nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2009‒01‒31
ten papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Psychological traits and the gender gap in full-time employment and wages: Evidence from Germany By Nils Braakmann
  2. Can Sanctions Induce Pessimism? An Experiment By Roberto Galbiati; Karl Schlag; Joël van der Weele
  3. Survey Evidence on Conditional Norm Enforcement By Traxler, Christian; Winter, Joachim
  4. Who Makes a Good Leader? Social Preferences and Leading-by-Example By Gächter, Simon; Nosenzo, Daniele; Renner, Elke; Sefton, Martin
  5. Social Connections and Incentives in the Workplace: Evidence from Personnel Data By Bandiera, Oriana; Barankay, Iwan; Rasul, Imran
  6. Green goods: are they good or bad news for the environment? Evidence from a laboratory experiment on impure public goods By Munro, Alistair; Valente, Marieta
  7. Unraveling the Age-Productivity Nexus: Confronting Perceptions of Employers and Employees By Dalen, H.P. van; Henkens, K.; Schippers, J.
  8. I Don't Want to Hear About it: Ration Ignorance among Duty-Oriented Consumers By Nyborg, Karine
  9. The attitude toward probabilities of portfolio managers : an experimental study. By Nicolas Roux
  10. Authority versus Persuasion By Eric J. Van den Steen

  1. By: Nils Braakmann (Institute of Economics, University of Lüneburg)
    Abstract: This paper shows that differences in various non-cognitive traits, specifically the “big five”, positive and negative reciprocity, locus of control and risk aversion, contribute to gender inequalities in wages and employment. Using the 2004 and 2005 waves of the German Socio-Economic Panel, evidence from regression and decomposition techniques suggests that gender differences in psychological traits are more important for inequalities in wages than in employment. Differences in the “big five”, in particular in agreeableness, conscientiousness and neurocitism matter for both wages and employment. For the latter, the results also show a large effect of differences in external locus of control.
    Keywords: Gender wage gap, non-cognitive traits, decomposition
    JEL: J24 J31
    Date: 2009–01
  2. By: Roberto Galbiati; Karl Schlag; Joël van der Weele
    Abstract: We experimentally investigate the effects of sanctions when there are multiple equilibria. Two subjects play a two-period minimum effort game in the presence of third player (principal). The principal benefits from coordination on higher effort, and is the only one informed of previous choices choices. We contrast introducing an exogenously imposed sanction in the second round to the case where the principal is allowed to decide whether or not, at a small cost, to impose a sanction. We find that exogenously introduced sanctions are effective in inducing optimistic beliefs about others and help coordination on more efficient equilibria. On the other hand, endogenously introduced sanctions negatively influence beliefs about the effort of the other player. The results supports the idea that sanctions have an expressive dimension which can undermine their effectiveness by discouraging optimistic players.
    Keywords: Sanctions, beliefs, expressive law, deterrence, coordination, minimum effort game
    JEL: C92 D83 K42
    Date: 2009–01
  3. By: Traxler, Christian; Winter, Joachim
    Abstract: We discuss survey evidence on individuals' willingness to sanction norm violations - such as evading taxes, drunk driving, fare dodging, or skiving o work - by expressing disapproval or social exclusion. Our data suggest that people condition their sanctioning behavior on their belief about the frequency of norm violations. The more commonly a norm violation is believed to occur, the lower the individuals' inclination to punish it. Based on an instrumental variable approach, we demonstrate that this pattern reflects a causal relationship.
    Keywords: Norm Enforcement; Sanctioning; Social Norms; Survey Evidence
    JEL: K42 Z13 D1
    Date: 2009–01–21
  4. By: Gächter, Simon (University of Nottingham); Nosenzo, Daniele (University of Nottingham); Renner, Elke (University of Nottingham); Sefton, Martin (University of Nottingham)
    Abstract: We examine the effects of social preferences and beliefs about the social preferences of others in a simple leader-follower voluntary contributions game. We find that groups perform best when led by those who are reciprocally oriented. Part of the effect can be explained by a false consensus effect: selfish players tend to think it more likely that they are matched with another selfish player and reciprocators tend to think it more likely that they are matched with another reciprocator. Thus, reciprocators contribute more as leaders partly because they are more optimistic than selfish players about the reciprocal responses of followers. However, even after controlling for beliefs we find that reciprocally-oriented leaders contribute more than selfish leaders. Thus, we conclude that differing leader contributions by differing types of leader must in large part reflect social motivations.
    Keywords: reciprocity, contribution preferences, leadership, leading-by-example, false consensus effect
    JEL: A13 C92
    Date: 2008–12
  5. By: Bandiera, Oriana (London School of Economics); Barankay, Iwan (University of Pennsylvania); Rasul, Imran (University College London)
    Abstract: We present evidence on the effect of social connections between workers and managers on productivity in the workplace. To evaluate whether the existence of social connections is beneficial to the firm's overall performance, we explore how the effects of social connections vary with the strength of managerial incentives and worker's ability. To do so, we combine panel data on individual worker's productivity from personnel records with a natural field experiment in which we engineered an exogenous change in managerial incentives, from fixed wages, to bonuses based on the average productivity of the workers managed. We find that when managers are paid fixed wages, they favor workers to whom they are socially connected irrespective of the worker's ability, but when they are paid performance bonuses, they target their effort towards high ability workers irrespective of whether they are socially connected to them or not. Although social connections increase the performance of connected workers, we find that favoring connected workers is detrimental for the firm's overall performance.
    Keywords: natural field experiment, managerial incentives, favoritism
    JEL: J33 M52 M54
    Date: 2008–12
  6. By: Munro, Alistair; Valente, Marieta
    Abstract: An impure public good is a commodity that combines public and private characteristics in fixed proportions. Green goods such as dolphin-friendly tuna or green electricity programs provide increasings popular examples of impure goods. We design an experiment to test how the presence of impure public goods affects pro-social behaviour. We set parameters, such that from a theoretical point of view the presence of the impure public good is behaviorally irrelevant. In a baseline setting, where the impure public good provides only small contributions to the public good. We observe that on aggregate pro-social behaviour, defined as total contributions to the public good, is lower in the presence of the impure good. Some individuals do not alter their decisions, but roughly two fifths of subjects make a lower contribution to the public good in the presence of the impure public good. On the contrary, in the case where the impure public good favours the public good component at the expense of private earnings, individuals are unaffected in their behaviour. We conclude that the presence of green goods which have only a small environmental component may reduce pro-environmental behaviour.
    Keywords: green goods; impure public goods; pro-social behaviour; social norms; experimental economics
    JEL: Q50 H41 D64 C91
    Date: 2008–10–30
  7. By: Dalen, H.P. van; Henkens, K.; Schippers, J. (Tilburg University, Center for Economic Research)
    Abstract: What determines the perceived productivity of young and older workers? In this study we present evidence for (Dutch) employers and employees. By confronting the perceptions of employers and employees some remarkable similarities and differences are revealed. It turns out that productivity perceptions are biased by the age group to which one belongs and the position in the hierarchy in the organization. The young favor the young, the old favor the old and employers discount productivity compared to employees. However, there are also remarkable similarities across employer and employees. By distinguishing the various underlying dimensions of productivity of young and older workers we tested whether ‘soft’ skills and abilities within the organization are just as important as the ‘hard’ dimensions - cognitive and physically based skills - in the eye of employers and employees. It appears that employers and employees weight the soft and the hard dimensions of skills in a uniform way: hard skills are far more important than soft skills no matter whether the worker is old or young. By sharing the stereotypical images the problem of age discrimination may therefore not only be due to employers’ behaviors and attitudes, but also due to those of employees.
    Keywords: aging;stereotypes;productivity;employers
    JEL: D21 J24 J71 M51
    Date: 2009
  8. By: Nyborg, Karine (Dept. of Economics, University of Oslo)
    Abstract: Individuals with a preference for keeping moral obligations may dislike learning that voluntary contributions are socially valuable: Such informa- tion can trigger unpleasant feelings of cognitive dissonance. I show that if initial beliefs about the social value of contributions are sufficiently low, duty-oriented consumers are willing to pay to avoid information. Attitude campaigns can increase contributions from such consumers by providing them with unwanted information. Consequentialist warm glow types with low initial beliefs, however, will seek low-cost information on their own initiative; thus, campaigns will have less effects for such consumers.
    Keywords: Voluntary contributions: public goods; responsibility; altruism; information campaigns; cognitive dissonance
    JEL: D11 D62 D64 D89 H41 Q21
    Date: 2008–07–10
  9. By: Nicolas Roux (Centre d'Economie de la Sorbonne)
    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.
    JEL: C91
    Date: 2008–09
  10. By: Eric J. Van den Steen (Harvard Business School, Strategy Unit)
    Abstract: This paper studies a principal's trade-off between using persuasion versus using interpersonal authority to get the agent to 'do the right thing' from the principal's perspective (when the principal and agent openly disagree on the right course of action). It shows that persuasion and authority are complements at low levels of effectiveness but substitutes at high levels. Furthermore, the principal will rely more on persuasion when agent motivation is more important for the execution of the project, when the agent has strong intrinsic or extrinsic incentives, and, for a wide range of settings, when the principal is more confident about the right course of action.
    Date: 2009–01

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