nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2008‒09‒05
eight papers chosen by
Marco Novarese
University of the Piemonte Orientale

  1. Shifting the Blame: On Delegation and Responsibility By Björn Bartling; Urs Fischbacher
  2. Are Risk Preferences Stable? Comparing an Experimental Measure with a Validated Survey-Based Measure By Lisa R. Anderson; Jennifer M. Mellor
  3. Cooperativeness and Impatience in the Tragedy of the Commons By Ernst Fehr; Andreas Leibbrandt
  4. Face Value By Catherine C. Eckel; Ragan Petrie
  5. On reputation: A microfoundation of contract enforcement and price rigidity By Ernst Fehr; Martin Brown; Christian Zehnder
  6. Image Building By B. Curtis Eaton; William D. White
  7. Preference reversals and probabilistic choice By Pavlo R. Blavatskyy
  8. The Returns to Cognitive Abilities and Personality Traits in Germany By Guido Heineck; Silke Anger

  1. By: Björn Bartling; Urs Fischbacher
    Abstract: To fully understand the motives for delegating a decision right, it is important to study responsibility attributions for outcomes of delegated decisions. We conducted an experiment in which subjects were able to delegate the choice between a fair or unfair allocation, and used a punishment option to elicit responsibility attributions. Our results show that, first, responsibility attribution can be effectively shifted and, second, this constitutes a powerful motive for the delegation of a decision right. Furthermore, we propose a formal measure of responsibility and show that this measure outperforms measures based on outcome or intention in predicting punishment behavior.
    Keywords: Delegation, decision rights, moral responsibility, blame shifting
    JEL: C91 D63
    Date: 2008–07
  2. By: Lisa R. Anderson (Department of Economics, College of William and Mary); Jennifer M. Mellor (Department of Economics, College of William and Mary)
    Abstract: We examine the stability of risk preference within subjects by comparing measures obtained from two elicitation methods, an economics experiment with real monetary rewards and a survey with questions on hypothetical gambles. The survey questions have been validated by numerous empirical studies of investment, insurance demand, smoking and alcohol use, and recent studies have shown the experimental measure is associated with several real-world risky behaviors. For the majority of subjects, we find that risk preferences are not stable across elicitation methods. In interval regression models, subjects’ risk preference classifications from survey questions on job-based gambles are not associated with risk preference estimates from the experiment. However, we find that risk classifications from inheritance-based gambles are significantly associated with the experimental measure. We identify some subjects for whom risk preference estimates are more strongly correlated across elicitation methods, suggesting that unobserved subject traits like comprehension or effort influence risk preference stability.
    Keywords: Risk Preferences, Laboratory Experiment, Survey
    JEL: C9 D8
    Date: 2008–08–12
  3. By: Ernst Fehr; Andreas Leibbrandt
    Abstract: This paper examines the role of other-regarding and time preferences for cooperation in the field. We study the preferences of fishermen whose main, and often only, source of income stems from using a common pool resource (CPR). The exploitation of a CPR involves a negative interpersonal and inter-temporal externality because individuals who exploit the CPR reduce the current and the future yield for both others and themselves. Accordingly, economic theory predicts that more cooperative and more patient individuals should be less likely to exploit the CPR. Our data supports this prediction because fishermen who exhibit a higher propensity for cooperation in a laboratory public goods experiment, and those who show more patience in a laboratory time preference experiment, exploit the fishing grounds less in their daily lives. Moreover, because the laboratory public goods game exhibits no inter-temporal spillovers, measured time preferences should not predict cooperative behavior in the laboratory. This prediction is also borne out by our data. Thus, laboratory preference measures are useful to capture important dimensions of field behavior.
    Keywords: Cooperation, common pool resource, experiments, generalizability, methodology
    JEL: B4 C9 D8 O1
    Date: 2008–07
  4. By: Catherine C. Eckel; Ragan Petrie
    Abstract: There is growing evidence of systematic heterogeneity in behavior by observable characteristics, such as what one would see in a face. We ask, is there informational value in knowing these characteristics in a strategic interaction? Subjects are given the opportunity to purchase a photograph of their partner in the play of a trust game. Not everyone purchases the photo, even at prices as low as $0.20. Senders (first movers in the game) have a more inelastic demand for pictures than responders (second movers). White senders have a substantially higher demand than nonwhite senders or responders. For responders, there is no difference in demand for pictures across ethnicity or sex. White senders who pay to see the picture of their partner use the information to discriminate, sending significantly less to black responders than to white responders. Overall, responders return a higher percentage of the amount received as offers go up, but they do differentiate that percentage when they see the picture of the sender, returning more to a member of the same ethnicity. A face, it appears, has strategic value, especially for those who will use the information to differentiate their decisions.
    Date: 2008–09
  5. By: Ernst Fehr; Martin Brown; Christian Zehnder
    Abstract: We study the impact of reputational incentives in markets characterized by moral hazard problems. Social preferences have been shown to enhance contract enforcement in these markets, while at the same time generating considerable wage and price rigidity. Reputation powerfully amplifies the positive effects of social preferences on contract enforcement by increasing contract efficiency substantially. This effect is, however, associated with a considerable bilateralisation of market interactions, suggesting that it may aggravate price rigidities. Surprisingly, reputation in fact weakens the wage and price rigidities arising from social preferences. Thus, in markets characterized by moral hazard, reputational incentives unambiguously increase mutually beneficial exchanges, reduce rents, and render markets more responsive to supply and demand shocks.
    Keywords: Reputation, Reciprocity, Relational Contracts, Price Rigidity, Wage Rigidity
    JEL: D82 J3 J41 E24 C9
    Date: 2008–07
  6. By: B. Curtis Eaton; William D. White
    Abstract: We humans engage in a lot of costuming that can often be interpreted as type communication. Uniforms are the obvious example (cops on the beat, for example, wear uniforms because they want us to know that they are cops), but there are many other examples. This paper models costuming, or image building, as type communication. At the heart of the analysis is a model of social interaction in which information concerning the type of the people with whom we interact is mutually valuable - that is, valuable to them and to us. We first examine the equilibria of an image building game in which players choose their costumes and then engage in a series of social interactions in which their costumes might serve as type signals. Obviously, there are as many perfect signaling equilibria as there are ways to assign costumes to player types, so the image building game has a very nasty coordination problem. We look at two ways in which this problem might be solved. First we look for salient, history dependent costume replacement strategies in a dynamic image building game with imperfectly durable costumes. Then we examine the possibility that the firms who make and sell costumes can solve the coordination problem through image advertising. Image advertising as we conceive of it has a number of interesting features that distinguish it from other forms of advertising.
    Date: 2008–01–28
  7. By: Pavlo R. Blavatskyy
    Abstract: Preference reversals occur when different (but formally equivalent) elicitation methods reveal conflicting preferences over two alternatives. This paper shows that when people have fuzzy preferences i.e. when they choose in a probabilistic manner, their observed decisions can generate systematic preference reversals. A simple model of probabilistic choice and valuation can account for a higher incidence of standard (nonstandard) preference reversals for certainty (probability) equivalents and it can also rationalize the existence of strong reversals. An important methodological contribution of the paper is a new definition of a probabilistic certainty/probability equivalent of a risky lottery.
    Keywords: Preference reversal, probabilistic choice, certainty equivalent, probability equivalent, valuation
    JEL: D01 D80 D81 C91
    Date: 2008–08
  8. By: Guido Heineck; Silke Anger
    Abstract: We provide the first joint evidence on the relationship between individuals' cognitive abilities, their personality and earnings for Germany. Using data from the German Socio-Economic Panel Study, we employ scores from an ultra-short IQ-test and a set of measures of personality traits, namely locus of control, reciprocity and all basic items from the Five Factor Personality Inventory. Our estimates suggest a positive effect of so-called fluid intelligence or speed of cognition on males¿ wages only. Findings for personality traits are more heterogeneous. There however is a robust wage penalty for an external locus of control for both men and women.
    Keywords: Cognitive abilities, personality traits, Five Factor Model, Locus of control, reciprocity, wages
    JEL: J24 J31 I21
    Date: 2008

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