nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2008‒04‒21
ten papers chosen by
Marco Novarese
University of the Piemonte Orientale

  1. Do Markets Promote Prosocial Behavior? Evidence from the Standard Cross-Cultural Sample. By E. Anthon Eff; Malcolm M. Dow
  2. Fast or Fair? A Study of Response Times By Marco Piovesan; Erik Wengström
  3. Institutions and Contract Enforcement By Falk, Armin; Huffman, David; MacLeod, W. Bentley
  4. Feedback and Incentives: Experimental Evidence By Eriksson, Tor; Poulsen, Anders; Villeval, Marie-Claire
  5. Searching for a better deal - on the influence of group decision making, time pressure and gender in a search experiment By Ibanez, Marcela; Czermak, Simon; Sutter, Matthias
  6. The Power of Positional Concerns By Benno Torgler; Sascha L. Schmidt; Bruno S. Frey
  7. The Knowledge Economy/Society: The Latest Example of “Measurement Without Theory”? By Les Oxley; David Thorns; Paul Walker; Hong Wang
  8. Political Entrepreneurship and Institutional Change: an Evolutionary Approach By Hederer, Christian
  9. "Voluntarily Separable Prisoner's Dilemma with Reference Letters" By Takako Fujiwara-Greve; Masahiro Okuno-Fujiwara; Nobue Suzuki
  10. Stylebook:Tips on Organization, Writing, and Formatting By Wicks, Rick

  1. By: E. Anthon Eff; Malcolm M. Dow
    Abstract: Recent experimental games conducted by ethnographers (Henrich et al. 2004) have shown that groups with higher levels of market integration exhibit higher levels of prosocial behavior. In order to see whether these results are confirmed in a broader ethnographic sample, this paper draws from the Standard Cross-Cultural Sample variables measuring the degree to which a culture seeks to inculcate generosity, honesty, and trust. Using these as dependent variables, models are developed where market-related variables are among the independent variables. The paper uses the methodology developed by Dow (2007) to correct for Galton’s problem, and uses multiple imputation to deal with the problem of missing data. The results fail to confirm a systematic association between generalized prosocial behavior and market integration.
    Keywords: prosocial behavior, multiple imputation, market integration, Galton’s problem
    JEL: R12 F16
    Date: 2008–04
  2. By: Marco Piovesan (Department of Economics, University of Copenhagen); Erik Wengström (Department of Economics, University of Copenhagen)
    Abstract: This paper uses a modified dictator game to investigate the relationship between response times and social preferences. We find that egoistic subjects make faster decisions than subjects with social preferences. Moreover, our within-analysis reveals that, for a given individual, egoistic payoff maximizing decisions are reached quicker than choices expressing social preferences.
    Keywords: response times; social preferences
    JEL: C72 C91
    Date: 2008–04
  3. By: Falk, Armin (University of Bonn); Huffman, David (Swarthmore College); MacLeod, W. Bentley (Columbia University)
    Abstract: We provide evidence on how two important types of institutions – dismissal barriers, and bonus pay – affect contract enforcement behavior in a market with incomplete contracts and repeated interactions. Dismissal barriers are shown to have a strong negative impact on worker performance, and market efficiency, by interfering with firms' use of firing threat as an incentive device. Dismissal barriers also distort the dynamics of worker effort levels over time, cause firms to rely more on the spot market for labor, and create a distribution of relationship lengths in the market that is more extreme, with more very short and more very long relationships. The introduction of a bonus pay option dramatically changes the market outcome. Firms are observed to substitute bonus pay for threat of firing as an incentive device, almost entirely offsetting the negative incentive and efficiency effects of dismissal barriers. Nevertheless, contract enforcement behavior remains fundamentally changed, because the option to pay bonuses causes firms to rely less on long-term relationships. Our results show that market outcomes are the result of a complex interplay between contract enforcement policies and the institutions in which they are embedded.
    Keywords: employment protection, efficiency wages, bonus pay, incomplete contracts, firing costs, experiment
    JEL: J41 J3 C9 D01
    Date: 2008–04
  4. By: Eriksson, Tor (Aarhus School of Business); Poulsen, Anders (University of East Anglia); Villeval, Marie-Claire (CNRS, GATE)
    Abstract: This paper experimentally investigates the impact of different pay and relative performance information policies on employee effort. We explore three information policies: No feedback about relative performance, feedback given halfway through the production period, and continuously updated feedback. The pay schemes are a piece rate payment scheme and a winner-takes-all tournament. We find that, regardless of the pay scheme used, feedback does not improve performance. There are no significant peer effects in the piece-rate pay scheme. In contrast, in the tournament scheme we find some evidence of positive peer effects since the underdogs almost never quit the competition even when lagging significantly behind, and frontrunners do not slack off. Moreover, in both pay schemes information feedback reduces the quality of the low performers’ work.
    Keywords: performance pay, tournament, piece rate, peer effects, information, feedback, evaluation, experiment
    JEL: C70 J16 J24 M52 J33 J31 C91
    Date: 2008–04
  5. By: Ibanez, Marcela (Department of Economics, School of Business, Economics and Law, Göteborg University); Czermak, Simon (University of Innsbruck); Sutter, Matthias (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: We study behavior in a search experiment where sellers receive randomized bids from a computer. At any time, sellers can accept the highest standing bid or ask for another bid at positive costs. We find that sellers stop searching earlier than theoretically optimal. Inducing a mild form of time pressure strengthens this finding in the early periods. There are marked gender differences. Men search significantly shorter than women. If subjects search in groups of two subjects, there is no difference to individual search, but teams of two women search much longer than men and recall more frequently.<P>
    Keywords: Search experiment; Time; Group decision; Gender differences
    JEL: C91 C92 D83
    Date: 2008–03–31
  6. By: Benno Torgler; Sascha L. Schmidt; Bruno S. Frey
    Abstract: People care a great deal about their relative economic position and not solely about their absolute economic position. However, behavioral evidence is rare. This paper provides evidence on how the relative income position affects professional sports performances. Our analysis suggests that if a player’s salary is below the average and this difference increases, his performance worsens. Moreover, the larger the income differences, the stronger positional concern effects are observable. We also find that the more the players are integrated, the more evident a relative income effect is. Finally, we find that positional effects are stronger among high performing teams.
    Keywords: Relative income; positional concerns; organizational justice; envy; social comparison; relative derivation; equity theory; prospect theory; loss aversion; performance
    Date: 2008–04
  7. By: Les Oxley (University of Canterbury); David Thorns; Paul Walker; Hong Wang
    Abstract: The world has embraced a set of concepts (knowledge driven growth) which are seen as the ‘core of future growth and wellbeing’ without any commonly agreed notion of what they are, how they might be measured, and crucially therefore, how they actually do (or might) affect economic growth and social wellbeing. The theory of how the mechanism works lacks important detail.
    Keywords: Knowledge Economy; Knowledge Society; Human Capital; Theory of the Firm
    JEL: D8 D21 L22 L23 O31
    Date: 2008–02–26
  8. By: Hederer, Christian
    Abstract: The paper is a contribution to the theory of institutional change. Using a process-based, evolutionary framework, a comparative analysis of economic and political entrepreneurship is provided and implications are derived for the role of political entrepreneurship, and the element of agency in general, for the evolution of formal institutions and institutional innovation.
    Keywords: Institutional change; entrepreneurship; market process theory; evolutionary approach
    JEL: D70 B52 P48
    Date: 2007–09
  9. By: Takako Fujiwara-Greve (Department of Economics, Keio University); Masahiro Okuno-Fujiwara (Faculty of Economics, University of Tokyo); Nobue Suzuki (Department of Economics, Komazawa University)
    Abstract: We consider voluntarily separable repeated Prisoner's Dilemma in which a pair of players meet randomly and repeatedly play Prisoner's Dilemma only by mutual agreement. Fujiwara-Greve and Okuno-Fujiwara (2007) consider the case that once a partnership is dissolved there is no information flow to other partnerships. We consider the case that players can issue a reference letter to the partner if they entered cooperation periods, but the content of a letter is not verifiable. We show that the sheer existence of a letter shortens the trust-building periods of new matches and thus improves efficiency in equilibrium.
    Date: 2008–03
  10. By: Wicks, Rick (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Fifteen years of copy-editing experience – with theses (both in economics and in several medical fields), journal articles, book chapters and books, conference presentations, government reports, etc. – are distilled here. Papers are often sent to me for “language correction”, but what I usually find is that, far more than that, what they most need is major work on organization, writing, and formatting (including presentation of tables and figures). Even good writers can improve their writing by paying attention to the points herein, I believe. Of course digging deeply into issues of organization, writing, and even formatting improves readability (and thus the probability of being published, read, and cited), but it can also help to improve the quality of the thinking, i.e., the content of the paper. I first review the standard organization of most empirical papers in economics, with suggestions for improvement (including a brief discussion of some issues in reporting of statistical and econometric results). Then I discuss many points of good (and bad) writing (including sections on The Language of Economists and on Overused/Misused Words) as well as points of formatting (including many choices, where – even more than in writing – consistency is the most important rule). Throughout, some differences between Swedish and English practice are discussed, as well as some between American and British practice.<P>
    Keywords: Organization; writing; formatting; tables; figures; sections; headings; English; Swedish; British
    JEL: A10 A20 A30 C10 Y10 Y20
    Date: 2008–04–07

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