nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2009‒02‒07
ten papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Instinctive Response in the Ultimatum Game By Pablo Brañas-Garza; Luis M. Miller
  2. Culture, Context, and the Taste for Redistribution By Luttmer, Erzo F. P.; Singhal, Monica
  3. Does the Better-Than-Average Effect Show That People Are Overconfident?: An Experiment. By Benoît, Jean-Pierre; Dubra, Juan; Moore, Don
  4. Consumer behaviour: evolution of preferences and the search for novelty By Garcia-Torres, Abraham
  5. An Experimental Study of the Effect of Announcements on Public Goods Contributions By Lisa R. Anderson; Sarah L. Stafford
  6. Elicited Beliefs and Social Information in Modified Dictator Games: What Do Dictators Believe Other Dictators Do? By Nagore Iriberri; Pedro Rey-Biel
  7. The Happiness of Giving: The Time-Ask Effect By Liu, Wendy; Aaker, Jennifer L.
  8. Experimetnal Evidence on Inflation Expectation Formation By Pfajfar, D.; Zakelj, B.
  9. How to generalize Darwinism suitably to help understand both the evolution and the development of economies By Pavel Pelikan
  10. Is bounded rationality a capacity, enabling learning? By Novarese, Marco

  1. By: Pablo Brañas-Garza (Department of Economic Theory and Economic History, University of Granada.); Luis M. Miller (Centre for Experimental Social Sciences, Nuffield College, University of Oxford.)
    Abstract: In a series of recent papers, Ariel Rubinstein claims that the study of response time sheds light on the process of reasoning involved in classical economic decision problems. In particular, he considers that a distinction can be drawn between instinc- tive and cognitive reasoning. This paper complements and expands upon Rubinstein's study on time responses. We show that strategic risk is the key element in explaining differences in median response time in ultimatum behavior.
    Keywords: Economic experiments, Ultimatum game, Yes-or-No game, median response time.
    JEL: C91
    Date: 2008–11–20
  2. By: Luttmer, Erzo F. P. (Harvard U); Singhal, Monica (Harvard U)
    Abstract: Is culture an important determinant of preferences for redistribution? To separate the effect of culture from the effect of the economic and institutional environment ("context"), we relate immigrants' preferences for redistribution to the average preference in their birth countries, controlling extensively for individual characteristics and country-of-residence fixed effects. We find a strong positive relationship. This cultural effect is larger for non-voters, those with shorter tenure in the country of residence, and those who move to countries with a large number of immigrants from their own birth countries. Immigrants from countries with a higher preference for redistribution are also more likely to vote for a more proredistribution political party. The effect of culture persists strongly into the second generation.
    JEL: D72 H23 Z10
    Date: 2008–08
  3. By: Benoît, Jean-Pierre; Dubra, Juan; Moore, Don
    Abstract: We conduct a proper test of the claim that people are overconfident, in the sense that they believe that they are better than others. The results of the experiment we present do not allow us to reject the hypotheses that the data has been generated by perfectly rational, unbiased, and appropriately confident agents.
    Keywords: Overconfidence; Better than Average; Experimental Economics; Irrationality; Signalling Models.
    JEL: D11 D12 D82 D83
    Date: 2009–02–02
  4. By: Garcia-Torres, Abraham (UNU-MERIT, Maastricht University)
    Abstract: Evolution of consumers' preferences has been recognized by many scholars as being key to understanding technological change. However, mainstream economics cannot account for the seemingly irrational behavior of consumers based on changes in taste – consumer theory lacks exibility and accuracy to explain changes in consumer behavior. Adopting a behavioral psychology perspective, this paper argues that there is a rational pattern in the change of consumers' tastes. I argue that behavioral psychology offers us a unique perspective to solve some of the paradoxes of consumer behavior. This paper incorporates exibility into CES utility function to more adequately account for, and differentiate between, habit formation routines. A model is developed in which habit formation and consumption of new goods are interrelated.
    Keywords: Consumer behaviour, Consumer choice, Technological change, Innovations
    JEL: D11 D12 D91 O31
    Date: 2009
  5. By: Lisa R. Anderson (Department of Economics, College of William and Mary); Sarah L. Stafford (Department of Economics, College of William and Mary)
    Abstract: We include probabilistic announcements in a standard public goods experiment. Although the possibility of having decisions announced encourages subjects to contribute more to the group account, learning that some individuals are free-riding more than the average has a negative effect
    Keywords: Voluntary Contributions Mechanism, Public Goods, Announcement
    JEL: C91 H41
    Date: 2009–02–02
  6. By: Nagore Iriberri; Pedro Rey-Biel
    Abstract: We use subjects’ actions in modified dictator games to perform a within-subject classification of individuals into four different types of interdependent preferences: Selfish, Social Welfare maximizers, Inequity Averse and Competitive. We elicit beliefs about other subjects’ actions in the same modified dictator games to test how much of the existent heterogeneity in others’ actions is known by subjects. We find that subjects with different interdependent preferences in fact have different beliefs about others’ actions. In particular, Selfish individuals cannot conceive others being non-Selfish while Social Welfare maximizers are closest to the actual distribution of others’ actions. We finally provide subjects with information on other subjects’ actions and re-classify individuals according to their (new) actions in the same modified dictator games. We find that social information does not affect Selfish individuals, but that individuals with interdependent preferences are more likely to change their behavior and tend to behave more selfishly.
    Keywords: Interdependent preferences, social welfare maximizing, inequity aversion, belief elicitation, social information, experiments, mixture-of-types models
    JEL: C72 C9 D81
    Date: 2008–04
  7. By: Liu, Wendy (U of California, Los Angeles); Aaker, Jennifer L. (U of California, Berkeley)
    Abstract: This research examines how a focus on time versus money can lead to two distinct mindsets that impact consumers' willingness to donate to charitable causes. The results of three experiments, conducted both in the lab and in the field, reveal that asking individuals to think about "how much time they would like to donate" (versus "how much money they would like to donate") to a charity increases the amount that they ultimately donate to the charity. Fueling this effect are differential mindsets activated by time versus money. Implications for the research on time, money and emotional well-being are discussed.
    Date: 2008–08
  8. By: Pfajfar, D.; Zakelj, B. (Tilburg University, Center for Economic Research)
    Abstract: Using laboratory experiments, we establish a number of stylized facts about the process of inflation expectation formation. Within a New Keynesian sticky price framework, we ask subjects to provide forecasts of inflation and their corresponding confidence bounds. We study individual responses and properties of the aggregate empirical distribution. Many subjects do not rely on a single model of expectation formation, but are rather switching between di¤erent models. About 40% of the subjects predominately use a rational rule when forecasting inflation and about 35% of agents simply extrapolate trend. Around 5% of subjects behave in an adaptive manner, while the remaining 20% behaves in accordance to adaptive learning and sticky information models. Furthermore, we find that subjects in only 60% of cases correctly perceive the underlying uncertainty in the economy when reporting confidence intervals. However, empirical analysis does not support a significant countercyclical behavior of individuals' confidence intervals.
    Keywords: Inflation Expectations;Experiments;New Keynesian Model;Adaptive Learning
    JEL: E37 C90 D80
    Date: 2009
  9. By: Pavel Pelikan
    Abstract: This paper agrees that a suitably generalized Darwinism may help understand socioeconomic change, but finds the most publicized generalization by Hodgson and Knudsen unsuitable. To do better, it generalizes the extension of Neo-Darwinism into evolutionary developmental biology ("evo-devo"), which pays more attention to genomes-as-instructors than to genes-as-replicators, and to the entire process of instructed development than to fully developed organisms. The new generalization has clear connections to economics with a minimum guarantee of helpfulness: it generalizes both evo-devo and previously elaborated approaches that already helped understand specific issues of comparative economics, economic reforms, and transformation policies
    Keywords: evolution of instructions, instructed development of interactors, multilevel evolution and development, evolution of institutional rules, development of economies Length 36 pages
    JEL: A10 D02 K10 O10 P50 Z10
    Date: 2009–01
  10. By: Novarese, Marco
    Abstract: This papers contributes to the stream of research on rule based behavior, and rationality. A bounded rational agent can deal just with a reduced number of variables, neglecting part of the overall complexity. This is usually taken as just a limitation: agents cannot deal with all relevant information and use biased decisional shortcuts. The stream of research on Ecological rationality, yet, evidences the possible advantage of using a limited amount of information. The present paper takes a similar, but not identical, point of view. I propose an idea based on some contributions on the ecology of the mind by Gregory Bateson. Learning requires to recognize a series of situations as identical and then to observe the effect of given variables in specific fixed contexts. Two situations can be considered identical only limiting considering part of the overall information and taking as unchanged a series of factors. This process determines an individual representation which have just to be coherent with the world. Only in abstract world contexts are objective situations. In the real world, they are just hypothesis to be continuously tested. This vision of bounds and learning has many implications for the debate on rationality and rule following.
    Keywords: Bounded rationality; ecological rationality; cognition; Gregory Bateson; contexts; learning; rules
    JEL: D83
    Date: 2009–01–31

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