nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2010‒08‒21
nine papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Social Image in Public Goods Provision with Real Effort By Emel Filiz-Ozbay; Erkut Y. Ozbay
  2. Ignorance is not always Bliss: Feedback and Dynamics in Public Good Experiments By Bigoni, M.; Suetens, S.
  3. Rethinking evolution, entropy and economics: A triadic conceptual framework for the maximum entropy principle as applied to the growth of knowledge By Herrmann-Pillath, Carsten
  4. Consumer Acceptance of Genetically Modified Foods: Traits, Labels and Diverse Information By Huffman, Wallace E.
  5. TRUST, TRUTH, STATUS AND IDENTITY, an experimental inquiry By Jeffrey V. Butler
  6. Teams Make You Smarter: Learning and Knowledge Transfer in Auctions and Markets by Teams and Individuals By Maciejovsky, Boris; Sutter, Matthias; Budescu, David V.; Bernau, Patrick
  7. Hidden Skewness By Ensthaler, Ludwig; Nottmeyer, Olga; Weizsäcker, Georg
  8. Motives of Socially Responsible Business Conduct By Graafland, J.J.; Kaptein, M.; Mazereeuw v/d Duijn Schouten, C.
  9. Lying in Business: Insights from Hannah Arendt’s ‘Lying in Politics’ By Eenkhoorn, P.; Einmahl, J.H.J.

  1. By: Emel Filiz-Ozbay (University of Maryland); Erkut Y. Ozbay (University of Maryland)
    Abstract: We study public goods game where the contribution efforts are observable. When the players are observed, they contribute more and free-riding diminishes significantly. On the other hand, presence of an audience does not affect the performance of players if there is no strategic aspect of the game, i.e. when they play private goods game. The findings are in line with the predictions of the social image theory where a player’s contribution is also a signal to an audience regarding how much she cares about contributing to the public goods.
    Keywords: Conditional CAPM
    Date: 2010–08
  2. By: Bigoni, M.; Suetens, S. (Tilburg University, Center for Economic Research)
    Abstract: In this paper we study the effects of providing additional feedback about individual contributions and earnings on the dynamics of contributions in a repeated public good game. We include treatments where subjects can freely choose whether to obtain additional information about individual contributions or individual earnings. We find that, in the aggregate, contributions decline less fast when additional information about contributions and earnings is provided on top of aggregate information. We also find that there exist substantial but intuitively appealing differences in the way individuals react to feedback. Particularly, individuals with a high propensity to contribute tend to imitate the highest contributor more often and are more inclined to obtain feedback about individual contributions than about individual earnings than individuals with a lower propensity to contribute.
    Keywords: voluntary contributions;experiment;repeated interaction;feedback;imitation
    JEL: C91 D74
    Date: 2010
  3. By: Herrmann-Pillath, Carsten
    Abstract: Recently, the maximum entropy principle has been applied to explain the evolution of complex non-equilibrium systems, such as the Earth system. I argue that it can also be fruitfully deployed to reconsider the classical treatment of entropy in economics by Georgescu-Roegen, if the growth of knowledge is seen as a physical process. Relying on central categories of Peirce's theory of signs, I follow the lines of a naturalistic evolutionary epistemology. In this framework, the three principles of Maximum Entropy (Jaynes), Maximum Power (Lotka) and Maximum Entropy Production can be arranged in a way such that evolution can be conceived as a process that manifests the physical tendency to maximize information generation and information capacity. This implies that the growth of knowledge is the dual of the process of entropy production. This theory matches with recent empirical research showing that economic growth can be tracked by measures of the throughput of useful work, mediated by the thermodynamic efficiency of the conversion of exergy into useful work. --
    Keywords: Peirce,Georgescu-Roegen,maximum entropy,maximum power,natural selection,semeiosis,physical inference devices,economic growth,useful work
    JEL: B52 D80 Q57
    Date: 2010
  4. By: Huffman, Wallace E.
    Abstract: New experimental economic methods are described and used to assess consumers' willingness to pay for food products that might be made from new transgenic and intragenic genetically modified (GM) traits. Participants in auctions are randomly chosen adult consumers in major US metropolitan areas and not college students. Food labels are kept simple and focus on key attributes of experimental goods. Diverse private information from the agricultural biotech industry (largely Monsanto and Syngenta), environmental groups (largely Greenpeace and Friends of the Earth) and independent third-party information is used to construct the information treatments. Food labels and information treatments are randomized, which is a deviation from traditional lab methods. Auctions are best described as sealed bid random n-th price and not the standard Vickery 2nd price auctions. I show that participants in these experiments respond to both food labels and information treatments, but no single type of information is dominant 
    Date: 2010–08–10
  5. By: Jeffrey V. Butler (EIEF)
    Abstract: In an experiment involving a standard trust game and a costless signalling game, it is demonstrated that economically relevant norm-based behaviors (trust, reciprocity and truth-telling) vary with social identity. The experimental procedure induced two trivial social identities. In one version, a status difference was induced. The results permitted a succinct description of identity effects: subjects held own-group members to a higher standard; and high status subjects held everyone, including themselves, to a higher standard. To illustrate the “high status/high standards” phenomenon, subjects’ “standards” were estimated from a simple identity model for a subset of the data.
    Date: 2010
  6. By: Maciejovsky, Boris (Imperial College London); Sutter, Matthias (University of Innsbruck); Budescu, David V. (Fordham University); Bernau, Patrick (University of Cologne)
    Abstract: We study the impact of team decision making on market behavior and its consequences for subsequent individual performance in the Wason selection task, the single-most studied reasoning task. We reformulated the task in terms of "assets" in a market context. Teams of traders learn the task’s solution faster than individuals and achieve this with weaker, less specific, performance feedback. Some teams even perform better than the best individuals. The experience of team decision-making in the market also creates positive knowledge spillovers for post-market individual performance in solving new Wason tasks, implying that team experiences enhance individual problem-solving skills.
    Keywords: team decisions, markets, auctions, Wason selection task, rationality
    JEL: C91 C92
    Date: 2010–08
  7. By: Ensthaler, Ludwig (DIW Berlin); Nottmeyer, Olga (DIW Berlin); Weizsäcker, Georg (University College London)
    Abstract: We provide laboratory evidence that people neglect skewness resulting from compound shocks.
    Keywords: skewness, belief biases, binomial tree
    JEL: C91
    Date: 2010–08
  8. By: Graafland, J.J.; Kaptein, M.; Mazereeuw v/d Duijn Schouten, C. (Tilburg University, Center for Economic Research)
    Abstract: The social and ecological challenges that governments face have raised their interest in socially responsible business conduct (SRBC). In this article we analyze the motives of executives to perform SRBC. We distinguish three types of motives: financial, ethical and altruistic motives. We test the hypotheses on a sample of 473 executives. The estimation results show that SRBC is driven by a combination of intrinsic and extrinsic motives, but that the intrinsic motives are stronger than the extrinsic motive.
    Keywords: intrinsic motivation;extrinsic motivation;corporate social responsibility;socially responsible business conduct
    JEL: M14 Z12
    Date: 2010
  9. By: Eenkhoorn, P.; Einmahl, J.H.J. (Tilburg University, Center for Economic Research)
    Abstract: The famous political philosopher Hannah Arendt develops several arguments why truthfulness cannot be counted among the political virtues. This article shows that similar arguments apply to lying in business. Based on Hannah Arendt’s theory, we distinguish five reasons why lying is a structural temptation in business: business is about action to change the world and therefore businessmen need the capacity to deny current reality; commerce requires successful image-making and liars have the advantage to come up with plausible stories; business communication is more often about opinions than about facts, giving leeway to ignore uncomfortable signals; business increasingly makes use of plans and models, but these techniques foster inflexibility in acknowledging the real facts; businessmen fall easily prey to self-deception, because one needs to act as if the vision already materializes. The theory is illustrated by a case study of Landis that grew from a relative insignificant into a large organization within a short period of time, but ended with outright lies and bankruptcy.
    Keywords: Lying;deceit in business;Hannah Arendt;image-making;self-deception;accounting fraud;politics and business;Landis
    JEL: D89 M14 M41
    Date: 2010

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