nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2010‒08‒06
fourteen papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. The Frames Behind the Games: Player's Perceptions of Prisoner's Dilemma, Chicken, Dictator, and Ultimatum Games By David J Butler; Victoria K Burbank; James S Chisholm
  2. Conditional Cooperation: Evidence for the Role of Self-Control By Peter Martinsson; Kristian Ove R. Myrseth; Conny Wollbrant
  3. Contracting in the trust game By Bracht, Juergen
  4. Dictator games in the lab and in nature: External validity tested and investigated in Ugandan primary schools By Abigail Barr; Andrew Zeitlin
  5. Coordinating to protect the global climate: Experimental evidence on the role of inequality and commitment By Tavoni, Alessandro; Dannenberg, Astrid; Löschel, Andreas
  6. An experimental investigation of imprecision attitude and its relation with risk attitude and impatience By Michèle Cohen; Jean-Marc Tallon; Jean-Christophe Vergnaud
  7. Preferences for Redistribution and Pensions: What Can We Learn from Experiments? By Tausch, Franziska; Potters, Jan; Riedl, Arno
  8. Estimation of a simple genetic algorithm applied to a laboratory experiment By Alfarano, Simone; Eva, Camacho; Josep, Domènech
  9. Contract design and insurance fraud: An experimental investigation By Lammers, Frauke; Schiller, Jörg
  10. Residential choices and interaction in three-member households: a choice experiment. By Edoardo Marcucci; Amanda Stathopoulos; Romeo Danielis; Lucia Rotaris
  11. Limited memory can be beneficial for the evolution of cooperation By Friederike Mengel; Gergely Horváth; Jaromir Kovarik
  12. Costly and discrete communication: An experimental investigation By Duffy, Sean; Hartwig, Tyson; Smith, John
  13. The connexionnist nature of modern financial markets. Challenges and possible outcomes By Isabelle Huault; Hélène Rainelli-Le Montagner
  14. Experience, Memory and Narrative: A Biographical Analysis of Ethnic Identity By Teodora Karamelska; Christian Geiselmann

  1. By: David J Butler (UWA Business School, The University of Western Australia); Victoria K Burbank (School of Social and Cultural Studies, The University of Western Australia); James S Chisholm (School of Anatomy and Human Biology, The University of Western Australia)
    Abstract: The tension between cooperative and competitive impulses is an eternal issue for every society. But how is this problem perceived by individual participants in the context of a behavioral games experiment? We first assess individual differences in players’ propensity to cooperate in a series of experimental games. We then use openended interviews with a subset of those players to investigate the various concepts (or ‘frames’) they used when thinking about self-interested and cooperative actions. More generally, we hope to raise awareness of player’s perceptions of experimental environments to inform both the design and interpretation of experiments and experimental data.
    Keywords: Laboratory Experiment, Frames, Selfishness, Cooperation
    Date: 2010
  2. By: Peter Martinsson (University of Gothenburg); Kristian Ove R. Myrseth (ESMT European School of Management and Technology); Conny Wollbrant (University of Gothenburg)
    Abstract: When facing the opportunity to allocate resources between oneself and others, individuals may experience a self-control conflict between urges to act selfishly and preferences to act pro-socially. We explore the domain of conditional cooperation, and we test the hypothesis that increased expectations about others’ average contribution increases own contributions to public goods more when self-control is high than when it is low. We pair a subtle framing technique with a public goods experiment. Consistent with our hypothesis, we find that conditionally cooperative behavior is stronger (i.e., less imperfect) when expectations of high contributions are accompanied by high levels of self-control.
    Keywords: self-control, pro-social behavior, public good experiment, conditional cooperation
    JEL: D01 D64 D70
    Date: 2010–07–26
  3. By: Bracht, Juergen
    Abstract: We present a simple mechanism that can be implemented in a simple experiment. In a modified trust game, the allocator can offer to pay the investor to cooperate. The mechanism is successful at implementing efficient outcomes: participants manage to achieve an efficient outcome, when this is possible, two—thirds of the time. While these results are encouraging, we find evidence that both concerns for fairness and motivation crowding out distort the incentives presented in the mechanism.
    Keywords: compensation mechanism, side payment, trust game, signaling, crowding out, concerns, for equity, taste for cooperation
    JEL: H42 D62 C92
    Date: 2010–07–22
  4. By: Abigail Barr; Andrew Zeitlin
    Abstract: This paper tests the external validity of a simple Dictator Game as a laboratory analogue for a naturally occurring policy-relevant decision-making context. In Uganda, where teacher absenteeism is a problem, primary school teachers’ allocations to parents in a Dictator Game are positively but weakly correlated with their time allocations to teaching and, so, negatively correlated with their absenteeism. Guided by a simple theoretical model, we find that the correlation can be improved by allowing for (a) variations in behavioural reference points across teachers and schools and (b) the positive effect if some School Management Committees on teacher attendance .
    Keywords: Public service, Education, Experiments, Africa, external validity, Methodology
    JEL: C91 D64 I29 O15 O17
    Date: 2010
  5. By: Tavoni, Alessandro; Dannenberg, Astrid; Löschel, Andreas
    Abstract: Free riding and coordination difficulties are held to be the primary causes of cooperation breakdown among nonrelatives. These thwarting effects are particularly severe in the absence of effective monitoring institutions capable of sanctioning deviant behavior. Unfortunately, solutions to global environmental dilemmas, like climate change, cannot depend on coercion mechanisms, given the transnational effects of emissions. A further complication is that it yields 'common but differentiated responsibilities'. Such asymmetries in wealth and carbon responsibilities among the actors, and the ensuing issues of equity, might further impede cooperation. Yet, a growing literature stresses the importance of non-economic factors in explaining human behavior; therefore, instruments that go beyond the traditional incentives might prove effective in facilitating the task. Given the empirical nature of the problem, we address it by means of a controlled laboratory experiment: a framed threshold public goods game is used to investigate the degree of cooperation and coordination achieved by groups of six participants in combating simulated catastrophic climate change. While necessarily simple for the sake of tractability, the game is designed to incorporate key real-world issues, such as inequity and the impact of emergent institutions based on nonbinding 'pledge and review' mechanisms. --
    Keywords: experimental economics,threshold public goods game,climate change,inequality,pledge
    JEL: C72 C92 Q54
    Date: 2010
  6. By: Michèle Cohen (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Jean-Marc Tallon (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Jean-Christophe Vergnaud (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, CERSES - Centre de recherche sens, ethique, société - CNRS : UMR8137 - Université Paris Descartes)
    Abstract: We report in this paper the result of three experiments on risk, ambiguity and time attitude. The first two differed by the population considered (students vs. general population) while the third one used a different protocol and concerned students and portfolio managers. We find quite a lot of heterogeneity at the individual level. Of principal interest was the elicitation of risk, time and ambiguity attitudes and the relationship among these (model free) measures. We find that on the student population, there is essentially no correlation. A non negligible fraction of the population behaves in an extremely cautious manner in the risk and ambiguity domain. When we drop this population from the sample, the correlation between our measures is also non significant. We also raise three questions linked to measurement of ambiguity attitudes that come out from our data sets.
    Keywords: Experiments, Risk aversion, Impatience, Imprecision Aversion.
    Date: 2010
  7. By: Tausch, Franziska (Maastricht University); Potters, Jan (Tilburg University); Riedl, Arno (Maastricht University)
    Abstract: Redistribution is an inevitable feature of collective pension schemes and economic experiments have revealed that most people have a preference for redistribution that is not merely inspired by self-interest. Interestingly, little is known on how these preferences interact with preferences for different pension schemes. In this paper we review the experimental evidence on preferences for redistribution and suggest some links to redistribution through pensions. For that purpose we distinguish between three types of situations. The first deals with distributional preferences behind a veil of ignorance. In the second type of situation, individuals make choices in front of the veil of ignorance and know their position. Finally, we discuss situations in which income is determined by interdependent rather than individual choices. In the closing parts of the paper we discuss whether and how these experimental results speak to the redistribution issues of pensions. For example, do they argue for or against mandatory participation? Should we have less redistribution and more actuarial fairness? How does this depend on the type of redistribution involved?
    Keywords: redistribution, fairness, pension, insurance, experiment
    JEL: C90 D01 D63 D64 H55
    Date: 2010–07
  8. By: Alfarano, Simone; Eva, Camacho; Josep, Domènech
    Abstract: The aim of our contribution relies on studying the possibility of implementing a genetic algorithm in order to reproduce some characteristics of a simple laboratory experiment with human subjects. The novelty of our paper regards the estimation of the key-parameters of the algorithm, and the analysis of the characteristics of the estimator.
    Keywords: Estimation; genetic algoritms; experimenst
    JEL: C13 C63
    Date: 2010–04
  9. By: Lammers, Frauke; Schiller, Jörg
    Abstract: This paper investigates the impact of insurance contract design on the behavior of filing fraudulent claims in an experimental setup. We test how fraud behavior varies for insurance contracts with full coverage, a straight deductible or variable premiums (bonus-malus contract). In our experiment, filing fraudulent claims is a dominant strategy for selfish participants, with no psychological costs of committing fraud. While some people always commit fraud, a substantial share of people only occasionally or never defraud. In addition, we find that deductible contracts may be perceived as unfair and thus increase the extent of claim build-up compared to full coverage contracts. In contrast, bonus-malus contracts with variable insurance premiums significantly reduce the filing of fictitious claims compared to both full coverage and deductible contracts. This reduction cannot be explained by monetary incentives. Our results indicate that contract design significantly affects psychological costs and, consequently, the extent of fraudulent behavior of policyholders. --
    Keywords: Insurance fraud,experiment,fairness,contract design,deductible,bonus-malus
    JEL: G22 C91
    Date: 2010
  10. By: Edoardo Marcucci (DIPES/CREI, Faculty of Political Science, University of Roma Tre.); Amanda Stathopoulos (DISES, Faculty of Economics, University of Trieste.); Romeo Danielis (DISES, Faculty of Economics, University of Trieste.); Lucia Rotaris (DISES, Faculty of Economics, University of Trieste.)
    Abstract: Microeconomics studies group behaviour by using the representative member model. However, there is growing evidence that there can be significant differences between choices made by single individuals and those made by the same individuals when choosing collectively. This study investigates the differences between individual and joint decisionmaking in the context of residential location choice. It is widely recognized that household location choices involve several members of a household with heterogeneous preferences and influence power. Nonetheless little is known about group decision-making processes in practice. In particular, there is only scant evidence on how preferences differ among family members and to what extent individual preferences can be aggregated to achieve an approximation of joint choices. The study evaluates whether there is heterogeneity in single members’ preferences. Furthermore, relative power is inferred by measuring similarity between ex ante single preferences and ex post joint choice outcomes. We also quantify the implicit bias generated by relying on the representative member approach. These issues are tested by employing a two-stage conjoint choice experiment administered to a sample of 53 Italian families. This work proposes a novel extension of the commonly used dyadic interaction approach to consider the role of adolescents in household decision-making.
    Keywords: Unitary household, stated choice experiments, residential location, agent interaction and relative influence, discrete choice models, MNL, MMNL.
    JEL: D12 C35 D79
    Date: 2010
  11. By: Friederike Mengel (Universidad de Alicante); Gergely Horváth (Dpto. Fundamentos del Análisis Económico); Jaromir Kovarik (Universidad de Alicante)
    Abstract: We study a dynamic process where agents in a network interact in a Prisoner’s Dilemma. The network not only mediates interactions, but also information: agents learn from their own experience and that of their neighbors in the network about the past behavior of others. Each agent can only memorize the last h periods. Evolution selects among three preference types: altruists, defectors and conditional cooperators. We show - relying on simulation techniques - that the probability of reaching a cooperative state does not relate monotonically to the size of memory h. In fact it turns out to be optimal from a population viewpoint that there is a finite bound on agents’ memory capacities. We also show that it is the interplay of local interactions, direct and indirect reputation and memory constraints that is crucial for the emergence of cooperation. Taken by itself, none of these mechanisms is sufficient to yield cooperation.
    Keywords: evolution, reputation, bounded memory, cooperation.
    JEL: C70 C72 C73
    Date: 2010–07
  12. By: Duffy, Sean; Hartwig, Tyson; Smith, John
    Abstract: Language is an imperfect and uneven means of communicating information about a complex and nuanced world. We run an experimental investigation of a setting in which the messages available to the sender imperfectly describe the state of the world, however the sender can improve communication, at a cost, by increasing the complexity or elaborateness of the message. As is standard in the communication literature, the sender learns the state of the world then sends a message to the receiver. The receiver observes the message and provides a best guess about the state. The incentives of the players are aligned in the sense that both sender and receiver are paid an amount which is increasing in the accuracy of the receiver's guess. As would be expected, we find that larger communication costs are associated with worse outcomes for both sender and receiver. Consistent with the communication literature, albeit in very different setting, we find that there is overcommunication. For the receiver, there is a positive relationship between the payoffs relative to the equilibrium predictions and communication costs. This relationship is negative for the senders. We also find that the response time of both the sender and receiver are positively related to their payoffs.
    Keywords: communication; cheap talk; overcommunication
    JEL: D82 C91 C72
    Date: 2010–07–29
  13. By: Isabelle Huault (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris Dauphine - Paris IX); Hélène Rainelli-Le Montagner (GREGOR - IAE de Paris)
    Abstract: The recent financial crisis has triggered radical criticism against financial markets. In this paper, we propose to analyse this criticism in the perspective drawn by Boltanski and Thevenot (1991/2006) around the notion of justification. We see the main debate as opposing the critics and the defenders of what can be identified as a Market order (Boltanski and Thevenot, 1991/2006). While the former regret the consequences of deregulation in financial markets, the latter insist on the preservation of regulatory options favouring market activity as much as possible. This debate however relies on the hypothesis that financial markets in general fit the ideal-type of the Walrasian market model. While this hypothesis might make sense as regards the description of stock markets (this refers to the so called market efficiency issue), it appears unrealistic when applied to the majority of modern financial markets. At least 80% of those are OTC markets where bilateral contracts are exchanged between counterparties in the absence of any centralized structure. Our thesis is that to be useful, a critical perspective on financial markets should take full account of the nature of OTC markets, which guarantees neither the transparency of prices nor the efficiency of competition mechanisms. We propose to characterize this nature using Boltanski and Chiapello's concept (1999/2008) of the Connexionnist World. We then emphasize the difficulty of the connexionnist grammar of worth to develop principles of justice in OTC markets, which are characterized by their despatialization and the infinity of potential members. We suggest potential tracks to struggle more efficiently against the drifts of the connexionnist logic as they arise on financial markets and their spillover effects on societies. The contribution of the paper is thus to provide a more precisely targeted critique of modern financial markets.
    Keywords: connexionism, social studies of finance, critical theory
    Date: 2010–07–01
  14. By: Teodora Karamelska (Bulgarian Academy of Sciences); Christian Geiselmann (DVV International)
    Abstract: In the first part of this paper, we will introduce the theoretical framework for analyzing autobiographical narratives as it has been developed by the German sociologists Fritz Schütze and Gabriele Rosenthal3, and later has been adapted by Koleva, Popova and others.4 In the second part we will use this methodology to analyze empirical data that have been collected as part of our MICROCON study on ethnic identity and the risk of inter-ethnic conflict in Bulgaria. We focus on the question of how people belonging to the group of “ethnic Turks” in Bulgaria define their ethnicity, between the competing contexts of the past (in the form of their experience) and the present (in the form of what they remember and how they reactualize it in their biographical narratives). The paper is based on the analysis of two (out of a sample of 120) narrative autobiographic interviews.
    Date: 2010

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