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on Cognitive and Behavioural Economics |
| By: | Joseph Henrich; Steve J. Heine; Ara Norenzayan |
| Abstract: | Behavioral scientists routinely publish broad claims about human psychology and behavior in the world’s top journals based on samples drawn entirely from Western, Educated, Industrialized, Rich and Democratic (WEIRD) societies. Researchers—often implicitly—assume that either there is little variation across human populations, or that these “standard subjects” are as representative of the species as any other population. Are these assumptions justified? Here, our review of the comparative database from across the behavioral sciences suggests both that there is substantial variability in experimental results across populations and that WEIRD subjects are particularly unusual compared with the rest of the species—frequent outliers. The domains reviewed include visual perception, fairness, cooperation, spatial reasoning, categorization and inferential induction, moral reasoning, reasoning styles, selfconcepts and related motivations, and the heritability of IQ. The findings suggest that members of WEIRD societies, including young children, are among the least representative populations one could find for generalizing about humans. Many of these findings involve domains that are associated with fundamental aspects of psychology, motivation, and behavior—hence, there are no obvious a priori grounds for claiming that a particular behavioral phenomenon is universal based on sampling from a single subpopulation. Overall, these empirical patterns suggests that we need to be less cavalier in addressing questions of human nature on the basis of data drawn from this particularly thin, and rather unusual, slice of humanity. We close by proposing ways to structurally re-organize the behavioral sciences to best tackle these challenges. |
| Keywords: | external validity, population variability, experiments, cross-cultural research, culture, human universals, generalizability, evolutionary psychology, cultural psychology, behavioral economics |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:rsw:rswwps:rswwps139&r=cbe |
| By: | Heineck, Guido (IAB, Nürnberg); Wölfel, Oliver (IAB, Nürnberg) |
| Abstract: | It is well known that individuals' risk attitudes are related to behavioral outcomes such as smoking, portfolio decisions, and also educational attainment, but there is barely any evidence on whether parental risk attitudes affect the educational attainment of dependent children. We add to this literature and examine children's secondary school track choice in Germany where tracking occurs at age ten and has a strong binding character. Our results indicate no consistent patterns for paternal risk preferences but a strong negative impact of maternal risk aversion on children's enrollment in upper secondary school. |
| Keywords: | educational choice, risk attitudes, SOEP |
| JEL: | I21 J24 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5197&r=cbe |
| By: | Masclet, David (University of Rennes); Noussair, Charles N. (Tilburg University); Villeval, Marie Claire (CNRS, GATE) |
| Abstract: | Experimental studies of social dilemmas have shown that while the existence of a sanctioning institution improves cooperation within groups, it also has a detrimental impact on group earnings in the short run. Could the introduction of pre-play threats to punish have enough of a beneficial impact on cooperation, while not incurring the cost associated with actual punishment, so that they increase overall welfare? We report an experiment in which players can issue non-binding threats to punish others based on their contribution levels to a public good. After observing others’ actual contributions, they choose their actual punishment level. We find that threats increase the level of contributions significantly. Efficiency is improved, but only in the long run. However, the possibility of sanctioning differences between threatened and actual punishment leads to lower threats, cooperation and welfare, restoring them to levels equal to or below the levels attained in the absence of threats. |
| Keywords: | threats, cheap talk, sanctions, public good, experiment |
| JEL: | C92 H41 D63 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5206&r=cbe |
| By: | Eriksson, Tor (Aarhus School of Business); Villeval, Marie Claire (CNRS, GATE) |
| Abstract: | Assuming that people care not only about what others do but also on what others think, we study respect as a non-monetary source of motivation in a context where the length of the employment relationship is endogeneous. In our three-stage gift-exchange experiment, the employer can express respect by giving the employee costly symbolic rewards after observing his level of effort. This experiment sheds light on the extent to which symbolic rewards are used, how they affect employees’ further effort, the duration of relationships, and the profits of employers. Furthermore, we study whether employers’ decisions to give symbolic rewards are driven by strategic considerations, by manipulating the bargaining power of employers and employees. We find that employers make use of symbolic rewards and chiefly to express their satisfaction with the employee. Indeed, symbolic rewards are more frequently used when there is excess supply of labor in the market while they are used in almost the same proportion when the market is balanced and when there is excess demand of labor. They are associated with higher profits and increased probability of continuing employment relationships. Overall, however, the opportunity of expressing respect does not improve efficiency compared with an environment in which it does not exist, possibly due to a crowding-out of extrinsic incentives by the availability of non-monetary incentives. |
| Keywords: | respect, symbolic rewards, incentives, labor market, experiment |
| JEL: | C91 J32 J64 M52 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5200&r=cbe |
| By: | Thomas Epper; Helga Fehr-Duda; Adrian Bruhin |
| Abstract: | A large body of experimental research has demonstrated that, on average, people violate the axioms of expected utility theory as well as of discounted utility theory. In particular, aggregate behavior is best characterized by probability distortions and hyperbolic discounting. But is it the same people who are prone to these behaviors? Based on an experiment with salient monetary incentives we demonstrate that there is a strong and significant relationship between greater departures from linear probability weighting and the degree of decreasing discount rates at the level of individual behavior. We argue that this relationship can be rationalized by the uncertainty inherent in any future event, linking discounting behavior directly to risk preferences. Consequently, decreasing discount rates may be generated by people's proneness to probability distortions. |
| Keywords: | Time preferences, risk preferences, hyperbolic discounting, probability weighting, institutionally generated uncertainty |
| JEL: | D01 D81 D91 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:zur:iewwpx:510&r=cbe |
| By: | Subhasish Dugar (Department of Economics, University of Calgary); Quazi Shahriar (Department of Economics, San Diego State University) |
| Abstract: | We examine, experimentally, how real group identities of parties (principal and agent), contemplating to form a partnership while facing a moral hazard problem (as treated in the contract theory), may attenuate the problem and thereby implement the socially desirable efficient outcome. We find that when both parties share the same real group identity, the proportion of play of the efficient outcome is significantly higher than when the parties share two different real group identities. However, when we induce a substantially weaker form of group identity or increase the saliency of the outside-option payoff of the principal, the incidence of play of the efficient outcome diminishes considerably, even when the parties’ identities align perfectly. Our results have important implications for organizational design. |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:sds:wpaper:0036&r=cbe |
| By: | David Hugh-Jones (Max Planck Institute of Economics, Jena); Martin A. Leroch (University of Hamburg) |
| Abstract: | People exhibit group reciprocity when they retaliate, not against the person who harmed them, but against somebody else in that person's group. Group reciprocity may be a key motivation behind intergroup conflict. We investigated group reciprocity in a laboratory experiment. After a group identity manipulation, subjects played a Prisoner's Dilemma with others from different groups. Subjects then allocated money between themselves and others, learning the group of the others. Subjects who knew that their partner in the Prisoner's Dilemma had defected became relatively less generous to people from the partner's group, compared to a third group. We use our experiment to develop hypotheses about group reciprocity and its correlates. |
| Keywords: | reciprocity, groups, conflict |
| JEL: | D74 C92 |
| Date: | 2010–09–27 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2010-066&r=cbe |
| By: | Pablo Brañas-Garza (Department of Economic Theory and Economic History, University of Granada.); Olusegun A. Oyediran (Department of Economic Theory and Economic History, University of Granada.); M.Fernanda Rivas (University of Granada.) |
| Abstract: | This paper o¤ers two related issues: (i ) an applications of beliefs about the cooperative behavior of others to policy-oriented issues, (ii ) a method of explor- ing prejudices (toward others) where interviewees are oblivious of its purpose. We studied contributions and guesses about others?contributions through an experimental game. Prejudice is examined as an implicitly held belief by a Spanish college student towards any of the speci?ed foreign population groups (i.e. the Asians, the Africans, the Latin Americans and the Westerners). The results show that: at the individual level, there exists some subjects that harbor strong positive (and negative) prejudices toward the foreigners. The prejudice models ?tted also show that: own contributions, femaleness, individual wealth; and beliefs about income status, cultural status, religious intensity, societal co- operation and political orientation have strong in?uences on racial prejudice. |
| Keywords: | Beliefs, Prejudice, Public Goods Game |
| Date: | 2010–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:10/04&r=cbe |
| By: | Goette, Lorenz (University of Lausanne); Huffman, David (Swarthmore College); Meier, Stephan (Columbia University); Sutter, Matthias (University of Innsbruck) |
| Abstract: | We investigate how group boundaries, and the economic environment surrounding groups, affect altruistic cooperation and punishment behavior. Our study uses experiments conducted with 525 officers in the Swiss Army, and exploits random assignment to platoons. We find that, without competition between groups, individuals are more prone to cooperate altruistically in a prisoner's dilemma game with in-group as opposed to out-group members. They also use a costly punishment option to selectively harm those who defect, encouraging a norm of cooperation towards the group. Adding competition between groups causes even stronger in-group cooperation, but also a qualitative change in punishment: punishment becomes antisocial, harming cooperative and defecting out-group members alike. These findings support recent evolutionary models and have important organizational implications. |
| Keywords: | group membership, competition, punishment, army, experiment |
| JEL: | C72 C91 C93 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5189&r=cbe |
| By: | Heineck, Guido (IAB, Nürnberg); Süssmuth, Bernd (University of Leipzig) |
| Abstract: | What are the long-term effects of Communism on economically relevant notions such as social trust? To answer this question, we use the reunification of Germany as a natural experiment and study the post-reunification trajectory of convergence with regard to individuals’ trust and risk, as well as perceived fairness and cooperativeness. Our hypotheses are derived from a model of German reunification that incorporates individual responses both to incentives and to values inherited from earlier generations as recently suggested in the literature. Using data from the German Socio-Economic Panel, we find that despite twenty years of reunification East Germans are still characterized by a persistent level of social distrust. In comparison to West Germans, they are also less inclined to see others as fair or helpful. Implied trajectories can be interpreted as evidence for the passing of cultural traits across generations and for cooperation being sustained by values rather than by reputation. Moreover, East Germans are found to be more risk loving than West Germans. In contrast to trust and fairness, full convergence in risk attitude is reached in recent years. |
| Keywords: | social trust, risk attitudes, political regimes, German reunification |
| JEL: | P51 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5219&r=cbe |
| By: | David Hugh-Jones; Ro'i Zultan |
| Abstract: | In experiments, people behave more cooperatively when they are aware of an external threat, while in the field, we observe surprisingly high levels of cooperation and altruism within groups in conflict situations such as civil wars. We provide an explanation for these phenomena. We introduce a model in which different groups vary in their willingness to help each other against external attackers. Attackers infer the cooperativeness of a group from its members' behaviour under attack, and may be deterred by a group which bands together against an initial attack. Then, even self-interested individuals may behave cooperatively when threatened, so as to mimic more cooperative groups. By doing so, they drive away attackers and increase their own future security. We argue that a group's reputation is a public good with a natural weakest-link structure. We test the implications of our model in a laboratory experiment. |
| Keywords: | cooperation, conflict, defence, signaling |
| JEL: | C73 C92 D74 |
| Date: | 2010–09–27 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2010-064&r=cbe |
| By: | Andreas Leibbrandt (University of Chicago, Department of Economics); Lauri Sääksvuori (Max Planck Institute of Economics, Jena) |
| Abstract: | Numerous studies suggest that communication may be a universal means to mitigate collective action problems. In this study, we challenge this view and show that the communication structure crucially determines whether communication mitigates or intensifies the problem of collective action. We observe the effect of different communication structures on collective action in the context of finitely repeated intergroup conflict and demonstrate that conflict expenditures are significantly higher if communication is restricted to one's own group as compared to a situation with no communication. However, expenditures are significantly lower if open communication within one's own group and between rivaling groups is allowed. We show that under open communication intergroup conflicts are avoided by groups taking turns in winning the contest. Our results do not only qualify the role of communication for collective action but may also provide insights on how to mitigate the destructive nature of intergroup conflicts. |
| Keywords: | Communication, Conflict, Experiment, Rent-seeking |
| JEL: | C72 C91 C92 D72 D74 |
| Date: | 2010–09–27 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2010-065&r=cbe |
| By: | James P. Smith; John J. McArdle; Robert Willis |
| Abstract: | In this paper, the authors studied the association of cognitive traits and in particular numeracy of both spouses on financial outcomes of the family. They found significant effects, particularly for numeracy for financial and non-financial respondents alike, but much larger effects for the financial decision maker in the family. They also examined who makes these financial decisions in the family and why. Once again, cognitive traits such as numeracy were an important component of that decision with larger effects of numeracy for husbands compared to wives. |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:ran:wpaper:785&r=cbe |
| By: | Gani Aldashev; Timoteo Carletti; Simone Righi |
| Abstract: | We study the informational efficiency of a market with a single traded asset. The price initially differs from the fundamental value, about which the agents have noisy private information (which is, on average, correct). A fraction of traders revise their price expectations in each period. The price at which the asset is traded is public information. The agents' expectations have an adaptive component and a social-interactions component with confirmatory bias. We show that, taken separately, each of the deviations from rationality worsen the information efficiency of the market. However, when the two biases are combined, the degree of informational inefficiency of the market (measured as the deviation of the long-run market price from the fundamental value of the asset) can be non-monotonic both in the weight of the adaptive component and in the degree of the confirmatory bias. For some ranges of parameters, two biases tend to mitigate each other's effect, thus increasing the informational efficiency. |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1009.5075&r=cbe |
| By: | Julie A. Nelson |
| Abstract: | Many believe that firms are driven to maximize profits, and therefore are not allowed to take actions that would benefit their workers, communities, or the environment if these actions would reduce profits even slightly. This essay shows that this belief is supported neither by sound economic evidence and arguments, nor by United States statutory and case law. The roots of this belief are, instead, to be found in a centuries-old desire of economists to make our discipline look like Newtonian physics. Among scholars of law, both misinformation and the use of University of Chicago-style economics have contributed to the belief's popularity. Among scholars and the public alike, the dualistic "love or money" view is appealing because of its simplicity and congruence with cultural gender norms. Reexamining the evidence, rather than adhering to common ideologies, this essay offers an unconventional analysis of corporate behavior and commodification. |
| URL: | http://d.repec.org/n?u=RePEc:dae:daepap:10-06&r=cbe |