nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2009‒04‒05
nine papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Spreading Academic Pay over Nine or Twelve Months: Economists Are Supposed to Know Better, but Do They Act Better? By Claar, Victor V; Diestl, Christine M; Poll, Ross D
  2. Can Sanctions Induce Pessimism? An Experiment By Roberto Galbiati; Karl Schlag; Joël van der Weele
  3. Revisiting Strategic versus Non-strategic Cooperation By Reuben, E.; Suetens, S.
  4. Hayek’s approach to cognitive and social order By Göbel, Jürgen
  5. Legal Interpretative Process and Litigants’Cognitive Biases By Bruno Deffains; Eric Langlais
  6. Learning to be Biased By Ch'ng , kean Siang; Zaharim, Norzarina
  7. Resistance to learning and the evolution of cooperation By Raul Jimenez; Haydee Lugo; Maxi San Miguel
  8. Home advantage in Turkish professional soccer By Seckin, Aylin; Pollard, Richard
  9. How does Tacit Knowledge Transfer Influence Innovation Speed? The Case of Science Based Entrepreneurial Firms By M. KNOCKAERT; D. UCBASARAN; M. WRIGHT; B. CLARYSSE

  1. By: Claar, Victor V; Diestl, Christine M; Poll, Ross D
    Abstract: Our paper empirically considers two general hypotheses related to the literature of behavioral economics. First, we test the null hypothesis that individuals behave, on average, in a manner more consistent with the rational expectations hypothesis than with the idea of self-control in the face of hyperbolic discounting in their saving decisions. Second, along a variety of dimensions, we examine whether individuals exhibit Herbert Simon’s notion that the goal formation of individuals will differ depending upon their relative levels of experience and knowledge. Perhaps there are significant differences among groups in their saving decisions that depend upon their apparent levels of intelligence, education, and knowledge. Finally, using a variety of individual-specific control variables, we test for robustness of the results.
    Keywords: Consumer Economics; Empirical Analysis; Life Cycle Models and Saving
    JEL: D11 D12 D91
    Date: 2009
  2. By: Roberto Galbiati; Karl Schlag; Joël van der Weele
    Abstract: We run an experiment in which two subjects play a two-round minimum effort game in the presence of a third player (principal) who is the only one informed about past effort choices and benefits from a higher minimum effort of the others. Sanctions introduced in the second round by the experimenter lead to more optimistic beliefs and higher efforts. This is not true when sanctions have been imposed by the principal. The possibility that the choice of a sanction is a signal of low effort levels causes players who chose high effort in the first round to be less optimistic.
    Keywords: Sanctions, beliefs, expressive law, deterrence, coordination, minimum effort game
    JEL: C92 D83 K42
    Date: 2009–03
  3. By: Reuben, E.; Suetens, S. (Tilburg University, Center for Economic Research)
    Abstract: We use a novel experimental design to disentangle strategically- and non-strategically-motivated cooperation. By using contingent responses in a repeated sequential prisoners’ dilemma with a known probabilistic end, we differentiate end-game behavior from continuation behavior within individuals while controlling for expectations. This design allows us to determine the extent to which strategically-cooperating individuals are responsible for the so-called endgame effect. Experiments with two different subject pools indicate that the most common motive for cooperation in repeated games is strategic and that the extent to which endgame effects are driven by strategically-cooperating individuals depends on the profitability of cooperation.
    Keywords: reputation building;strong reciprocity;conditional cooperation;strategic cooperation
    JEL: C91 D01 D74
    Date: 2009
  4. By: Göbel, Jürgen
    Abstract: The human being can be regarded as a product of evolution. She has prevailed in the evolutionary process because of her ability to create and to use knowledge. The creation and the use of knowledge depend on the cognitive and on the social order. Both types of order are interdependent. Hayek sought to analyze the principles of both types of order. In particular, he based his analysis on three research disciplines: Evolutionary Epistemology, Cognitive Psychology, and Systems Theory. In this article, we recapitulate and revise his respective analysis. Hayek’s approach thus appears as particularly sustainable and powerful.
    Keywords: Hayek; cognition; social order
    JEL: D02 B53 D87
    Date: 2009–02–28
  5. By: Bruno Deffains; Eric Langlais
    Abstract: For contemporary legal theory, law is essentially an interpretative and hermeneutics practice (Ackerman (1991), Horwitz (1992)). A straightforward consequence is that legal disputes between parties are motivated by their divergent interpretations regarding what the law says on their case. This point of view fits well with the growing evidence showing that litigants’ cognitive performances display optimistic bias or self-serving bias (Babcock and Lowenstein (1997)). This paper provides a theoretical analysis of the influence of such a cognitive bias on pretrial negotiations. However, we also consider that this effect is mitigated because of the litigants’ confidence in their own ability to predict the verdict; we model this issue assuming that litigants are risk averse in the sense of Yaari (1987), i.e. they display a kind of (rational) probability distortion which is also well documented in experimental economics. In a model à la Bebcuck (1984), we show that the consequences of self-serving bias are partially consistent with the "optimistic model", but that parties’ risk aversion has more ambiguous/unpredictable effects. These results contribute to explaining that the beliefs in the result of the trial are not sufficient in themselves to understand the behaviors of litigants. As suggested by legal theory, the confidence the parties have in their beliefs is probably more important.
    Keywords: litigation, self-serving bias, risk aversion
    JEL: D81 K42
    Date: 2009
  6. By: Ch'ng , kean Siang; Zaharim, Norzarina
    Abstract: We simulate societal opinion dynamics when there is confirmation bias in information gathering and spread. If decision making is influenced by confirmation bias, the agent puts more weight on positive information to confirm hypothesis or reservation in the learning process, which renders selectivity in information gathering. If the utility discovered post purchase is low, it is externalized rather than internalized (i.e., self blame) for the selectivity of information. This causes the agent to outweigh the negative information. These two mechanisms are simulated to investigate the societal opinion dynamics and explain behavioral patterns such as overconfidence, stickiness of response and ``success breeds success" phenomenon.
    Keywords: Confirmation bias; Opinion percolation and convergence; Selectivity in information search; Hypothesis testing
    JEL: C63 D01
    Date: 2009–03–31
  7. By: Raul Jimenez; Haydee Lugo; Maxi San Miguel
    Abstract: In many evolutionary algorithms, crossover is the main operator used in generating new individuals from old ones. However, the usual mechanism for generating offsprings in spatially structured evolutionary games has to date been clonation. Here we study the effect of incorporating crossover on these models. Our framework is the spatial Continuous Prisoner's Dilemma. For this evolutionary game, it has been reported that occasional errors (mutations) in the clonal process can explain the emergence of cooperation from a non-cooperative initial state. First, we show that this only occurs for particular regimes of low costs of cooperation. Then, we display how crossover gets greater the range of scenarios where cooperative mutants can invade selfish populations. In a social context, where crossover involves a general rule of gradual learning, our results show that the less that is learnt in a single step, the larger the degree of global cooperation finally attained. In general, the effect of step-by-step learning can be more efficient for the evolution of cooperation than a full blast one.
    Keywords: Evolutionary games, Continuous prisoner's dilemma, Spatially structured, Crossover, Learning
    Date: 2009–02
  8. By: Seckin, Aylin; Pollard, Richard
    Abstract: Home advantage is known to play an important role in the outcome of professional soccer games, and to vary considerably worldwide. In the Turkish Super League over the last 12 years, 61.5% of the total points gained have been won by the home team, a figure similar to the worldwide average and to the Premier League in England. It is lower (57.7%) for games played between teams from Istanbul and especially high for games involving teams from cities in the more remote and ethically distinct parts of Turkey (Van and Diyarbakir). Match performance data show that although home teams in Turkey take 26% more shots at goal than away teams, the success rates for shots do not differ. For fouls and disciplinary cards, home and away teams do not differ significantly in Turkey, a finding that that differs from games in England, perhaps due to less referee bias.
    Keywords: Home advantage;professional soccer
    JEL: L8 L83
    Date: 2007
    Abstract: The increased pressure put on public research institutes to commercialize their research results has given rise to an increased academic interest in technology transfer in general and science based entrepreneurial firms specifically. By building on innovation speed and knowledge literatures, this paper aims to improve understanding of how tacit knowledge can be effectively transferred from the research institute to the science based entrepreneurial firm. More specifically, we assess under which conditions tacit knowledge contributes to the generation of innovation speed, which is a crucial success parameter for technology based ventures. Using an inductive case study approach, we show that tacit knowledge can only be transferred effectively when a substantial part of the original research team joins the new venture as founders. Our analysis also reveals that the mere transfer of tacit knowledge is insufficient to ensure the successful commercialization of technology. Commercial expertise is also required on the condition that the cognitive distance between the scientific researchers and the person responsible for market interaction is not too large. Our findings have implications for science based entrepreneurs, technology transfer officers, venture capitalists, policy makers and the academic community.
    Keywords: science based entrepreneurial firms; tacit knowledge; technology transfer; innovation speed; cognitive distance
    Date: 2009–01

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