nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2010‒12‒04
eleven papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Revisiting Michael McBride’s experiment about “Money, happiness, and aspirations” By Abigail Barr
  2. Taking the initiative. What motivates leaders? By Lisa Bruttel; Urs Fischbacher
  3. Behavioral biases and cognitive reflection By Eva I. Hoppe; David J. Kusterer
  4. On the path-dependence of tax compliance By Lisa Bruttel; Tim Friehe
  5. Free Riding in the Lab and in the Field By Florian Englmaier; Georg Gebhardt
  6. Who should be called to the lab? A comprehensive comparison of students and non-students in classic experimental games By Michèle Belot; Raymond Duch; Luis Miller
  7. When a precedent of donation favors defection in the Prisoner's dilemma By Garapin, A.; Llerena, D.; Hollard, M.
  8. Cognitive Racial Discrimination: A Benchmark Experimental Study By Michèle Belot
  9. A fault confessed is half redressed - Confessions and Punishment By Verena Utikal
  10. An Economic Approach to Voluntary Association By Ekaterina Melnik; Jean-Benoît Zimmermann
  11. The Public Perception and Normative Valuation of Executive Compensation: An International Comparison By Kuhn, Andreas

  1. By: Abigail Barr (Queen Elizabeth House, University of Oxford)
    Abstract: In a laboratory experiment designed to test aspiration-based theories of happiness, McBride (2010) found no evidence of the predicted negative effect of own past payments on subjects’ satisfaction with their current round payments. This paper presents further analysis of McBride’s data that reveals such an effect. In the treatment where such an effect is most likely to be observed, subjects’ satisfaction with their payments in a given round is negatively affected by the level of payment they received the last time they faced the same payment probabilities. The overall trajectory of their payments when facing the same payment probabilities is also found to have an effect.
    Keywords: Satisfaction, Happiness, Adaptation, Experiment
    JEL: C91 I31
    Date: 2010–11
  2. By: Lisa Bruttel; Urs Fischbacher
    Abstract: Taking the initiative is a crucial element of leadership and an important asset for many jobs. We assess leadership in a game in which it emerges spontaneously since people have a non-obvious possibility to take the initiative. Combining this game with small experimental games and questionnaires, we investigate the motives and personality characteristics that entail leadership. We find efficiency concerns, generosity, and attention seeking as important determinants of leadership. Response time patterns and the results from the cognitive reflection test show that cognitive resources are relevant in the decision to lead.
    Keywords: leading-by-example, social preferences, experiment
    Date: 2010
  3. By: Eva I. Hoppe; David J. Kusterer
    Abstract: In a large-scale laboratory experiment, we investigate whether subjects' scores on the cognitive reflection test (CRT) are related to their susceptibility to the base rate fallacy, the conservatism bias, overconfidence, and the endowment effect.
    Keywords: Cognitive reflection test, Base rate fallacy, Conservatism, Overconfidence, Endowment effect
    JEL: C91 D80 J24
    Date: 2010–07–28
  4. By: Lisa Bruttel; Tim Friehe
    Abstract: This paper presents experimental evidence that tax compliance is path dependent. We show that individuals faced with the same current tax enforcement parameters, will nevertheless choose different compliance if they have faced different tax enforcement parameters in the past. This finding has important policy implications. For instance, legal harmonization in the EU cannot be expected to reliably yield similar behavior in countries with different legal histories.
    Keywords: Tax compliance, Path dependence, Experiment
    Date: 2010
  5. By: Florian Englmaier (University of Munich); Georg Gebhardt (Ulm University)
    Abstract: We run a public good experiment in the field and in the lab with (partly) the same subjects. The field experiment is a true natural field experiment as subjects do not know that they are exposed to an experimental variation. We can show that subjects' behavior in the classic lab public good experiment correlates with their behavior in the structurally comparable public good treatment in the field but not with behavior in any of two control treatments we ran in the field. This effect is also economically significant. We conclude that a) the classic lab public good experiment captures important aspects of structurally equivalent real life situations and b) that behavior in lab and field at least in our setting is driven by the same underlying forces.
    Keywords: Field and Lab Experiments, External Validity, Public Goods, Team Production
    JEL: C91 C93 D01 D64
    Date: 2010–09
  6. By: Michèle Belot; Raymond Duch (Centre for Experimental Social Sciences, Nuffield College, University of Oxford); Luis Miller
    Abstract: This study compares the behavior of students and non-students in a number of classic experimental games. We find that students are more likely to behave as homo-economicus agents than non-students in games involving other-regarding preferences (Dictator Game, Trust Game and Public Good Game). These differences persist even when controlling for demographics, cognitive ability and risk preferences. In games that do not engage other-regarding preferences (Beauty-contest and Second-price Auction) there is limited evidence of differences in behaviour between subject pools. In none of the five games is there evidence of significant differences in comprehension between students and non-students. Within subject analyses indicate that students are highly consistent in their other-regarding preferences while non-student subjects are inconsistent across other-regarding games. Our findings suggest that experiments using students will provide a lower bound estimate of other-regardedness in the general population while exaggerating the stability of other-regarding preferences.
    Keywords: lab experiments, convenience samples, other-regarding preferences, consistency
    JEL: C72 C81 C91
    Date: 2010–10
  7. By: Garapin, A.; Llerena, D.; Hollard, M.
    Abstract: In this paper we examine the question of wether a collective activity can influence cooperation in a subsequent repeated one shot prisoner's dilemma (PD) game. We conduct two series of experiments. The first consists of control experiments in which 30 periods of a PD game are played, with a random re-matching of the pairs in every period. In a second series of experiments, subjects first play a donation game and then the PD game. In the donation game they collectively discuss the amount of a donation to a given charity, before putting the question to an individual and anonymous vote. Cooperation levels in the PD games preceded by the donation game are signficantly lower than those observed in the control experiment.
    JEL: C72 C91 C92
    Date: 2010
  8. By: Michèle Belot (Centre for Experimental Social Sciences, Nuffield College, University of Oxford)
    Abstract: This study investigates the following questions: Is it harder to distinguish and remember people if they are of another race? And do memory limitations have discriminatory implications? To answer these questions, I conduct an experiment in a laboratory environment. Participants are presented with a set of potential candidates of different races - East Asian and Caucasian White - and each candidate is associated with a monetary value. Incentives are provided to recall candidates with higher values. I find that people are much better able to recall candidates with higher values if they are of the same race. Candidates of the other race are more likely to be confused with each other. This leads to positive and negative discrimination at the same time: those at bottom of the value distribution benefit while those at the top lose out. These results suggest that cognitive biases could play a role in the nature of cross-racial relations, in particular for phenomena relying on repeated interactions and individual recognition, such as the formation and maintenance of social ties or the establishment of trust relationships.
    Keywords: Own-Race-Bias, Discrimination, Bounded Memory
    JEL: J71 C91 D83
    Date: 2010–10
  9. By: Verena Utikal
    Abstract: Confessions after failures are socially desirable. However, confessions also bear the risk of punishment. In a laboratory experiment I examine how confessions work. I analyze whether the willingness to punish harmful failures depends on how the harmed party has learned about the outcome. The harmed party can learn about the outcome via random detection or self-report by the performer. I find that confessions are a powerful instrument: Punishment for confessed failures is less likely than for randomly detected failures.
    Keywords: Cheap Talk, Confession, Experiment, Intentions
    Date: 2010
  10. By: Ekaterina Melnik (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); Jean-Benoît Zimmermann (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)
    Abstract: We develop an economic model of association based on voluntary contributions. Different equilibria corresponding to the different modes of formation of associations are analyzed and the results are compared with the existing empirical literature. The main contribution consists in analyzing voluntary associations as a means of providing collective consumption goods or services while allowing for some heterogeneity of preferences concerning the quality of these goods or services. Thus we introduce the concept of subjective quality as a possible incentive for volunteering. The model stresses the importance of non-pecuniary rewards and of accepted differentiation for the well-functioning of voluntary organizations.
    Keywords: Voluntary Association; Public Good; Volunteering
    Date: 2010–11–19
  11. By: Kuhn, Andreas (University of Zurich)
    Abstract: This paper describes individuals' perceptions and normative valuations of executive compensation using comparable survey data for fifteen OECD member countries. An overwhelming majority of individuals (more than 90%) believes that top executives earn more than they actually deserve. However, there is also substantial variation in the actual and ethical levels of executive compensation, both within and across countries. The empirical analysis further shows that subjective estimates of executive pay are associated with objective measures of inequality and redistribution, and that individuals' perceptions and normative valuations of executive compensation are associated with their more general political preferences.
    Keywords: executive compensation, subjective wage estimates, political preferences
    JEL: D31 D63 J31
    Date: 2010–11

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