nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2009‒11‒07
eleven papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Motivational Goal Bracketing By Koch, Alexander K.; Nafziger, Julia
  2. Targeting Non-Cognitive Skills to Improve Cognitive Outcomes: Evidence from a Remedial Education Intervention By Holmlund, Helena; Silva, Olmo
  3. Microfoundations of Social Capital By Christian Thöni; Jean-Robert Tyran; Erik Wengström
  4. Confusion and Reinforcement Learning in Experimental Public Goods Games By Ralph-C Bayer; Elke Renner; Rupert Sausgruber
  5. Retaining the Thin Blue Line: What shapes workers’ willingness not to quit the current work environment? By Martin Gachter; David A. Savage; Benno Torgler
  6. An experimental study into the influence of works council advice on managerial decision-making By Saraï Sapulete; Arjen van Witteloostuijn; Wesley Kaufmann
  7. On Price Data Elicitation: a Laboratory Investigation By Morone, Andrea
  8. Irrational Financial Markets By Fabrice Rousseau; Laurent Germain; Fabrice Rousseau; Anne Vanhems
  10. A Dynamic Ellsberg Urn Experiment By Dominiak, Adam; Dürsch, Peter; Lefort, Jean-Philippe
  11. Procedural Rationality and Happiness By Novarese, Marco; Castellani, Marco; Di Giovinazzo, Viviana

  1. By: Koch, Alexander K. (University of Aarhus); Nafziger, Julia (University of Aarhus)
    Abstract: It is a puzzle why people often evaluate consequences of choices separately (narrow bracketing) rather than jointly (broad bracketing). We study the hypothesis that a present-biased individual, who faces two tasks, may bracket his goals narrowly for motivational reasons. Goals motivate because they serve as reference points that make substandard performance psychologically painful. A broad goal allows high performance in one task to compensate for low performance in the other. This partially insures against the risk of falling short of ones' goal(s), but creates incentives to shirk in one of the tasks. Narrow goals have a stronger motivational force and thus can be optimal. In particular, if one task outcome becomes known before working on the second task, narrow bracketing is always optimal.
    Keywords: goals, multiple tasks, motivational bracketing, self-control, time inconsistency, psychology
    JEL: A12 C70 D91
    Date: 2009–10
  2. By: Holmlund, Helena (CEP, London School of Economics); Silva, Olmo (London School of Economics)
    Abstract: A growing body of research highlights the importance of non-cognitive skills as determinants of young people's cognitive outcomes at school. However, little evidence exists about the effects of policies that specifically target students' non-cognitive skills as a way to improve educational achievements. In this paper, we shed light on this issue by studying a remedial education programme aimed at English secondary school pupils at risk of school exclusion and with worsening educational trajectories. The main peculiarity of this intervention is that it solely targets students' non-cognitive skills – such as self-confidence, locus of control, self-esteem and motivation – with the aim of improving pupils' records of attendance and end-of-compulsory-education (age 16) cognitive outcomes. We evaluate the effect of the policy on test scores in standardized national exams at age-16 using both least squares and propensity-score matching methods. Additionally, we exploit repeated observations on pupils’ test scores to control for unobservables that might affect students’ outcomes and selection into the programme. We find little evidence that the programme significantly helped treated youths to improve their age-16 test outcomes. We also find little evidence of heterogeneous policy effects along a variety of dimensions.
    Keywords: cognitive and non-cognitive skills; policy evaluation; secondary schooling
    JEL: C20 I20 H75
    Date: 2009–10
  3. By: Christian Thöni (University of St. Gallen); Jean-Robert Tyran (Department of Economics, University of Copenhagen); Erik Wengström (Department of Economics, University of Copenhagen)
    Abstract: We show that the standard trust question routinely used in social capital research is importantly related to cooperation behavior and we provide a microfoundation for this relation. We run a large-scale public goods experiment over the internet in Denmark and find that the trust question is a proxy for cooperation preferences rather than beliefs about others’ cooperation. To disentangle the preference and belief channels, we run a (standard) public goods game in which beliefs matter for cooperation choices and one (using the strategy method) in which they do not matter. We show that the “fairness question”, a recently proposed alternative to the “trust question”, is also related to cooperation behavior but operates through beliefs rather than preferences.
    Keywords: Social capital; Trust; Fairness; Public goods; Cooperation; Experiment
    JEL: H41 C91 C72
    Date: 2009–10
  4. By: Ralph-C Bayer; Elke Renner (School of Economics, University of Nottingham, United Kingdom); Rupert Sausgruber
    Abstract: We use a limited information environment to mimic the state of confusion in an experimental, repeated public goods game. The results show that reinforcement learning leads to dynamics similar to those observed in standard public goods games. However, closer inspection shows that individual decay of contributions in standard public goods games cannot be fully explained by reinforcement learning. According to our estimates, learning only accounts for 41 percent of the decay in contributions in standard public goods games. The contribution dynamics of subjects, who are identified as conditional cooperators, differ strongly from the learning dynamics, while a learning model estimated from the limited information treatment tracks behavior for subjects, who cannot be classified as conditional cooperators, reasonably well.
    Keywords: public goods experiments, learning, limited information, confusion, conditional cooperation
    JEL: C90 D83 H41
    Date: 2009–10
  5. By: Martin Gachter; David A. Savage; Benno Torgler
    Abstract: The purpose of this study is to investigate the determinants of police officers‘ willingness to quit their current department. For this purpose, we work with US survey data that covers a large set of police officers for the Baltimore Police Department in Maryland. Our results indicate that more effective cooperation between units, a higher trust in the work partner, a higher level of interactional justice and a higher level of work-life-balance reduces police officers‘ willingness to quit the department substantially. On the other hand, higher physical and psychological stress and the expereicene of traumatic events are not, ceteris paribus, correlated with the willingness to leave the department. It might be that police officers accept stress as an acceptable factor in their job description.
    Keywords: Willingness to Quit the Job; Turnover Rates: Job Satisfaction; Stress; Police Officers; Work-Life Balance; Fairness; Acceptance.
    JEL: I10 I12 I31 J24 J81 Z13
    Date: 2009–10–28
  6. By: Saraï Sapulete; Arjen van Witteloostuijn; Wesley Kaufmann
    Abstract: This paper experimentally studies the potential effect of works councils on managerial decision-making. Empirical evidence on the influence of works councils in organizations is still mixed. Therefore, this experimental study tries to gain more insights into the mechanisms that may underlie the impact of works council advice. First, we try to explain whether advice given by a works council influences the decision managers make. Second, we attempt to explain whether works councils delay the decision-making process. In order to answer these questions, we conducted experiments with undergraduate students, who played a two-player Prisoner's Dilemma price-setting game. One group received advice from a works council, whilst the other group did not. As expected, advice does have an influence on decision-making: receiving advice for setting a low price leads to a higher likelihood to set a low price as well, and receiving advice to set a high price leads to a high price decision. Female managers are more likely to take the works council advice into account. Subjects with an other-regarding orientation tend to choose a high price, even when they are advised to opt for a low price. Further, decisionmaking is not delayed by the advice, but there is an interaction effect with gender: female managers receiving advice tend to think longer about their decision.
    Keywords: works council advice, experimental economics, managerial decisionmaking
    JEL: J53 C91 L29
    Date: 2009–10
  7. By: Morone, Andrea
    Abstract: There is abundant literature in experimental research on decision making under risk, which compares, and ranks subjects’ preferences on the basis of some elicitation method. The present paper performs a similar analysis in order to compare them. Since pricing data lead in many cases to some anomalies (i.e. status quo bias endowment effect) we examine three mechanisms to elicit price preferences: willingness-to-pay in a second price auction, willingness-to-accept in a second price auction, and certainty equivalent elicited with BDM. A Bayesian interpretation of our results suggests that it is not possible to state ex-ante the more appropriate elicitation method for a particular subject: for 1/3 of our sample WTP is preferred for 1/3 of our sample WTA is preferred and for the remaining 1/3 BDM is preferred.
    Keywords: willingness-to-pay; willingness-to-accept; BDM; second price auction
    JEL: D81
    Date: 2009–10
  8. By: Fabrice Rousseau (Economics, National University of Ireland, Maynooth); Laurent Germain (Toulouse Business School, France); Fabrice Rousseau (Economics, National University of Ireland, Maynooth); Anne Vanhems (Toulouse Business School, France)
    Abstract: We analyze a model where irrational and rational traders exchange a risky asset with competitive market makers. Irrational traders misperceive the mean of prior information (optimistic/pessimistic bias), the variance of prior information (better/lower than average effect)and the variance of the noise in their private signal (overconfidence/underconfidence bias). When market makers are rational we obtain results identical to Kyle and Wang (1997). However if market makers are irrational, we obtain that moderately underconfident traders can outperform rational ones and that irrational market makers can fare better than rational ones. Lastly we find that extreme level of confidence implies high trading volume.
    Keywords: Irrationality
    Date: 2008
  9. By: Antonio Lopolito; Maurizio Prosperi; Roberta Sisto
    Date: 2009–09
  10. By: Dominiak, Adam; Dürsch, Peter; Lefort, Jean-Philippe
    Abstract: Two rationality arguments are used to justify the link between conditional and unconditional preferences in decision theory: dynamic consistency and consequentialism. Dynamic consistency requires that ex ante contingent choices are respected by updated preferences. Consequentialism states that only those outcomes which are still possible can matter for updated preferences. We test the descriptive validity of these rationality arguments with a dynamic version of Ellsberg's three color experiment and find that subjects act more often in line with consequentialism than with dynamic consistency.
    Keywords: Non expected utility preferences; ambiguity; updating; dynamic consistency; consequentialism
    JEL: C91 D81
    Date: 2009–09–21
  11. By: Novarese, Marco; Castellani, Marco; Di Giovinazzo, Viviana
    Abstract: The Economics of Happiness already recognizes how procedures affect the evaluation of outcomes, although this has only been looked at within the standard framework of substantial rationality. This paper aims to go beyond that kind of approach by linking happiness and procedural rationality, focusing on ‘happiness for choice’ (the individual’s perceived satisfaction after the decision making process). Simon’s model shows the need for defining aspirations whose values are adapted to the past experience in a given environment. Some remarks proposed by Scitovsky’s allow to extend this idea considering the role of creative representation of the world as a way for trying to go beyond the past. These ideas are tested using data on aspirations and satisfaction expressed by students attending an economic course.
    Keywords: Procedural rationality; satisfaction; students; happiness; aspirations
    JEL: D83
    Date: 2009–10–31

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