nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2010‒06‒11
fourteen papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Does a Rose by any other Name Smell as Sweet? A Cognitive Perspective on Poets and Poetry By Maya Bar-Hillel; Alon Maharshak; Avital Moshinsky; Ruth Nofech
  2. The role of parental investments for cognitive and noncognitive skill formation: Evidence for the first 11 years of life By Coneus, Katja; Laucht, Manfred; Reuß, Karsten
  3. Reciprocity and Resistance to Comprehensive Reform By Urs Fischbacher; Simon Schudy
  5. Don’t Tell Me What to Do, Tell Me Who to Follow! - Field Experiment Evidence on Voluntary Donations By Alpízar, Francisco; Martinsson, Peter
  6. Chess players' performance beyond 64 squares: A case study on the limitations of cognitive abilities transfer By Christoph Bühren; Björn Frank
  7. Simultaneous Decision-Making in Competitive and Cooperative Environments By Anya Savikhin; Roman M. Sheremeta
  8. Consumer Ethics: The Role of Self-Regulatory Focus By T. DE BOCK; P. VAN KENHOVE;
  9. The 11-20 Money Request Game: Evaluating the Upper Bound of k-Level Reasoning By Ayala Arad; Ariel Rubinstein
  10. Cooperation Spillovers in Coordination Games By Timothy N. Cason; Anya Savikhin; Roman M. Sheremeta
  11. The Impact of Law Enforcement Design on Legal Compliance By Lisa Bruttel; Tim Friehe
  12. The Ecological and Civil Mainsprings of Property: An Experimental Economic History of Whalers’ Rules of Capture By Bart J. Wilson; Taylor Jaworski; Karl Schurter; Andrew Smyth
  13. Unbiased Disagreement in financial markets, waves of pessimism and the risk return tradeoff By Elyès Jouini; Clotilde Napp
  14. Second Mover Advantage and Bertrand Dynamic Competition: An Experiment By S.N. O'Higgins; Arturo Palomba; Patrizia Sbriglia

  1. By: Maya Bar-Hillel; Alon Maharshak; Avital Moshinsky; Ruth Nofech
    Abstract: Evidence, both anecdotal and scientific, suggests that people treat (or are affected by) products of prestigious sources differently than those of less prestigious or anonymous sources. The "products" which are the focus of the present study are poems, and the "sources" are the poets. We explore the manner in which the poet's name affects the experience of reading a poem. Study 1 shows that a poet's reputation has a major effect on the evaluation of a poem, whereas the poem's quality is hardly discernible to lay readers. Study 2 asks whether the poet's name affects only the reader's reported evaluation (as in The Emperor's New Clothes) or is sincere. Since we conclude it is, Study 3 explores how a poet's name alters the experience of the poem. In the absence of objective criteria for measuring "true poetic experience", we propose some indirect methodological paradigms for addressing this question.
    Date: 2010–05
  2. By: Coneus, Katja; Laucht, Manfred; Reuß, Karsten
    Abstract: This paper examines the impact of parental investments on the development of cognitive, mental and emotional skills during childhood using data from a longitudinal study, the Mannheim Study of Children at Risk, starting at birth. Our work offers three important innovations. First, we use reliable measures of the child's cognitive, mental and emotional skills as well as accurate measures of parental investment. Second, we estimate latent factor models to account for unobserved characteristics of children. Third, we examine the skill development for girls and boys separately, as well as for children who were born with either organic or psychosocial risk. We find a decreasing impact of parental investments on cognitive and mental skills, while emotional skills seem to be unaffected by parental investment throughout childhood. Thus, initial inequality persists during childhood. Since families are the main sources of education during the first years of life, our results have important implications for the quality of the parent-child relationship. --
    Keywords: cognitive skills,noncognitive skills,critical and sensitive periods,self-productivity,inequality,organic risk,psychosocial risk
    JEL: I12 I21 J13
    Date: 2010
  3. By: Urs Fischbacher; Simon Schudy
    Abstract: Comprehensive reforms often fail or become piecemeal during preparatory phase of the legislation. A promising candidate to explain the failure of comprehensive reforms is vote trading on a subset of individual bills included in the original comprehensive reform. When legislators expect profitable vote trading on a subset of bills to be possible, they may ex ante strategically block comprehensive reforms. We analyze in a laboratory experiment whether trust and reciprocity among legislators leads to vote trading in sequential bill by bill procedures when commitment devices are missing and whether such vote trading possibilities cause resistance to comprehensive reform. We find that (i) transparent voting procedures facilitate vote trading based on trust in other legislators' reciprocity whereas (ii) secretive procedures reduce trust in others' reciprocity and makes vote trades difficult. (iii) Resistance to comprehensive reform occurs when legislators know that the alternative procedure to voting on the comprehensive reform is a transparent sequential bill by bill voting procedure, whereas (iv) legislators opt for voting on a comprehensive reform when the alternative procedure is a sequential secret ballot.
    Keywords: Comprehensive Reform, Sequential Voting, Vote Trading, Experiment
    Date: 2010
  4. By: Nazaria Solferino (Dipartimento di Economia e Statistica, Università della Calabria)
    Abstract: Often people procrastinate unpleasant tasks for immediate gratification in doing nothing today. Therefore many scholars have been engaged in designing incentive schemes to avoid it. We think the process is very complicated and many features need to be analyzed, as the subjective evaluations of succeeding and rewards. Moreover, sometime people procrastinate because they feel insecure, investing to improve their performance hoping in a better result in the long run. This process can be dangerous, producing as result that we call “the curse of perfectionism”. Nevertheless procrastination may also have positive consequences if people spend their time in alternative activities, also useful for other ex post best rewarded tasks. We call this case as “productive procrastination”. In this paper we explore all these possibilities and underline conditions for they happen. We also discuss our results according to the difference between naive and sophisticated subjects.
    Keywords: Time-Inconsistent Preferences, Optimal Effort, Procrastination, Inter-temporal Choice
    JEL: A12 D11 D74 D91
    Date: 2010–05
  5. By: Alpízar, Francisco (Environment for Development Center for Central America, CATIE); Martinsson, Peter (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: We conducted a field experiment in a protected area to explore the effects of conformity to a social reference versus a comparable, but imposed, suggested donation. As observed before, we see visitors conforming to the changing social reference. On the other hand, the treatment in which we suggested a donation resulted in lower shares of visitors donating, compared to the social reference treatment, and lower conditional donations even compared to the control. We concluded that visitors look at their peers as a reference to conform to, but partially reject being confronted with an imposed suggestion on how to behave.<p>
    Keywords: Conformity; donation; field experiment
    JEL: C93 D10 D60 Q50
    Date: 2010–06–02
  6. By: Christoph Bühren (University of Kassel); Björn Frank (University of Kassel)
    Abstract: In a beauty contest experiment with over 6,000 chess players, ranked from amateur to world class, we found that Grandmasters act very similar to other humans. This even holds true when they play exclusively against players of approximately their own strength. In line with psychological research on chess players' thinking, we argue that they are not more rational in a game theoretic sense per se. Their skills are rather specific for their game.
    Keywords: chess, beauty contest, cognitive transfer
    JEL: C93 C72
    Date: 2010
  7. By: Anya Savikhin (The University of Chicago); Roman M. Sheremeta (Argyros School of Business and Economics, Chapman University)
    Abstract: MWe experimentally investigate simultaneous decision-making in two contrasting environments: a competitive environment (a contest) and a cooperative environment (a voluntary contribution mechanism). We find that the cooperative nature of the voluntary contribution mechanism spills over to the contest, decreasing sub-optimal overbidding in the contest. However, contributions to the public good are not affected by simultaneous participation in the contest. There is a significant negative correlation between decisions made in competitive and cooperative environments, i.e. more cooperative subjects tend to be less competitive and vice versa. This correlation can be rationalized by heterogeneous social preferences towards inequality but not by bounded rationality theory.
    Keywords: cooperation, competition, public goods, contests, experiments, behavioral spillover
    JEL: C72 C91
    Date: 2010–04
    Abstract: The present study investigates the influence of self-regulatory focus on consumer ethical beliefs (i.e., consumers’ judgment of various unethical consumer practices). The self-regulatory focus framework is highly influential and applies to an impressively wide spectrum of topics across a diverse array of domains. However, previous research has not yet examined the link between this personality construct and the consumer ethics field. Findings indicate that promotion affects one’s attitude toward questionable consumer practices with those having a stronger (versus weaker) promotion focus being more likely to believe these consumer misbehaviors to be acceptable. Further, this study shows that prevention influences one’s perception of morally dubious consumer practices with those having a stronger (versus weaker) prevention focus being more inclined to believe these questionable consumer activities to be unacceptable.
    Keywords: consumer ethical beliefs, consumer ethics, consumer ethics scale, personal characteristics, self-regulatory focus
    Date: 2010–04
  9. By: Ayala Arad; Ariel Rubinstein
    Date: 2010–05–30
  10. By: Timothy N. Cason (Department of Economics, Krannert School of Management, Purdue University); Anya Savikhin (The University of Chicago); Roman M. Sheremeta (Argyros School of Business and Economics, Chapman University)
    Abstract: Motivated by problems of coordination failure observed in weak-link games, we experimentally investigate behavioral spillovers for order-statistic coordination games. Subjects play the minimum- and median-effort coordination games simultaneously and sequentially. The results show the precedent for cooperative behavior spills over from the median game to the minimum game when the games are played sequentially. Moreover, spillover occurs even when group composition changes, although the effect is not as strong. We also find that the precedent for uncooperative behavior does not spill over from the minimum game to the median game. These findings suggest guidelines for increasing cooperative behavior within organizations.
    Keywords: coordination, order-statistic games, experiments, cooperation, minimum game, behavioral spillover
    JEL: C72 C91
    Date: 2009–11
  11. By: Lisa Bruttel; Tim Friehe
    Abstract: This paper presents experimental evidence on the way in which the design of law enforcement impacts legal compliance. The experiment includes two law enforcement designs: one in which sanctioning results in victim-compensation and one in which sanctions are rent-seeking devices for the enforcer. We show that in the rent-seeking design (i) potential violators choose non-compliance more often and (ii) the average violator tries to avoid detection less aggressively.
    Keywords: norm compliance, law enforcement, avoidance, experiment
    Date: 2010
  12. By: Bart J. Wilson (Economic Science Institute, Chapman University); Taylor Jaworski (Department of Economics, University of Arizona); Karl Schurter (Department of Economics, University of Virginia); Andrew Smyth (Department of Economics, Florida State University)
    Abstract: This paper uses a laboratory experiment to probe the proposition that property emerges anarchically out of social custom. We test the hypothesis that whalers in the 18th and 19th century developed rules of conduct that minimized the sum of the transaction and production costs of capturing their prey, the primary implication being that different ecological conditions lead to different rules of capture. Holding everything else constant, we find that simply imposing two different types of prey is insufficient to observe two different rules of capture. Another factor is essential, namely that the members of the community are civil-minded.
    Keywords: property rights, endogenous rules, whaling, experimental economics
    JEL: C92 D23 K11 N50
    Date: 2010–05
  13. By: Elyès Jouini (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris Dauphine - Paris IX); Clotilde Napp (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris Dauphine - Paris IX)
    Abstract: Can investors with irrational beliefs be neglected as long as they are rational on average ? Do their trades cancel out with no consequences on prices, as implicitly assumed by traditional models? We consider a model with irrational investors, who are rational on average. We obtain waves of pessimism and optimism that lead to countercyclical market prices of risk and procyclical risk-free rates. The variance of the state price density is greatly increased. The long run risk-return relation is mod- i…ed; in particular, the long run market price of risk might be higher than both the instantaneous and the rational ones.
    Keywords: irrational investors, rational on average
    Date: 2010
  14. By: S.N. O'Higgins; Arturo Palomba; Patrizia Sbriglia
    Abstract: In this paper we provide an experimental test of a dynamic Bertrand duopolistic model, where firms move sequentially and their informational setting varies across different designs. Our experiment is composed of three treatments. In the first treatment, subjects receive information only on the costs and demand parameters and on the price’ choices of their opponent in the market in which they are positioned (matching is fixed); in the second and third treatments, subjects are also informed on the behaviour of players who are not directly operating in their market. Our aim is to study whether the individual behaviour and the process of equilibrium convergence are affected by the specific informational setting adopted. In all treatments we selected students who had previously studied market games and industrial organization, conjecturing that the specific participants’ expertise decreased the chances of imitation in treatment II and III. However, our results prove the opposite: the extra information provided in treatment II and III strongly affects the long run convergence to the market equilibrium. In fact, whilst in the first session, a high proportion of markets converge to the Nash-Bertrand symmetric solution, we observe that a high proportion of markets converge to more collusive outcomes in treatment II and more competitive outcomes in treatment III. By the same token, players’ profits significantly differ in three settings. An interesting point of our analysis relates to the assessment of the individual behavioural rules in the second and third treatments. When information on the behaviour of participants on uncorrelated markets is provided, players begin to adopt mixed behavioural rules, in the sense that they follow myopic best reply rules as long as their profits are in line with the average profits on all markets, and , when their gains fall below that threshold, they start imitating successful strategies adopted on other markets.
    Keywords: price competition, learning, strategic information.
    JEL: C90 C91
    Date: 2010–05

This nep-cbe issue is ©2010 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.
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