nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2009‒05‒16
ten papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Fairness Motivations and Procedures of Choice between Lotteries as Revealed through Eye Movements By Amos Arieli; Yaniv Ben-Ami; Ariel Rubinstein
  2. Effects of Impulsivity and Self-control on Calorie Intake By Asirvatham, Jebaraj; McNamara, Paul E.
  3. Myopia, regrets and risky behaviors By Pierre Pestieau; Grégory Ponthière
  4. Herd Behavior in Financial Markets: An Experiment with Financial Market Professionals By Antonio Guarino; Marco Cipriani
  5. Mass Psychology in Action: Identification of Social Interaction Effects in the German Stock Market By Thomas Lux
  6. Emotional Decision-Makers and Anomalous Attitudes towards Information By F. Barigozzi; R. Levaggi
  7. Scale Dependence of Overconfidence in Stock Market Volatility Forecasts By Glaser, Markus; Langer, Thomas; Reynders, Jens; Weber, Martin
  8. How groups reach agreement in risky choices: an experiment. By M. Casari; J. Zhang
  9. Efficiency Gains from Team-Based Coordination – Large-Scale Experimental Evidence By Francesco Feri; Bernd Irlenbusch; Matthias Sutter

  1. By: Amos Arieli; Yaniv Ben-Ami; Ariel Rubinstein
    Date: 2009–05–06
  2. By: Asirvatham, Jebaraj; McNamara, Paul E.
    Abstract: Neoclassical economic theory models individuals as making consistent choices over time and it assumes these choices are the outcome of rational utility maximization. Recent theoretical developments in the theory of consumer decision-making have drawn evidence from other disciplines such as, neuroscience (McClure et al, 2004) and psychology, and proposed more generalized models in a dual-self framework explicitly accounting for self-control or impulsivity (Gul and Pesendorfer, 2004; Fudenberg and Levine, 2006; and Brocas and Carillo, 2008). This study attempts to understand the dietary choices in a dual-self framework while explicitly identifying calorie intake owing to impulsivity and self-control. We construct standard psychological measures using the responses to the Dutch Eating Behavioral Questionnaire (DEBQ) filled by the respondents of the UK Diet and Nutrition Survey. These measures have been tested for their validity and apply to a broad range of population: of different weights, across gender, ethnicity (Bardone-Cone, and Boyd, 2007) and are used in experiments (Ouwens, 2005).Using panel data methods, we find that impulsivity increases calorie intake and self-control decreases calorie intake. Further, caloric intake is larger than one can restrain and therefore the result of the intrapersonal conflict is positive calories intake on average.
    Keywords: Self-control, Nutrition, diet, health, impulsivity, BMI, Consumer/Household Economics, Food Consumption/Nutrition/Food Safety, Health Economics and Policy, Institutional and Behavioral Economics, D12, D03, I00,
    Date: 2009
  3. By: Pierre Pestieau; Grégory Ponthière
    Abstract: This paper examines how a government should intervene when agents make, for different reasons, choices that have long term detrimental effects on their survival prospects. We consider an economy where some agents make risky choices (here sin good consumption) out of myopia, and regret their choices later on, whereas other agents make, because of their impatience, the same risky choices, which they never regret. We argue that, in the first-best, a government should only interfere with behaviors that agents regret, but not with other behaviors. In the second-best, asymmetric information and redistributive concerns imply interference not only with myopic behaviors, but also with impatience-based behaviors. Finally, we introduce heterogeneity in individual productivity, and show that the optimal tax on the sin good depends on the size of the myopic group, on the reactivity of sin good consumption to tax changes, and on the extent to which sin good consumption is correlated with labor earnings.
    Date: 2009
  4. By: Antonio Guarino (University College London); Marco Cipriani (George Washington University)
    Abstract: We study herd behavior in a laboratory ?nancial market with ?- nancial market professionals. An important novelty of the experi- mental design is the use of a strategy-like method. This allows us to detect herd behavior directly by observing subjects?decisions for all realizations of their private signal. In the paper, we compare two treatments - one in which the price adjusts to the order ?ow in such a way that herding should never occur, and one in which the presence of event uncertainty makes herding possible. In the ?rst treatment, traders herd seldom, in accordance with both the theory and previous experimental evidence on student subjects. A proportion of traders, however, engage in contrarianism, something not accounted for by the theory. In the second treatment, on the one hand, the proportion of herding decisions increases, but not as much as the theory would sug- gest; on the other hand, contrarianism disappears altogether. In both treatments, in contrast with what theory predicts, subjects sometimes prefer to abstain from trading, which a¤ects the process of price discovery negatively.
    Date: 2008–02
  5. By: Thomas Lux
    Abstract: We use weekly survey data on short-term and medium-term sentiment of German investors to estimate the parameters of a stochastic model of opinion dynamics. The bivariate nature of our data set also allows us to explore the interaction between the two hypothesized opinion formation processes, while consideration of the simultaneous weekly changes of the stock index DAX enables us to study the influence of sentiment on returns within a behavioral model of boundedly rational traders. Technically, we extend the maximum likelihood framework for parameter estimation in agent-based models introduced by Lux (2009a) by generalizing it to bivariate and trivariate settings. As it turns out, short-term sentiment is governed by strong social interaction with abrupt changes of direction while medium-term sentiment is a slowly moving process with more moderate social interaction. The trivariate model can potentially predict stock returns out-of-sample on the base of medium-run sentiment at least if an apparently spurious influence from short-run sentiment is discarded
    Keywords: Opinion formation, social interaction, investor sentiment
    JEL: G12 D84
    Date: 2009–04
  6. By: F. Barigozzi; R. Levaggi
    Date: 2009–02
  7. By: Glaser, Markus (Sonderforschungsbereich 504); Langer, Thomas (Westfälischen Wilhelms-Universität Münster Lehrstuhl für BWL, insbesondere Finanzierung); Reynders, Jens; Weber, Martin (Lehrstuhl für ABWL, Finanzwirtschaft, insb. Bankbetriebslehre)
    Abstract: In this study, we analyze whether volatility forecasts (judgmental confidence intervals) are influenced by the specific elicitation mode (i.e. whether forecasters have to state future price levels or directly future returns as upper and lower bounds). We present questionnaire responses of about 250 students from two German universities. Participants were asked to state median forecasts as well as confidence intervals for seven stock market time series. Using a between subject design, one half of the subjects was asked to state future price levels, the other group was directly asked for returns. Consistent with prior research we find that subjects underestimate the volatility of stock returns, indicating overconfidence. As a new insight, we find that the strength of the overconfidence effect in stock market forecasts is highly significantly affected by the fact whether subjects provide price or return forecasts. Volatility estimates are lower (and the overconfidence bias is thus stronger) when subjects are asked for returns compared to price forecasts.
    Date: 2008–12–03
  8. By: M. Casari; J. Zhang
    Date: 2009–04
  9. By: Francesco Feri (Department of Public Finance, University of Innsbruck); Bernd Irlenbusch (London School of Economics & Political Science - Department of Management; Institute for the Study of Labor (IZA)); Matthias Sutter (University of Innsbruck - Department of Public Economics; University of Gothenburg - Department of Economics)
    Abstract: The need for efficient coordination is ubiquitous in organizations and industries. The literature on the determinants of efficient coordination has focused on individual decision making so far. In reality, however, teams often have to coordinate with other teams. We present a series of coordination experiments with a total of 1,101 participants. We find that teams of three subjects each coordinate much more efficiently than individuals. This finding adds one important cornerstone to the recent literature on the conditions for successful coordination. We explain the differences between individuals and teams using the experience weighted attraction learning model.
    JEL: C71 C91 C92
    Date: 2009–04
  10. By: Daniele Nosenzo (University of Nottingham); Martin Sefton (University of Nottingham)
    Abstract: In this paper we examine voluntary contributions to a public good when the timing of contributions is endogenously determined by contributors, focusing on the simple quasi-linear setting with two players (Varian, 1994). We show that the move order that is predicted to emerge is sensitive to how commitment opportunities are modeled. We show that a favorable move order is predicted to emerge in Hamilton and Slutsky's (1990) "observable delay" extended game, but a detrimental move order is predicted to emerge in their "action commitment" extended game. We then report a laboratory experiment designed to examine whether the predicted move ordering emerges, and how this impacts overall contributions, in these extended games. The results are similar in both extended games. We find that when the detrimental move order is observed, contributions are indeed lower, as predicted. However, this detrimental move order is seldom observed. Instead of committing to low contributions, players tend to avoid making a commitment. These experimental results on timing decisions suggest that commitment opportunities may be less damaging to public good provision than previously thought.
    Keywords: Public Goods, Voluntary Contributions, Sequential Contributions, Endogenous Timing, Action Commitment, Observable Delay, Experiment
    JEL: H41 C72 C92
    Date: 2009–04

This nep-cbe issue is ©2009 by Marco Novarese. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.