ in the elicitation procedure. In particular, we are interested in whether responses to ‘contextual’ questions – where the specific context in which the deaths occur is known – differ from ‘generic’ questions – where the context is unknown. Further, we set out to test whether sensitivity to the numbers of deaths differs across the ‘generic’ and ‘contextual’ versions of the questions. We uncover evidence to suggest that both the perceived ‘badness’ of different types of deaths and sensitivity to the numbers of deaths may differ according to whether ‘generic’ or ‘contextual’ descriptions are used.<br> Qualitative data suggested two reasons why responses to ‘generic’ and ‘contextual’ questions differed: firstly, some influential variables were omitted from the ‘generic’ descriptions and secondly, certain variables were interpreted somewhat differently once the context had been identified. The implications of our findings for ‘generic’ questions, such as those commonly used in health economics (for example, the EQ 5D), are discussed. |
| Keywords: | Preferences, Context effects, Affect heuristic |
| JEL: | H5 I10 |
| Date: | 2007–12 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:wp620&r=cbe |
| By: | Lionel Page (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, Westminster Business School - University of Westminster); Louis Lévy-Garboua (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, CIRANO - Centre interuniversitaire de recherche en analyse des organisations - Université du Québec à Montréal, Ecole d'économie de Paris - Paris School of Economics - Université Panthéon-Sorbonne - Paris I); Claude Montmarquette (CIRANO - Centre interuniversitaire de recherche en analyse des organisations - Université du Québec à Montréal, Université de Montréal - Département de Sciences Economique - Université de Montréal) |
| Abstract: | The explanation of social inequalities in education is still a debated issue in economics. Recent empirical studies tend to downplay the potential role of credit constraint. This article tests a different potential explanation of social inequalities in education, specifically that social differences in aspiration level result in different educational choices. Having existed for a long time in the sociology of education, this explanation can be justified if aspiration levels are seen as reference points in a Prospect Theory framework. In order to test this explanation, this article applies the method of experimental economics to the issue of education choice and behaviour. One hundred twenty-nine individuals participated in an experiment in which they had to perform a task over fifteen stages grouped in three blocks or levels. In order to continue through the experiment, a minimum level of success was required at the end of each level. Rewards were dependent on the final level successfully reached. At the end of each level, participants could either choose to stop and take their reward or to pay a cost to continue further in order to possibly receive higher rewards. To test the impact of aspiration levels, outcomes were either presented as gains or losses relative to an initial sum. In accordance with the theoretical predictions, participants in the loss framing group choose to go further in the experiment. There was also a significant and interesting gender effect in the loss framing treatment, such that males performed better and reached higher levels. |
| Keywords: | Education inequality, Prospect Theory, Experimental Economics |
| Date: | 2007–12 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00203145_v1&r=cbe |
| By: | Einat Neuman (University Center of Ariel); Shoshana Neuman (Bar-Ilan University, CEPR and IZA) |
| Abstract: | A Discrete Choice Experiment (DCE) in the health-care sector is used to test the loss aversion theory that is derived from reference-dependent preferences: The absolute subjective value of a deviation from a reference point is generally greater when the deviation represents a loss than when the same-sized change is perceived as a gain. As far as is known, this paper is the first to use a DCE to test the loss aversion theory. A DCE appears to be a highly suitable tool for this testing because it estimates the marginal valuations of attributes, based on deviations from a reference point (a constant scenario). Moreover, loss aversion can be examined for each attribute separately. A DCE can also be applied to nontraded goods with non-tangible attributes. A health-care event is used for empirical illustration: The loss aversion theory is tested within the context of preference structures for maternity-ward attributes, estimated using data entailing 3850 observations from a sample of 542 women who recently gave birth. Seven hypotheses are presented and tested. Overall, significant support for behavioral loss aversion theories was found. |
| Keywords: | preferences, attributes, loss aversion, reference-dependence, Discrete Choice Experiment, maternity-wards |
| JEL: | D01 D12 I19 |
| Date: | 2007–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3238&r=cbe |
| By: | Spiliopoulos, Leonidas |
| Abstract: | The purpose of this paper is to reexamine the seminal belief elicitation experiment by Nyarko and Schotter (2002) under the prism of pattern recognition. Instead of modeling elicited beliefs by a standard weighted fictitious play model this paper proposes a generalized variant of fictitious play that is able to detect two period patterns in opponents’ behavior. Evidence is presented that these generalized pattern detection models provide a better fit than standard weighted fictitious play. Individual heterogeneity was discovered as ten players were classified as employing a two period pattern detection fictitious play model, compared to eleven players who followed a non-pattern detecting fictitious play model. The average estimates of the memory parameter for these classes were 0.678 and 0.456 respectively, with five individual cases where the memory parameter was equal to zero. This is in sharp contrast to the estimates obtained from standard weighted fictitious play models which are centred on one, a bias introduced by the absence of a constant in these models. Non-pattern detecting fictitious play models with memory parameters of zero are equivalent to the win-stay/lose-shift heuristic, and therefore some sub jects seem to be employing a simple heuristic alternative to more complex learning models. Simulations of these various belief formation models show that that this simple heuristic is quite effective against other more complex fictitious play models. |
| Keywords: | learning; game theory; behavioral game theory; fictitious play; repeated games; mixed strategy; non-cooperative games; pattern recognition; pattern detection; experimental economics; beliefs; belief elicitation; strategic |
| JEL: | C9 C63 C73 C72 |
| Date: | 2008–01–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:6666&r=cbe |
| By: | Greg Piper (National Council for Voluntary Organisations (NCVO), London); Sylke V. Schnepf (S3RI, University of Southampton and IZA) |
| Abstract: | The predominant part of the literature states that women are more likely to donate to charitable causes but men are more generous in terms of the amount given. The last result generally derives from the focus on mean amount given. This paper examines gender differences in giving focusing on the distribution of amounts donated and the probability of giving using UK micro-data on individual giving to charitable causes. Results indicate that most women are more generous than men also in terms of the amounts donated. Quantile regression analysis shows that this pattern is robust if we take into account gender differences in individual characteristics such as household structure, education and income. The analysis also examines differences in gender preferences for varying charitable causes. For most of the paper, separate analyses are presented for single and married/cohabiting people, highlighting the very different gender patterns of giving behaviour found in the two groups. |
| Keywords: | charitable donations, gender differences |
| JEL: | D12 D30 D64 J16 L31 |
| Date: | 2007–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3242&r=cbe |
| By: | Mitreanu, Cristian |
| Abstract: | The article, "A Business-Relevant View of Human Nature," provides a new theory of human nature, and aims to bring it to the center of our understanding of business, or commerce, creating a strong foundation for new business and economic principles and practices. The article has three parts. In the first section, the author identifies and discusses the fundamental drives that characterize all forms of life. Building upon these findings, he then develops the unique view of human nature in the second section. Finally, in the last section, he highlights the new perspectives on business that can be generated with the help of the new theory of human nature. |
| JEL: | D0 M0 B0 M1 A1 B5 |
| Date: | 2007–11–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:6560&r=cbe |
| By: | Dirk Engelmann (Royal Holloway, University of London); Dorothea Kübler (Technical University Berlin and IZA) |
| Abstract: | In order to address the impact of regulation on ethical concerns of consumers, we study the effect of a minimum wage. In our experimental market, consumers have monopsony power, firms engage in Bertrand competition, and workers are passive recipients of a wage payment. Two treatments are employed, one with no minimum wage in the first part but with a minimum wage in the second part, and one treatment with a minimum wage at the outset that is abolished in the second part. In both treatments, wages decrease over time in the first part even though some consumers show an interest in fair wages. If a minimum wage is in place, wages decline even faster. Introducing a minimum wage in a mature market raises average wages, while abolishing it lowers them. We discuss the implications of our results, such as the crowding out of ethical behavior through legal regulation. |
| Keywords: | fairness, crowding out, consumer behavior, minimum wage, experimental economics |
| JEL: | C91 J88 K31 |
| Date: | 2007–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3266&r=cbe |