nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2009‒09‒11
ten papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. The Effect of Motivations on Social Indirect Reciprocity: an Experimental Analysis By Luca Stanca; Luigino Bruni; Marco Mantovani
  2. Mental Equilibrium and Rational Emotions By Eyal Winter; Ignacio Garcia-Jurado; Jose Mendez-Naya; Luciano Mendez-Naya
  3. Transitive Regret By Sushil Bikhchandani; Uzi Segal
  4. Psychological Influences on Investors Intention to be Socially Responsible Investors: A comparison what influences SRI intentions among different types of investors By Jansson, Magnus; Biel, Anders
  5. Risk Attitude and Investment Decisions across European Countries: Are Women More Conservative Investors Than Men? By Oleg Badunenko; Nataliya Barasinska; Dorothea Schäfer
  6. Risk aversion and schooling decisions By Christian Belzil; Marco Leonardi
  7. How (Not) to Measure Institutions By Stefan Voigt
  8. Eliciting environmental preferences of Ghanaians in the laboratory: An incentive-compatible experiment By Meroz, Yael; Morone, Andrea; Morone, Piergiuseppe
  9. Judicial Errors and Crime Deterrence: Theory and Experimental Evidence By Matteo Rizzolli; Luca Stanca
  10. Driving Under the Influence of Our Fathers By Hjalmarsson, Randi; Lindquist, Matthew

  1. By: Luca Stanca; Luigino Bruni; Marco Mantovani
    Abstract: This paper investigates the effects of motivations on the perceived kindness of an action within the context of strong social indirect reci- procity. We test experimentally the hypothesis that, for a given dis- tributional outcome, an action is perceived by a third party to be less kind if it can be strategically motivated. The results do not support this hypothesis: social indirect reciprocity is indeed found to be signif- icantly stronger when strategic motivations cannot be ruled out. We interpret these findings as an indication of the role played by team reasoning in explaining reciprocal behavior.
    Keywords: Indirect Reciprocity, Motivations, Social Preferences, Laboratory Experiments
    JEL: D63 C78 C91
    Date: 2009–08
  2. By: Eyal Winter; Ignacio Garcia-Jurado; Jose Mendez-Naya; Luciano Mendez-Naya
    Abstract: We introduce emotions into an equilibrium notion. In a mental equilibrium each player "selects" an emotional state which determines the player's preferences over the outcomes of the game. These preferences typically differ from the players' material preferences. The emotional states interact to play a Nash equilibrium and in addition each player's emotional state must be a best response (with respect to material preferences) to the emotional states of the others. We discuss the concept behind the definition of mental equilibrium and show that this behavioral equilibrium notion organizes quite well the results of some of the most popular experiments in the experimental economics literature. We shall demonstrate the role of mental equilibrium in incentive mechaisms and will discuss the concept of collective emotions, which is based on the idea that players can coordinate their emotional states.
    Date: 2009–09
  3. By: Sushil Bikhchandani (UCLA); Uzi Segal (Boston College)
    Abstract: Preferences may arise from regret, i.e., from comparisons with alternatives forgone by the decision maker. We ask whether regret-based behavior is consistent with non-expected utility theories of transitive choice. We show that the answer is no. If choices are governed by ex ante regret and elation then non-expected utility preferences must be intransitive.
    Keywords: transitivity, regret
    Date: 2009–09–04
  4. By: Jansson, Magnus (University of Gothenburg); Biel, Anders (University of Gothenburg)
    Abstract: This study investigates determinants of equity investments according to socially responsible criteria among Swedish investors such as investment institutions, institutional investors and private investors. In total 38 investment institutions, 60 employees from 19 investment institutions, 453 private investors and 71 institutional investors participated in a questionnaire study. The aim of the study was to investigate financial beliefs and psychological factors that may promote or impede SRI among different types of investors. It was found that while Socially Responsible Investment (SRI) among private and institutional investors was guided by self-transcendent values (environmental and social values), this was not the case among fund managers working in investment institutions. Fund managers were affected by beliefs about long-term returns of SRI. Private investors were, in addition, influenced by beliefs about long-term returns, while institutional investors were motivated by an effort to reduce financial risks. Finally, investment institutions tended to overrate the importance of financial returns among their beneficiaries (private and institutional beneficiaries) and underestimate the importance of ethical, environmental and social aspects for beneficiaries. The results indicate that private and institutional investors/beneficiaries give a wider interpretation of fiduciary duty than institutional investors do.
    Keywords: Socially responsible investment; Investment decisions; Ethical investments; Values; Beliefs
    Date: 2009–09–02
  5. By: Oleg Badunenko; Nataliya Barasinska; Dorothea Schäfer
    Abstract: This study questions the popular stereotype that women are more risk averse than men in their investment decisions. The analysis is based on micro-level data from large-scale surveys of private households in five European countries. We enrich the conventional approach to examination of gender differences by explicitly controlling for investors' self-perceived risk aversion. Our results confirm the gender stereotype only partially. We find that women are less likely to hold risky assets. However, female owners of risky assets allocate an equal or even a higher share of their wealth to these assets than men. Our findings suggest that especially in case of women, the declared attitude toward financial risks may be misleading as it does not necessarily reflect the actual willingness to bear risks.
    Keywords: gender, risk aversion, financial behavior
    JEL: G11 J16
    Date: 2009
  6. By: Christian Belzil (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, ENSAE - École Nationale de la Statistique et de l'Administration Économique - ENSAE); Marco Leonardi (Università degli studi di Milano - Università di Milano - Università degli studi di Milano)
    Abstract: Using unique Italian panel data in which individual differences in attitudes toward risk are measurable (from a lottery pricing question), we investigate the effect of the individual specific time invariant risk aversion factor on the probability of entering higher education. Apart from the risk aversion factor, absolute risk aversion depends on various state variables (wealth, liquidity constraints, back- ground risk) and is assumed to be measured with nonclassical error. We also take into account the endogeneity of the response to the risk aversion question, as well as potential non-classical measurement error in wealth. All model specifications point out to the fact that individual specific risk aversion acts as a deterrent to higher education investment.
    Keywords: Risk Aversion, Ex-ante risk, schooling, subjective beliefs, dynamic discrete choices
    Date: 2009–08–26
  7. By: Stefan Voigt (MACIE (Philipps University Marburg), Barfüßertor 2, 35032 Marburg, Germany; CESifo; ICER, Torino)
    Abstract: The statement “institutions matter” has become commonplace. A precondition for it to be supported by empirical evidence, is, however, that institutions are measurable. Glaeser et al. (2004) attacks many studies claiming to prove the relevance of institutions for economic development as being based on flawed measures of institutions, or not even on institutions at all. This paper shows that their criticism deserves to be taken seriously, but that it is somewhat overblown. Some of the difficulties in measuring institutions are described and some ways of measuring them are proposed.
    Keywords: Institutions, Institutions vs. Policies, Measurement, Formal vs. Informal Institutions
    JEL: B41 H11 K00 O17 O43 O57
    Date: 2009
  8. By: Meroz, Yael; Morone, Andrea; Morone, Piergiuseppe
    Abstract: In this paper we aim to look into the attributes of Ghanaians’ willingness-to-pay for green products. This would help us to assess whether Ghanaians show a preference towards environmental goods. The methodology employed to address these issues is an ‘experimentally-adapted’ CV survey which involves laboratory experiment conducted among Ghanaian University students. Notwithstanding the limitations arising from the sample used in our experiment (most notably University students do not represent, economically wise, the entire Ghanaian population), we believe that our investigation provides a first answer to such question as Ghanaians consistently show that they are willing to pay an extra premium for green products.
    Keywords: contingent valuation; experiment; incentive-compatible; Ghana; organic products; willingness to pay.
    JEL: O10 Q56 C91
    Date: 2009–09–04
  9. By: Matteo Rizzolli; Luca Stanca
    Abstract: The standard economic theory of crime deterrence predicts that the conviction of an innocent (type-I error) is as detrimental to deterrence as the acquittal of a guilty individual (type-II error). In this paper, we qualify this result theoretically, showing that in the presence of risk aversion, loss-aversion, or differential sensitivity to procedural fairness, type-I errors can have a larger effect on deterrence than type-II errors. We test these predictions with an experiment where participants make a decision on whether to steal from other individuals, being subject to different probabilities of judicial errors. The results indicate that both types of judicial errors have a large and significant impact on deterrence, but these effects are not symmetric. An increase in the probability of type-I errors has a larger negative impact on deterrence than an equivalent increase in the probability of type-II errors. This asymmetry is largely explained by risk aversion and, to a lesser extent, type-I error aversion.
    Keywords: Judicial errors, criminal procedure, procedural fairness, experimental economics, law and economics, crime, deterrence
    JEL: C91 K14 K41 K42
    Date: 2009–08
  10. By: Hjalmarsson, Randi (Univerisity of Maryland); Lindquist, Matthew (Dept. of Economics, Stockholm University)
    Abstract: This paper studies intergenerational correlations in drunk driving between fathers and their children using the Stockholm Birth Cohort. We find strong evidence of an intergenerational drunk driving relationship. Cohort members who have fathers with a drunk driving record have 2.59 times higher odds of having a drunk driving conviction themselves than cohort members with non-drunk driving fathers. We then go on to investigate the underlying mechanisms that give rise to these correlations. The results provide compelling evidence that at least some of this relationship represents a behavior-specific transference from fathers to their children. Specifically, much of the raw father-child drunk driving relationship persists over and above controls for a number of potential explanations, including that the relationship is: (i) a by-product of parental alcoholism, (ii) symptomatic of a general pattern of non-law abiding behavior, (iii) attributable to inherited ability and physical characteristics, and (iv) accounted for by common background variables or social factors. We then go on to show how this mechanism may change over time. As cohort members age into adulthood, the father-child drunk driving relationship appears to be driven by a more general behavioral transference mechanism and can be accounted for by parental alcoholism and non-law abiding behavior.
    Keywords: alcohol; crime; drunk driving; illegal behavior; intergenerational crime; intergenerational mobility; risky behavior
    JEL: J62 K42
    Date: 2009–09–07

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