nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2008‒12‒14
fifteen papers chosen by
Marco Novarese
University of the Piemonte Orientale

  1. Routines and leadership in Schumpeter and von Mises' analysis of economic change By Agnès Festré; Nathalie Lazaric
  2. Biased Probability Judgment: Representative Evidence for Pervasiveness and Economic Outcomes By Dohmen Thomas; Falk Armin; Huffman David; Marklein Felix; Sunde Uwe
  3. Multiplayer belief revision By Antoine Billot; Jean-Christophe Vergnaud; Bernard Walliser
  4. In the back of your mind: Subliminal influences of religious concepts on prosocial behavior By Ahmed, Ali M.; Salas, Osvaldo
  5. Errors in Judicial Decisions By Joep Sonnemans; Frans van Dijk
  6. Rich meets Poor - An International Fairness Experiment By Alexander W. Cappelen; Karl Ove Moene; Erik Ø. Sørensen; Bertil Tungodden
  7. Are ‘True’ Preferences Revealed in Repeated Markets? An Experimental Demonstration of Context-dependent Valuations By Fabio Tufano
  8. Fundraising through Competition: Evidence from the Lab By Henrik Orzen
  9. A proper test of overconfidence By Benoît, Jean-Pierre; Dubra, Juan; Moore, Don
  10. The Attitude Toward Probabilities of Portfolio Managers : an Experimental Study By Nicolas Roux
  11. The Effect of Rating Agencies on Herd Behaviour By Giovanni Ferri; Andrea Morone
  12. Loss Aversion and Rent-Seeking: An Experimental Study By Xiaojing Kong
  13. Alcohol Consumption and Risk Attitude By Alejandra Cortes Aguilar; Antonio Espín Martín; Filippos Exadaktylos; Oyediran Segun; Luis Alejandro Palacios García; Antonios Proestakis
  14. Determinants of Students€٠First Impressions of Instructors and Courses By Dicks, Michael R.; Pruitt, J. Ross; Tilley, Daniel S.
  15. Do Households Have a Good Sense of Their Retirement Preparedness? By Alicia H. Munnell; Francesca Golub-Sass; Mauricio Soto; Anthony Webb

  1. By: Agnès Festré (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR6227 - Université de Nice Sophia-Antipolis); Nathalie Lazaric (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR6227 - Université de Nice Sophia-Antipolis)
    Abstract: The purpose of our contribution is to analyse the notion of routine as it is developed in recent economic literature in the light of two past economists, Joseph Schumpeter and Ludwig von Mises. We will focus on one peculiar feature put forward by the two Austrian economists, namely, on the distinction between adaptive / routine-minded behaviour on one side, and active / creative behaviour on the other. According to us, this feature is worth emphasizing since it permits to shed some new light on the long disputed Nelson and Winter's conception of routines. Our conjecture is that if Nelson and Winter had taken up the aforementioned distinction, they would have developed a richer view of economic behaviour and of its interweaving within the firm or the social environment.
    Keywords: Routines, Schumpeter, von Mises
    Date: 2007
  2. By: Dohmen Thomas; Falk Armin; Huffman David; Marklein Felix; Sunde Uwe (ROA rm)
    Abstract: Many economic decisions involve a substantial amount of uncertainty, andtherefore crucially depend on how individuals process probabilistic information. Inthis paper, we investigate the capability for probability judgment in a representativesample of the German population. Our results show that almost a third of therespondents exhibits systematically biased perceptions of probability. The findingsalso indicate that the observed biases are related to observed outcomes, whichindicates the policy relevance of our findings.
    Keywords: education, training and the labour market;
    Date: 2008
  3. By: Antoine Billot (Université Paris 2 - Laboratoire d'Economie Moderne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Jean-Christophe Vergnaud (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Bernard Walliser (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: One main topic of the epistemic program of game theory deals with the value of information. To study this question in a broad context, one needs to adapt some of the tools used in multiplayer epistemic logic. A hierarchical belief structure is introduced both in a syntactical and semantical framework. In the same framework, a generalized notion of message is characterized by its content and its status. For a given message, a multiplayer belief revision rule that transforms any initial belief structure into a final belief one is designed. A representation theorem relates syntactical axioms to the belief revision rule.
    Keywords: Belief revision, message, epistemic logic.
    Date: 2008–08
  4. By: Ahmed, Ali M. (Department of Economics, School of Business, Economics and Law, Göteborg University); Salas, Osvaldo (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Does religion enhance prosocial behavior? We investigate the ways in which implicit influences of religious concepts affect generosity and cooperation. In contrast to previous studies, we assess the direct impact of religion as an independent variable on prosocial behavior. We do so by subliminally priming participants with religious concepts in a scrambled sentence task before they play a dictator game and a prisoner’s dilemma game. We found that implicit priming of religious concepts significantly increased prosocial behavior in both games. This result was present among both religious and nonreligious participants. Selfreported measure of religiosity was related neither to generosity nor to cooperation.<p>
    Keywords: religion; priming; dictator game; prisoner’s dilemma game
    JEL: C90 Z12 Z13
    Date: 2008–12–08
  5. By: Joep Sonnemans (CREED, Amsterdam School of Economics, University of Amsterdam); Frans van Dijk (Council for the Judiciary, The Hague, the Netherlands)
    Abstract: In criminal cases the task of the judge is to transform the uncertainty about the facts into the certainty of the verdict. In this experiment we examine the relationship between evidence of which the strength is known, subjective probability of guilt and verdict for abstract cases. We look at two situations: (1) all evidence is given and (2) evidence can be acquired. Roughly half of the participants do not base their decision on a subjective belief of the probability of guilt. The others underestimate in general the probability of guilt, but this is more than compensated by a tendency to convict at too low probability of guilt. In the situation where evidence can be acquired, participants do not acquire enough evidence.
    Keywords: Decision under uncertainty; judicial decisions; experiment
    JEL: C91 D81 K4
    Date: 2008–09–19
  6. By: Alexander W. Cappelen (Norwegian School of Economics and Business Administration, Bergen); Karl Ove Moene (University of Oslo); Erik Ø. Sørensen (VU University Amsterdam); Bertil Tungodden (Norwegian School of Economics and Business Administration, and Chr. Michelsen Institute)
    Abstract: Why do people in rich countries not transfer more of their income to people in the world's poorest countries? To study this question and the relative importance of needs, entitlements, and nationality in people's social preferences, we conducted a real effort fairness experiment where people in two of the world's richest countries, Norway and Germany, interacted directly with people in Uganda and Tanzania, two of the world's poorest countries. In this experiment, the participants were given the opportunity to transfer money to poor persons with whom they were matched. The study provides four main findings. First, entitlement considerations are crucial in explaining the distributive behavior of rich people in the experiment; second, needs considerations matter a lot for some participants; third, the participants acted as moral cosmopolitans; and finally, the participants' choices are consistent with a self-serving bias in their social preferences.
    Keywords: fairness; experiments
    JEL: C90 D63
    Date: 2008–10–14
  7. By: Fabio Tufano (CeDEx, School of Economics, University of Nottingham; Cifrem, Università degli Studi di Trento)
    Abstract: This paper reports a new and significant experimental demonstration that market participants adjust their bids towards the price observed in previous market periods when – by design – individuals’ values should not be affiliated with the market price. This demonstration implies that market prices may not adjust as standard comparative statics predicts and emphasizes the significance of social aspects even in market contexts. Hence, the present study shows that market behaviour is not anomaly-free. Indeed, market behaviour does not reveal the underlying true preferences but rather context-dependent preferences.
    Keywords: Repeated markets; Economic principles; Anomalies; Experiment; Social interactions
    JEL: C92 D01 D44
    Date: 2008–10
  8. By: Henrik Orzen (University of Nottingham)
    Abstract: This paper investigates mechanisms for the private provision of a public good which utilize competition to incentivize contributions. Theory predicts that “all-pay” competition is particularly effective for fundraising. Within this class of mechanisms different types of lotteries and all-pay auctions are analyzed and ranked. Four all-pay competition mechanisms are then examined in a laboratory experiment vis-à-vis a voluntary contribution mechanism (VCM). All four outperform the VCM and towards the end of the experiment fully efficient outcomes are attained in the “lowest common denominator” scheme, which is particularly accommodating for people who have a preference for cooperating conditionally on others doing their bit.
    Keywords: Public Goods; Provision Mechanisms; Experiments; Contests
    JEL: C72 C92
    Date: 2008–10
  9. By: Benoît, Jean-Pierre; Dubra, Juan; Moore, Don
    Abstract: In this paper we conduct two proper tests of overconfidence. We reject the hypothesis "the data cannot be generated by a rational model" in both experiments.
    Keywords: Overconfidence; Better than Average; Experimental Economics; Irrationality; Signalling Models.
    JEL: D11 D12 D82 D83
    Date: 2008–12–05
  10. By: Nicolas Roux (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: This paper proposes an experiment about the attitude toward probabilities on a population of portfolio managers. Its aim is to check whether or not portfolio managers are neutral toward probabilities. Meanwhile, it presents a experimental protocole that highlights an inconsistency between two experimental techniques. It also introduces a new functional form for the probability weighting function. Results unambiguously show that portfolio managers are not neutral toward probabilities and that they display a strong heterogeneity in their preferences.
    Keywords: Attitude toward probabilities, probability weighting function, expected utility, rank dependent expected utility, experimental economics, decision under risk.
    Date: 2008–11
  11. By: Giovanni Ferri; Andrea Morone
    Abstract: This paper purports to provide some evidence on the effect of rating agencies on herding in financial markets. By means of a laboratory experiment, we investigate the effect and interaction between private and public information. Previous experiments showed that lemmings behaviour can survive in a market context where information is private (Hey and Morone, 2004), and that an experimental market can be very volatile and not efficient in transmitting information (Alfarano et al., 2006). We study experimentally, if socially undesirable behaviour – that survives in a market contest – may be eliminated owing to the presence of rating agencies.
    Keywords: Herd behaviour, informational cascades, rating agency, bubble.
    JEL: C91 D82 D83
    Date: 2008–10–21
  12. By: Xiaojing Kong
    Abstract: We report an experiment designed to evaluate the impact of loss aversion on rent-seeking contests. We find, as theoretically predicted, a negative relationship between rent-seeking expenditures and loss aversion. However, for any degree of loss aversion, levels of rent-seeking expenditure are higher than predicted. Moreover, we find that the effect of loss aversion becomes weaker with repetition of the contest.
    Date: 2008–10
  13. By: Alejandra Cortes Aguilar (Department of Economic Theory and Economic History, University of Granada.); Antonio Espín Martín (Department of Economic Theory and Economic History, University of Granada.); Filippos Exadaktylos (Department of Economic Theory and Economic History, University of Granada.); Oyediran Segun (Department of Economic Theory and Economic History, University of Granada.); Luis Alejandro Palacios García (Department of Economic Theory and Economic History, University of Granada.); Antonios Proestakis (Department of Economic Theory and Economic History, University of Granada.)
    Abstract: This study examines the effect of alcohol on individual preferences in lottery games of varying risk profiles. The experiment was carried out in the field where the subjects were randomly sampled from a pool of visiting adults in festive-mood who were in the natural environment for drinking and social interactions. The results suggest that men’s risky behaviour is negatively correlated with alcohol expectancies, while women’s risky behaviour is negatively correlated with their actual alcohol consumption. The environment seems to have an additional effect on the subject's risk preferences.
    Keywords: risk, alcohol, lottery
    JEL: C93 D85 Z13
    Date: 2008–12–02
  14. By: Dicks, Michael R.; Pruitt, J. Ross; Tilley, Daniel S.
    Abstract: Students evaluated instructors and courses in the first two weeks of the fall semester to determine the factors that form impressions in the early stages of the semester. Results indicate differences exist between upper and lower division courses with presentation of material and perceived workload as key factors that students use to form first impressions.
    Keywords: Teaching/Communication/Extension/Profession,
    Date: 2008
  15. By: Alicia H. Munnell; Francesca Golub-Sass; Mauricio Soto; Anthony Webb
    Abstract: The National Retirement Risk Index (NRRI) measures the percentage of working-age households who are ‘at risk’ of being financially unprepared for retirement today and in coming decades. The calculations show that even if households work to age 65 and annuitize all their financial assets, including the receipts from reverse mortgages on their homes, 44 percent will be ‘at risk’ of being unable to maintain their standard of living in retirement. An extension of the analysis to account explicitly for health care costs in retirement raises the share of ‘at risk’ households from 44 percent to 61 percent...
    Date: 2008–08

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