nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2010‒02‒05
seven papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. An Evolutionary Theory of Household Consumption Behavior By Nelson, Richard; Consoli, Davide
  2. How embodied cognitions affect judgments: Height-related attribution bias in football foul calls By Quaquebeke, N. van; Giessner, S.R.
  3. Sense of Control Affects Investment Behavior By Li King King
  4. Impacts of Personality on Herding in Financial Decision-Making By Baddeley, M.; Burke, C.; Schultz, W.; Tobler, T.
  5. Will You Accept Without Knowing What? A Thuringian Newspaper Experiment of the Yes-No Game By Werner Güth; Oliver Kirchkamp
  6. Concepts of price fairness: Empirical research into the Dutch coffee market By Gielessen, R.; Graafland, J.J.
  7. Do we believe in climate change? A multi-agent climate-economic model By Sylvie Geisendorf

  1. By: Nelson, Richard; Consoli, Davide
    Abstract: Evolutionary economics badly needs a behavioral theory of household consumption behavior, but to date only limited progress has been made on that front. Partly because Schumpeter's own writings were focused there, and partly because this has been the focus of most of the more recent empirical work on technological change, modern evolutionary economists have focused on the "supply side". However, because a significant portion of the innovation going on in capitalist countries has been in the form of new consumer goods and services, it should be obvious that dealing coherently with the Schumpeterian agenda requires a theory which treats in a realistic way how consumers respond to new goods and services. The purpose of this essay is to map out a broad alternative to the neoclassical theory of consumer behavior.
    Keywords: Household Consumption Behaviour; Evolutionary Economics
    JEL: D11 O33 D83
    Date: 2010–01–22
  2. By: Quaquebeke, N. van; Giessner, S.R. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Many fouls committed in football (called soccer in some countries) are ambiguous, and there is no objective way of determining who is the “true†perpetrator or the “true†victim. Consequently, fans as well as referees often rely on a variety of decision cues when judging such foul situations. Based on embodiment research, which links perceptions of height to concepts of strength, power, and aggression, we argue that height is going to be one of the decision cues used. As a result, people are more likely to attribute a foul in an ambiguous tackle situation to the taller of two players. We find consistent support for our hypothesis, not only in field data spanning the last seven UEFA Champions League and German Bundesliga seasons, as well as the last three FIFA World Cups, but also in two experimental studies. The resulting dilemma for refereeing in practice is discussed.
    Keywords: dominance;power;refereeing;decision making;decision cue;information processing
    Date: 2010–02–01
  3. By: Li King King (Strategic Interaction Group, Max Planck Institute of Economics, Jena)
    Abstract: Preference for control affects investment behavior. Participants of laboratory experiments invest different amount of money in a risky asset when face with two different methods of control which have identical payoff structure and probability distribution, but provide different sense of control. Preference for controlling and not controlling are both observed. Participants increase their investment when their preferred method of control is used. Participants who prefer to control more reduce their investment more strongly when face with less control. Preference for control has larger effect on investment behavior when participants are induced to have a comparative mindset rather than non-comparative mindset.
    Keywords: Preference for control, sense of control, risk attitudes, illusion of control, source preference, portfolio choice, behavioral finance, comparative mindset, non-comparative mindset
    JEL: B49 C91 D81 G11 G19
    Date: 2010–01–20
  4. By: Baddeley, M.; Burke, C.; Schultz, W.; Tobler, T.
    Abstract: Experimental analyses have identified significant tendencies for individuals to follow herd decisions, a finding which has been explained using Bayesian principles of statistical inference. This paper outlines the results from a herding task designed to extend these analyses. Empirically, we estimate logistic functions using panel fixed effect estimation techniques to quantify the impact of herd decisions on individuals‘ decisions about whether or not to buy a financial asset. We confirm that there are statistically significant propensities to herd and that social information about others‘ decisions has an impact on individuals‘ decisions. We extend these findings by identifying associations between herding propensities and individual characteristics such as gender, age and specific personality traits including impulsivity and venturesomeness.
    Keywords: herding, social influence, financial decision making, personality
    JEL: D81 C92 G14
    Date: 2010–01–22
  5. By: Werner Güth (Strategiec Interaction Group, Max Planck Institute of Economics, Jena); Oliver Kirchkamp (Friedrich-Schiller-University Jena, School of Economics and Business Administration)
    Abstract: Many economic experiments are run in the laboratory with students as participants. In this paper we use a newspaper experiment to learn more about external validity of lab research. Our workhorse is the Yes-No game. Unlike in ultimatum games responders of the Yes-No games do not know the proposal when deciding between whether to accept it or not. We use two different amounts that can be shared (100 Euro and 1000 Euro). In line with findings for the ultimatum game, offers were fairer and rejections less likely when participants are older and submit their decisisons via mail rather than the Internet. By comparing our results with other studies (using executives or students), we demonstrate, at least for this type of game, the external validity of lab research.
    JEL: C91 C93
    Date: 2010–01–25
  6. By: Gielessen, R.; Graafland, J.J.
    Abstract: This paper researches perceptions of the concept of price fairness in the Dutch coffee market. We distinguish four alternative standards of fair prices based on egalitarian, basic rights, capitalistic and libertarian approaches. We investigate which standards are guiding the perceptions of price fairness of citizens and coffee trade organizations. We find there is a divergence in views between citizens and key players in the coffee market. Whereas citizens support the concept of fairness derived from the basic rights approach, holding that the price should provide coffee farmers with a minimum level of subsistence, representatives of Dutch coffee traders hold the capitalistic view that the free world market price is fair.
    Keywords: Fair price; coffee market; justice; fair trade; libertarianism; moral desert; egalitarianism
    JEL: D63 A13 L31 D49 P16
    Date: 2009
  7. By: Sylvie Geisendorf (Department of Economics, University of Kassel)
    Abstract: Climate-economic models are mainly intertemporal cost-benefit analyses, trying to balance the damages from climate change against mitigation costs and derive an optimal climate policy. In recent years, the huge importance of uncertainty about climate behaviour impinging such models has been emphasized and it has been argued that one-shot intertemporal optimization is an unrealistic venture. However, only few authors tried to explicitly model the impact of uncertainty on agents’ beliefs and resulting behaviour. Janssen´s (1996) “battle of perspectives” multi-agent climate-economy model is a notable exception. Based on a macro-economic climate-economy model, he implemented adaptive agents, holding different perspectives on the dynamics of climate change and necessary preventive action. The present paper aims to make a case for this model which has gone largely unnoticed by climate economics. It argues for more multi-agent based research in climate economics to analyse the importance of human beliefs. Finally, the paper will update the “battle of perspectives” with current data to investigate the significance of uncertain data for economic climate change models.
    Keywords: climate change, climate-economy models, multi-agent modelling, mitigation, perceptions,bounded rationality, learning
    Date: 2009–12

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