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on Cognitive and Behavioural Economics |
| By: | Rosinger, Elemer Elad |
| Abstract: | Recently, P Krugman has suggested that psychology should be included in the theory of economics in view of its critical role played in the behaviour of the large masses of people whose day to day participation impacts so heavily upon economic affairs. Here it is argued that such an inclusion of psychology as an important component of economic theory should further be extended to the psychology of theoretical economists as well. Indeed, the severe division of theoretical economists along various preconceived or a priori lines is still affecting with a massive negative effect our national and global economies. And while democracy may be a legitimate approach in politics, since no one can seriously claim that politics is a science, on the contrary, and precisely to the extent that economics is claimed by some to have by now reached the level of science, such arbitrary sharp divisions, mostly politically motivated, which we still have in the theory of economics may indeed require the urgent and significant consideration of the psychology of the respective theoretical economists. |
| Keywords: | psychology of theoretical economists; to be included in economics theory |
| JEL: | B0 A1 B3 A11 A14 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:28148&r=cbe |
| By: | Daniele Nosenzo (School of Economics, University of Nottingham); Theo Offerman (CREED, Department of Economics, University of Amsterdam); Martin Sefton (School of Economics, University of Nottingham); Ailko van der Veen (CREED, Department of Economics, University of Amsterdam) |
| Abstract: | We examine the effectiveness of bonuses and fines in an ‘inspection game’ where an employer can learn the effort of a worker through costly inspection. Standard game theoretic analysis predicts that fines discourage shirking, whereas bonuses encourage shirking. In contrast, ownpayoff effects suggest that both fines and bonuses discourage shirking. In an experiment we find that fines are more effective than bonuses in reducing shirking. However, we do not find that bonuses encourage shirking. Behavioral theories based on Impulse Balance Equilibrium or Quantal Response Equilibrium provide a good account of deviations from Nash equilibrium predictions. |
| Keywords: | Inspection Games; Costly Monitoring; Rewards and Punishments; Bonuses and Fines; Quantal Response Equilibrium; Impulse Balance Equilibrium; Experiment |
| JEL: | C70 C72 C92 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:cdx:dpaper:2010-21&r=cbe |
| By: | Francesca Gino (Harvard Business School, Negotiation, Organizations & Markets Unit); Dan Ariely (Fuqua School of Business, Duke University) |
| Abstract: | Creativity is a common aspiration for individuals, organizations, and societies. Here, however, we test whether creativity increases dishonesty. We propose that a creative personality and creativity primes promote individuals' motivation to think outside the box and that this increased motivation leads to unethical behavior. In four studies, we show that participants with creative personalities who scored high on a test measuring divergent thinking tended to cheat more (Study 1); that dispositional creativity is a better predictor of unethical behavior than intelligence (Study 2); and that participants who were primed to think creatively were more likely to behave dishonestly because of their creativity motivation (Study 3) and greater ability to justify their dishonest behavior (Study 4). Finally, a field study constructively replicates these effects and demonstrates that individuals who work in more creative positions are also more morally flexible (Study 5). The results provide evidence for an association between creativity and dishonesty, thus highlighting a dark side of creativity. |
| Keywords: | creativity, creative thinking, dishonesty, intelligence, unethical behavior |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:hbs:wpaper:11-064&r=cbe |
| By: | John Duffy; Felix Munoz-Garcia (School of Economic Sciences, Washington State University) |
| Abstract: | This paper investigates incomplete information and signaling about players?inequity aversion in the simultaneous and sequential-move prisoner?s dilemma game. We ?first evaluate the role of incomplete information according to: (1) whether uncertainty helps select the effcient equilibrium outcome, and (2) whether more cooperation can be sustained under incomplete than under complete information. We then examine the possibility of information transmission among individuals in a signaling game. A separating equilibrium can be supported in which players with high concerns about fairness bear the cost of cooperating in order to reveal their type to opponents, thus promoting cooperation in subsequent periods. We also fi?nd a pooling equilibrium in which a player unconcerned about inequity aversion initially cooperates in order to mislead the uninformed player. This misleading strategy induces cooperation from the uninformed player in the subsequent stage of the game, moment at which the unconcerned player takes the opportunity to defect. This "?backstabbing?" equilibrium helps explain frequently observed behavior in ?finitely-repeated experiments. |
| Keywords: | Prisoner?s Dilemma; Inequity aversion; Incomplete Information; Signaling |
| JEL: | C72 C73 D82 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:wsu:wpaper:munoz-8&r=cbe |
| By: | Johansson-Stenman, Olof (Department of Economics, School of Business, Economics and Law, Göteborg University); Svedsäter, Henrik (Organisational Behaviour, London Business School, United Kingdom) |
| Abstract: | Hypothetical bias in stated-preference methods appears sometimes to be very large, and other times non-existent. This is here largely explained by a model where people derive utility from a positive self-image associated with morally commendable behavior. The results of a choice experiment are consistent with the predictions of this model; the hypothetical marginal willingness to pay (MWTP) for a moral good (contributions to a WWF project) is significantly higher than the corresponding real MWTP, whereas no hypothetical bias is present for an amoral good (a restaurant voucher). Moreover, both the theoretical model and the experimental evidence suggest that also the real MWTP for the moral good is biased upwards by being higher within than outside the experimental context.<p> |
| Keywords: | Stated-preference methods; choice experiment; hypothetical bias; self-image; non-market valuation; warm glow |
| JEL: | C91 D63 Q50 |
| Date: | 2011–01–13 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0484&r=cbe |
| By: | Pahlke, Julius; Strasser, Sebastian; Vieider, Ferdinand M. |
| Abstract: | We systematically explore decision situations in which a decision maker bears responsibility for somebody else's outcomes as well as for her own in situations of payoff equality. In the gain domain we confirm the intuition that being responsible for somebody else's payoffs increases risk aversion. This is however not attributable to a 'cautious shift' as often thought. Indeed, looking at risk attitudes in the loss domain, we find an increase in risk seeking under responsibility. This raises issues about the nature of various decision biases under risk, and to what extent changed behavior under responsibility may depend on a social norm of caution in situations of responsibility versus naive corrections from perceived biases. To further explore this issue, we designed a second experiment to explore risk-taking behavior for gain prospects offering very small or very large probabilities of winning. For large probabilities, we find increased risk aversion, thus confirming our earlier finding. For small probabilities however, we find an increase of risk seeking under conditions of responsibility. The latter finding thus discredits hypotheses of a social rule dictating caution under responsibility, and can be explained through flexible self-correction models predicting an accentuation of the fourfold pattern of risk attitudes predicted by prospect theory. An additional accountability mechanism does not change risk behavior, except for mixed prospects, in which it reduces loss aversion. This indicates that loss aversion is of a fundamentally different nature than probability weighting or utility curvature. Implications for debiasing are discussed. |
| Keywords: | risk attitude; other-regarding preferences; prospect theory; agency; social norms |
| JEL: | D81 |
| Date: | 2010–11–15 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:12115&r=cbe |
| By: | Llopis-Corcoles, Oscar |
| Abstract: | Enabling knowledge sharing among individuals in organizations is fundamental to innovation and organizational success. Nevertheless, despite receiving great attention among both academics and practitioners, knowledge sharing research is still searching for integrated framework. Recent literature reviews shows that most of the existing research has centered on a macro perspective, attaching less emphasis on the integration of the individual in the process. Being aware of this, an increasing group of scholars have proposed a multi-level integration of the individual and the organizational perspectives. This paper argues that this new approach that is grounded on sociology provides appropriate research questions, but might not be enough to successfully answer them, since is rooted in a sociological vision of the individual. Knowledge sharing literature might pay more attention to the reciprocal interaction of personal factors, individual behavior and organizational environment. A possible way to fill this gap can be by viewing the topic through the lens of the social cognitive theory. This theory permits a better integration of existing research of some psychosocial topics such as vicarious learning, self-efficacy, cognitive biases and schemas. |
| Keywords: | Knowledge management; knowledge sharing; multilevel model; social cognitive theory |
| JEL: | M12 O31 |
| Date: | 2011–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:ing:wpaper:201101&r=cbe |
| By: | M. Cristelli; L. Pietronero; A. Zaccaria |
| Abstract: | We present an overview of some representative Agent-Based Models in Economics. We discuss why and how agent-based models represent an important step in order to explain the dynamics and the statistical properties of financial markets beyond the Classical Theory of Economics. We perform a schematic analysis of several models with respect to some specific key categories such as agents' strategies, price evolution, number of agents, etc. In the conclusive part of this review we address some open questions and future perspectives and highlight the conceptual importance of some usually neglected topics, such as non-stationarity and the self-organization of financial markets. |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1101.1847&r=cbe |
| By: | Novarese, Marco; Lanteri, Alessandro; Tibaldeschi, Cesare |
| Abstract: | This article experimentally explores the way in which human agents learn how to process and manage new information. In an abstract setting, players should perform an everyday task: selecting information, making generalizations, distinguishing contexts. The tendency to generalize is common to all participants, but in a different way. Best players have a stringer tendency to generalise rules. A high score is, in fact, associated with low entropy for mistakes, that is with a tendency to repeat the same mistakes over and over. Though the repetition of mistakes might be considered a failure to properly employ feedback or a bias, it may instead turn out as a viable and successful procedure. This result is connected to the literature on learning. |
| Keywords: | behavioural entropy; cognitive economics; complexity; experiments; feedback; heuristics; learning |
| JEL: | A12 D83 C91 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:28007&r=cbe |