nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2008‒04‒12
eight papers chosen by
Marco Novarese
University of the Piemonte Orientale

  1. Efficient Consumer Altruism and Fair Trade By David Reinstein; Joon Song
  2. Shopping Context and Consumers' Mental Representation of Complex Shopping Trip Decision Problems By Dellaert, B.G.C.; Arentze, T.A.; Timmermans, H.J.P.
  3. Giving To Ingrates? By Michael Jones; Michael McKee
  4. Morals and Mores? Experimental Evidence on Equity and Equality from the US and Japan By James Konow; Tatsuyoshi Saijo; Kenju Akai
  5. Allocating an indivisible good. A questionnaire-experimental study of intercultural differences By Erik Schokkaert; Kurt Devooght; Bart Capeau; Sara Lelli
  6. Sequential reciprocity in two-player, two-stages games: an experimental analysis By Geert Dhaene; Jan Bouckaert
  7. Conditional Cooperation: Disentangling Strategic from Non-Strategic Motivations By Reuben, E.; Suetens, S.
  8. Risk Taking in Winner-Take-All Competition By Matthias Kräkel; Petra Nieken; Judith Przemeck

  1. By: David Reinstein; Joon Song
    Abstract: Consumers have shown willingness to pay a premium for products labeled as "Fair Trade" and to prefer retailers that are seen as more generous to their suppliers and employees. We define a fair trade product as a bundle of a consumption good and a donation. An altruistic consumer will only choose this bundle over its separate elements if the bundle is less expensive. Thus, for fair trade to be sustainable in a competitive equilibrium, an efficiency must be generated. In general, the first-best level of investment (to reduce the retailer's cost or boosts quality) cannot be achieved when it is non-verifiable. However, the altruism of the consumer facilitates a more efficient contract: by paying the supplier more, the retailer can both extract more consumer surplus and increase the level of contracted investment, while preserving incentive compatibility. We provide empirical and anecdotal evidence for the assumptions and predictions of this model, focusing on the coffee industry.
    Date: 2008–03–27
  2. By: Dellaert, B.G.C.; Arentze, T.A.; Timmermans, H.J.P. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Depending on the shopping context, consumers may develop different mental representations of complex shopping trip decision problems to help them interpret the decision situation that they face and evaluate alternative courses of action. To investigate these mental representations and how they vary across contexts, the authors propose a causal network structure that allows for a formal representation of how context-specific benefits requirements affect consumers’ evaluation of decision alternative attributes. They empirically test hypotheses derived from the framework, using data on consumers’ mental representations of a complex shopping trip decision problem across four shopping contexts that differ in terms of opening hour restrictions and shopping purpose, and find support for the proposed structure and hypotheses.
    Keywords: retailing;consumer decision-making;mental representations;context effects;shopping trip decisions
    Date: 2008–03–25
  3. By: Michael Jones; Michael McKee
    Abstract: Models for voluntary provision of public goods predict free riding is rational unless the model includes a motive for the act of giving referred to as a “warm glow” in the literature. The source for this warm glow is likely to include the gratitude of the recipient. The experimental setting employed here controls for positive or negative reciprocity from the recipient of a gift to isolate the individual satisfaction from the act of giving as the remaining motivation for giving. The experimental treatment is whether the recipient is informed that his/her payoff includes a “gift” from another participant (donor or giver). The central finding is that donations increase when the donor/giver knows that the recipient knows that a gift has been provided. Key Words:
    Date: 2008
  4. By: James Konow; Tatsuyoshi Saijo; Kenju Akai
    Date: 2008–04–04
  5. By: Erik Schokkaert; Kurt Devooght; Bart Capeau; Sara Lelli
    Abstract: We present the results of a questionnaire study in Belgium, Burkina Faso and Indonesia focusing on the problem of the just allocation of an indivisible good. The formal axioms proposed in social choice theory are helpful in structuring the response patterns. Interindividual differences can be interpreted in a meaningful way in terms of basic intuitions about desert, efficiency and compensation. Belgian students are most resourceegalitarian, Burkinese students attach a large weight to innate capacities, Indonesian students focus on actual production. The crucial no-envy criterion is supported by a majority of respondents, but this majority becomes small if there is an unavoidable conflict between no-envy and the "responsibility" requirement of the stand-alone upper bound.
    Keywords: distributive justice, indivisible good, no envy criterion, intercultural differences
    JEL: D63
    Date: 2008–03
  6. By: Geert Dhaene; Jan Bouckaert
    Abstract: We experimentally test Dufwenberg and Kirchsteiger’s (2004) theory of sequential reciprocity in a sequential prisoner’s dilemma (SPD) and a mini-ultimatum game (MUG). Data on behavior and first- and second-order beliefs allow us to classify each subject’s behavior as a material best response, a reciprocity best response, both, or none. We found that in both games the behavior of about 80% of the firstmovers was a material best response, a reciprocity best response, or both. The remaining 20% of first-movers almost always made choices that were “too kind” according to the theory of reciprocity. Secondmover behavior, in both games, was fully in line with the predictions of the theory. The average behavior and beliefs across subjects were compatible with a sequential reciprocity equilibrium in the SPD but not in the MUG. We also found first- and second-order beliefs to be unbiased in the SPD and nearly unbiased in the MUG.
    Keywords: sequential reciprocity; sequential prisoner’s dilemma; mini-ultimatum game.
    JEL: A13 C70 C92 D63
    Date: 2008–03
  7. By: Reuben, E.; Suetens, S. (Tilburg University, Center for Economic Research)
    Abstract: We use a novel experimental design to examine the role of reputational concerns in explaining conditional cooperation in social dilemmas. By using the strategy method in a repeated sequential prisoners? dilemma in which the probabilistic end is known, we can distinguish between strategically and non-strategically motivated cooperation. Second movers who are strong reciprocators ought to conditionally cooperate with first movers irrespective of whether the game continues or not. In contrast, strategically motivated second movers conditionally cooperate only if the game continues and they otherwise defect. Experimental results, with two different subject pools, indicate reputation building is used around 30% of the time, which accounts for between 50% and 75% of all realized cooperative actions. The percentage of strong reciprocators varied between 6% to 23%.
    Keywords: cooperation;reputation building;strong reciprocity;repeated prisoners? dilemma
    JEL: C91 D01 D74
    Date: 2008
  8. By: Matthias Kräkel; Petra Nieken; Judith Przemeck
    Abstract: We analyze a two-stage game between two heterogeneous players. At stage one, common risk is chosen by one of the players. At stage two, both players observe the given level of risk and simultaneously invest in a winner-take-all competition The game is solved theoretically and then tested by using laboratory experiments. We find three effects that determine risk taking at stage one - an effort effect, a likelihood effect and a reversed likelihood effect. For the likelihood effect, risk taking and investments are clearly in line with theory. Pairwise comparison shows that the effort effect seems to be more relevant than the reversed likelihood effect when takin risk.
    Keywords: Tournaments; Competition; Risk-Taking; Experiment
    JEL: M51 C91 D23
    Date: 2008–04–03

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