nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2008‒02‒02
thirteen papers chosen by
Marco Novarese
University of the Piemonte Orientale

  1. Awards - A View from Psychological Economics By Bruno S. Frey; Susanne Neckermann
  2. measures of social capital and trust By o'higgins, s. niall; Sbriglia, Patrizia
  3. Insurance Purchase for Low-Probability Losses By Susan K. Laury; Melayne Morgan McInnes; J. Todd Swarthout
  4. Measuring Risk Attitudes Controlling for Personality Traits By Jungmin Lee; Cary Deck; Javier Reyes; Chris Rosen
  5. Social Networks and Trust: not the Experimental Evidence you may Expect By Daniela Di Cagno; Emanuela Sciubba
  6. Does Competition Enhance Performance or Cheating? A Laboratory Experiment By Schwieren, Christiane; Weichselbaumer, Doris
  7. A Public Good Version of the Collective Household Model: An Empirical Approach with an Application to British Household Data By van Klaveren, Chris; van Praag, Bernard M. S.; Maassen van den Brink, Henriette
  8. Risk, Uncertainty and Discrete Choice Models By André de Palma; Moshe Ben-Akiva; David Brownstone; Charles Holt; Thierry Magnac; Daniel McFadden; Peter Moffatt; Nathalie Picard; Kenneth Train; Peter Wakker; Joan Walker
  9. On the Absorbability of Herd Behaviour and Informational Cascades: An Experimental Analysis By Morone, Andrea; Fiore, Annamaria; Sandri, Serena
  10. Matching and Challenge Gifts to Charity: Evidence from Laboratory and Natural Field Experiments By Rondeau, Daniel; List, John A.
  11. Anthropological and ethical foundations of organization theory By Argandoña, Antonio
  12. The Role of Transformational Leadership in Enhancing Team Reflexivity By Schippers, M.C.; Hartog, D.N. den; Koopman, P.L.; Knippenberg, D.L. van
  13. Freedom and Rationality By Christophe Salvat

  1. By: Bruno S. Frey; Susanne Neckermann
    Abstract: Awards in the form of orders, decorations, prizes, and titles are ubiquitous in monarchies and republics, private organizations, not-for-profit, and profit-oriented firms. This paper argues that awards present a unique combination of different stimuli and that they are distinct and unlike other monetary and non-monetary rewards. Despite their relevance in all areas of life awards have not received much scientific attention. We propose to study awards and present results on a vignette experiment that quantifies and isolates the effects of different award characteristics such as the publicity associated with winning an award. Further, employing a unique data set, we demonstrate that there are substantial differences in the intensity of usage of awards across countries.
    Keywords: Awards; compensation; incentives; principal-agent; honors and distinctions
    JEL: C93 J33 M52
    Date: 2008–01
  2. By: o'higgins, s. niall; Sbriglia, Patrizia
    Abstract: Trust and trustworthiness are important components of social capital and much attention has been devoted to the problems of their correct evaluation. Attitudinal survey questions as reported in the EVS – European Value Survey - are often regarded as inefficient indicators of trust, since they lack of behavioural underpinnings (Putnam, 1995) which one might desire when measuring trust. In this paper, we consider alternative measures of trust and trustworthiness, based on behavioural assumptions. We construct two relative behavioural measures of trust (RBM1 and RBM2), both based on the ex post measurement of trust, once individuals are informed on the level of trustworthiness of the social group to which they have been allocated during the experiment. Our main finding is that the relative behavioural measures show that trust strongly varies once the individual is informed on the on the level of trustworthiness of the social group to which he\she has been allocated during the experiment. This difference is higher the higher is the family level of income and the parental education status. As for previous findings (Glaeser et al., 2000, Lazzarini, 2005) which have found no correlation between attitudinal and behavioural measures of trust, we find that relative behavioural measures are not correlated to attitudinal measures but they are strongly correlated to groups’ trustworthiness. We also find that similar social preferences profiles (between Senders and Recipients) tend to enhance the individual level of trust, in the RBM2 context. This result seems to confirm the importance of the homogeneity of the social environment when studying the effects of policy interventions (Alesina and La Ferrara, 2002).
    Keywords: social capital; trust; experiments
    JEL: A10
    Date: 2007–08
  3. By: Susan K. Laury; Melayne Morgan McInnes; J. Todd Swarthout
    Abstract: It is widely accepted that individuals tend to underinsure against low-probability, high-loss events relative to high-probability, low-loss events. This conventional wisdom is based largely on field studies, as there is very little experimental evidence. We reexamine this issue with an experiment that accounts for possible confounds in prior insurance experiments. Our results are counter to the prior experimental evidence, as we observe subjects buying more insurance for low-probability events than the higher-probability events, given a constant expected loss and load factor. Our results suggest that, to the extent underinsurance for catastrophic risk is observed in the field, it can be attributed to factors other than the relative probability of the loss events.
    Keywords: low-probability hazards, insurance, risk, experiments
    JEL: C91 D80
    Date: 2008–01
  4. By: Jungmin Lee (Department of Economics, Florida International University); Cary Deck (Department of Economics, University of Arkansas); Javier Reyes (Department of Economics, University of Arkansas); Chris Rosen (Department of Management, University of Arkansas)
    Abstract: This study measures risk attitudes using two paid experiments: the Holt and Laury (2002) procedure and a variation of the game show Deal or No Deal. The participants also completed a series of personality questionnaires developed in the psychology literature including the risk domains of Weber, Blais, and Betz (2002). As in previous studies risk attitudes vary within subjects across elicitation methods. However, this variation can be explained by individual personality traits. Specifically, subjects behave as though the Holt and Laury task is an investment decision while the Deal or No Deal task is a gambling decision.
    Keywords: Risk Attitudes, Risk Taking Behavior, Personality Traits, Laboratory Experiments.
    JEL: C9 D8
    Date: 2008–01
  5. By: Daniela Di Cagno; Emanuela Sciubba (School of Economics, Mathematics & Statistics, Birkbeck)
    Abstract: We run a laboratory experiment were friendship networks are generated endogenously within an anonymous group. Our experiment builds on two phases in sequence: a network formation game and a trust game. We ?find that in those sessions where the trust game is played before the network formation game, the overall level of trust is not signi?cantly different from the one observed in a simple trust game; in those sessions where the trust game is played after the network formation game we ?find that the overall level of trust is signi?cantly lower than in the simple trust game. Hence surprisingly trust does not increase because of enforced reciprocity and moreover a common social history does affect the level of trust, but in a negative manner. Where network effects matter is in the choice of whom to trust: while we tend to trust less on average those with whom we have already interacted compared to total strangers, past history allows us to select whom to trust relatively more than others.
    Keywords: network formation, trust game, experiments
    JEL: C91 C92 L14
    Date: 2008–01
  6. By: Schwieren, Christiane (University of Heidelberg); Weichselbaumer, Doris (University of Linz)
    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: cheating, piece rate, tournament, competition, experiment
    JEL: C91 J24 J31 M52
    Date: 2008–01
  7. By: van Klaveren, Chris (University of Amsterdam); van Praag, Bernard M. S. (University of Amsterdam); Maassen van den Brink, Henriette (University of Amsterdam)
    Abstract: In this paper we consider an empirical collective household model of time allocation for two-earner households. The novelty of this paper is that we estimate a version of the collective household model, where the internally produced goods and the externally purchased goods are assumed to be public. The empirical results suggest that: (1) Preferences of men and women differ; (2) Although there are significant individual variations, on average the utility functions of men and women are equally weighted in the household utility function; (3) Differences in the ratio of the partners' hourly wages are explanatory for how individual utilities are weighted in the household utility function. (4) The female's preference for household production is influenced by family size, but this does not hold for the male; (5) Both the male and the female have a backward-bending labor supply curve; (6) Labor-supply curves are forward-bending with respect to the partner's wage rate; (7) Our model rejects the unitary Slutsky symmetry condition.
    Keywords: household behavior, collective household models, labor supply,
    JEL: D12 D13 J22
    Date: 2008–01
  8. By: André de Palma (THEMA,University of Cergy-Pontoise); Moshe Ben-Akiva (Massachusetts Institute of Technology); David Brownstone (University of California at Irvine); Charles Holt (University of Virginia); Thierry Magnac (Toulouse School of Economics); Daniel McFadden (University of California, Berkeley); Peter Moffatt (University of East Anglia); Nathalie Picard (University of Cergy-Pontoise); Kenneth Train (University of California, Berkeley); Peter Wakker (Erasmus University); Joan Walker (Boston University)
    Abstract: This paper examines the cross-fertilizations of random utility models with the study of decision making under risk and uncertainty. We start with a description of the Expected Utility (EU) theory and then consider deviations from the standard EU frameworks, involving the Allais paradox and the Ellsberg paradox, inter alia. We then discuss how the resulting Non-EU framework can be modeled and estimated within the framework of discrete choices in static and dynamic contexts. Our objectives in addressing risk and ambiguity in individual choice contexts are to understand the decision choice process, and to use behavioral information for prediction, prescription and policy analysis.
    Keywords: discrete choice, decision making, risk, uncertainty, (cumulative) prospect theory, ambiguity
    Date: 2008
  9. By: Morone, Andrea; Fiore, Annamaria; Sandri, Serena
    Abstract: A theory is said to be fully absorbable whenever its own acceptance by all of the individuals belonging to a certain population does not question its predictive validity. This accounts for strategic equilibria and can be related to the logic underlying convergence of behaviour and intentional herding in sequential games. This paper discusses the absorbability of informational cascades’ theory by bounded rational decision-makers and analyses whether providing individuals with theoretic information on informational cascades affects overall probability of herding phenomena to occur as well as whether an incorrect cascade can be reversed because of bounded rational adapting of the theory’s prescriptive.
    Keywords: Theory absorption; Herd behaviour; Informational cascades
    JEL: D8 C91 C72
    Date: 2007
  10. By: Rondeau, Daniel (University of Victoria); List, John A. (University of Maryland)
    Abstract: This study designs a natural field experiment linked to a controlled laboratory experiment to examine the effectiveness of matching gifts and challenge gifts, two popular strategies used to secure a portion of the $200 billion annually given to charities. We find evidence that challenge gifts positively influence contributions in the field, but matching gifts do not. Methodologically, we find important similarities and dissimilarities between behavior in the lab and the field. Overall, our results have clear implications for fundraisers and provide avenues for future empirical and theoretical work on charitable giving.
    Keywords: fundraising, threshold public goods, charitable giving, field experiments
    JEL: C93 H41
    Date: 2008–01
  11. By: Argandoña, Antonio (IESE Business School)
    Abstract: The ever more frequent and forceful criticisms of management sciences suggest that we need a new model. In fact, the number of proposed alternatives has multiplied, with some suggesting that the range of economic points of departure be extended, while others turn to other sciences (sociology, psychology, neuroeconomics, political sciences, philosophy) for their inspiration. This article suggests returning to the origins of economic science, action theory, with a broader approach that takes in the contributions of realist philosophy (Aristotle, Thomas Aquinas), with a view to laying the foundations for a richer organizational theory in which ethics plays a clearer role.
    Keywords: action theory; ethics; management; moral virtues; organization theory;
    Date: 2007–09–07
  12. By: Schippers, M.C.; Hartog, D.N. den; Koopman, P.L.; Knippenberg, D.L. van (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Team reflexivity, or the extent to which teams reflect upon and modify their functioning, has been identified as a key factor in the effectiveness of work teams. As yet, however, little is known about the factors that play a role in enhancing team reflexivity, and it is thus important to develop theorizing around the determinants of reflexivity. From an applied perspective, leadership is a very relevant factor. The current study is a first step in the development of such a theory, and addresses this important gap in our understanding of team reflexivity by focusing on the role of leader behavior. We examined the extent to which transformational leadership influences team reflexivity and, in turn, team performance in a field study conducted among 32 intact work teams from nine organizations. Team members rated reflexivity and leadership, while external managers rated team performance. We hypothesized and tested a mediational model proposing that transformational leadership is related to the adoption of a shared vision by the team. This in turn relates to team reflexivity, which leads to higher team performance. Results support this model.
    Keywords: transformational leadership;shared vision;team reflexivity;team performance;team learning
    Date: 2007–11–27
  13. By: Christophe Salvat (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales - CNRS : UMR6579)
    Abstract: This paper deals with Rousseau’s idea of freedom in terms of rationality and deliberation. It gives support to Berlin’s interpretation of the general will as a rational and objective will but dismisses the idea that Rousseau’s theory necessarily leads to authoritarianism. The general will, publicly expressed by the law, may be defined as the rational and self-regarding will agents would have if put in an independent and objective state, i.e. the state of nature. The general and the particular will, henceforth considered from an individual point of view, theoretically constitute two alternative choices for an agent. A special focus will then be placed on the function of the law in the process of individual deliberation. By signalling the general will, the law urges individuals to deliberate and to question the autonomy of their preferences. I shall argue that citizenship denotes for Rousseau the tendency of individuals to favour the general will and to master their natural weakness of will. The achievement of citizenship, however, strongly relies upon man’s identification with the community, i.e. patriotism, and upon the emotions stirred by the potential death of the body politic.
    Keywords: Rousseau ; Rationality; Freedom ; Deliberation, Emotions
    Date: 2008–01–24

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