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on Cognitive and Behavioural Economics |
| By: | David Colander; Richard P.F. Holt; J. Barkley Rosser |
| Abstract: | This article argues that the neoclassical era in economics has ended and is being replaced by a new era. What best characterizes the new era is its acceptance that the economy is complex, and thus that it might be called the complexity era. The complexity era has not arrived through a revolution. Instead, it has evolved out of the many strains of neoclassical work, along with work done by less orthodox mainstream and heterodox economists. It is only in its beginning stages. The article discusses the work that is forming the foundation of the complexity era, and how that work will likely change the way in which we understand economic phenomena and the economics profession. |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:mdl:mdlpap:1001&r=cbe |
| By: | Sonia Di Giannatale (Centro de Investigación y Docencia Económicas); Alexander Elbittar (Centro de Investigación y Docencia Económicas); Patricia López Rodriguez (Universidad Iberoamericana); María José Roa (Centro de Investigación y Docencia Económicas) |
| Abstract: | In this paper we analyze the relationship between financial decisions, information acquisition, and trust. In particular, our hypothesis is that financial transactions depend, among other variables, on the level of trust, reciprocity and association among individuals. Also, individuals’ willingness to acquire and process information relevant to perform financial transactions is related not only to their cognitive abilities, but also to the level of trust they have in the financial institutions. We conducted a field experiment using the trust game, with two important variations, with the partners of an of credit and savings cooperative located in a rural area of México. Our results indicate that those individuals who frequently visit their friends show greater willingness to trust other individuals. In contrast, those individuals who visit their families more regularly show less willingness to reciprocate, while active members of the cooperative show greater reciprocity. Regarding the acquisition of information, we find that just over 2/3 of the participants buy the maximum of pieces of information. However, none of the pieces of information acquired appears to affect the transfers among participants. Possibly for our experimental subjects trust plays an overextended role in financial decision making that makes information acquisition less relevant than it is for other types of individuals making the same sort of decisions. |
| Keywords: | Social Networks, Information, Social Preferences, Cooperation, Trust, Reciprocity, Financial Development, Field Experiments |
| Date: | 2010–02–17 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:10/02&r=cbe |
| By: | Hill, Ruth Vargas; Maruyama, Eduardo; Viceisza, Angelino |
| Abstract: | We present results from an artefactual field experiment conducted in rural Peru that considers how observing nonreciprocal behavior influences an individual's decision to reciprocate. Specifically, we consider the behavior of second movers in a trust game, assessing how their decision to reciprocate is influenced by the observed behavior of others and the extent to which their actions can be observed. In documenting how an external shock to the number observed not to reciprocate influences reciprocation, the paper endeavors to provide some insight into how reciprocity can unravel when individuals are learning behavior in a new market institution. |
| Keywords: | artefactual field experiment, norms, nonreciprocal behavior, Trust, Markets, Institutions, |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:948&r=cbe |
| By: | Florian Artinger (Max Planck Institute for Human Development and Technical University Berlin); Filippos Exadaktylos (University of Granada); Hannes Koppel (Max Planck Institute of Economics); Lauri Sääksvuori (Max Planck Institute of Economics) |
| Abstract: | The quadratic scoring rule (QSR) is often used to guarantee an incentive compatible elicitation of subjective probabilities over events. Experimentalists have regularly not been able to ensure that subjects fully comprehend the consequences of their actions on payoffs given the rules of the games. In this note, we present a procedure that allows the transparent use of the QSR even in multiple-choice scenarios. For that purpose, two methodological means are applied: an alternative representation of the score and a short learning period to familiarize subjects with the payoff mechanism. The results suggest that both means were necessary and successful in facilitating subjects’ understanding of the rule. |
| Keywords: | quadratic scoring rule, belief elicitation, saliency, experiment |
| Date: | 2010–02–10 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:10/01&r=cbe |
| By: | Serra, Danila (Florida State University); Serneels, Pieter (University of East Anglia); Barr, Abigail (University of Oxford) |
| Abstract: | Economists have traditionally assumed that individual behavior is motivated exclusively by extrinsic incentives. Social psychologists, in contrast, stress that intrinsic motivations are also important. In recent work, economic theorists have started to build psychological factors, like intrinsic motivations, into their models. Besley and Ghatak (2005) propose that individuals are differently motivated in that they have different "missions," and their self-selection into sectors or organizations with matching missions enhances organizational efficiency. We test Besley and Ghatak's model using data from a unique cohort study. We generate two proxies for intrinsic motivations: a survey-based measure of the health professionals’ philanthropic motivations and an experimental measure of their pro-social motivations. We find that both proxies predict health professionals' decision to work in the non-profit sector. We also find that philanthropic health workers employed in the non-profit sector earn lower wages than their colleagues. |
| Keywords: | sector choice, intrinsic motivation, non-profit |
| JEL: | C93 I11 J24 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4746&r=cbe |
| By: | Caliendo, Marco (IZA); Cobb-Clark, Deborah A. (Australian National University); Uhlendorff, Arne (University of Mannheim) |
| Abstract: | Standard job search theory assumes that unemployed individuals have perfect information about the effect of their search effort on the job offer arrival rate. In this paper, we present an alternative model which assumes instead that each individual has a subjective belief about the impact of his or her search effort on the rate at which job offers arrive. These beliefs depend in part on an individual's locus of control, i.e., the extent to which a person believes that future outcomes are determined by his or her own actions as opposed to external factors. We estimate the impact of locus of control on job search behavior using a novel panel data set of newly-unemployed individuals in Germany. Consistent with our theoretical predictions, we find evidence that individuals with an internal locus of control search more and that individuals who believe that their future outcomes are determined by external factors have lower reservation wages. |
| Keywords: | job search behavior, search effort, reservation wage, locus of control, unemployment duration |
| JEL: | J64 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4750&r=cbe |
| By: | Amélie Goossens (DULBEA, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels.); Pierre-Guillaume Méon (Centre Emile Bernheim and DULBEA, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels.) |
| Abstract: | Using a survey of a large group of first and final-year students of different disciplines, to study their belief in the existence of mutual benefits of voluntary transactions, we observe significant differences between economics and business students on the one hand, and students of other disciplines on the other hand. Those differences increase over time, due to economics students increasingly supporting that belief, and other students increasingly disagreeing with it. Beliefs of students specializing in the same topic also become more homogeneous over time. We therefore report evidence of both a selection and a learning effect of studying different disciplines. |
| Keywords: | Higher education, learning, self-selection, beliefs, fairness of the market. |
| JEL: | A13 A20 B40 D01 D63 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:10-012&r=cbe |
| By: | Kevin Amonlirdviman; Carlos Carvalho |
| Abstract: | Loss aversion has been used to explain why a high equity premium might be consistent with plausible levels of risk aversion. The intuition is that the different utility impact of wealth gains and losses leads loss-averse investors to behave similarly to investors with high risk aversion. But if so, should these agents not perceive larger gains from international diversification than standard expected-utility preference agents with plausible levels of risk aversion? They might not, because comovements in international stock markets are asymmetric: Correlations are higher in market downturns than in upturns. This asymmetry dampens the gains from diversification relatively more for loss-averse investors. We analyze the portfolio problem of such an investor who has to choose between home and foreign equities in the presence of asymmetric comovement in returns. Perhaps surprisingly, in the context of the home bias puzzle we find that the loss-averse investors behave similarly to those with standard expected-utility preferences and plausible levels of risk aversion. We argue that preference specifications that appear to perform well with respect to the equity premium puzzle should be subjected to this "test." |
| Keywords: | Stocks - Rate of return ; Risk ; Investments ; Portfolio management |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:430&r=cbe |
| By: | Barr, Jason; Saraceno, Francesco (Centre de recherche en économie de Sciences Po) |
| Abstract: | This paper models the organization of the firm as a type of artificial neural network in a duopoly setting. The firm plays a repeated Prisoner’s Dilemma type game, and must also learn to map environmental signals to demand parameters and to its rival’s willingness to cooperate. We study the prospects for cooperation given the need for the firm to learn the environment and its rival’s output. We show how profit and cooperation rates are affected by the sizes of both firms, their willingness to cooperate, and by environmental complexity. In addition, we investigate equilibrium firm size and cooperation rates. |
| Keywords: | Artificial neural networks;; Prisoner’s Dilemma;; Cooperation;; Firm learning; |
| JEL: | C63 C72 D21 D83 L13 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:ner:sciepo:info:hdl:2441/9832&r=cbe |