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on Cognitive and Behavioural Economics |
| By: | Almlund, Mathilde (University of Chicago); Duckworth, Angela Lee (University of Pennsylvania); Heckman, James J. (University of Chicago); Kautz, Tim (University of Chicago) |
| Abstract: | This paper explores the power of personality traits both as predictors and as causes of academic and economic success, health, and criminal activity. Measured personality is interpreted as a construct derived from an economic model of preferences, constraints, and information. Evidence is reviewed about the "situational specificity" of personality traits and preferences. An extreme version of the situationist view claims that there are no stable personality traits or preference parameters that persons carry across different situations. Those who hold this view claim that personality psychology has little relevance for economics. The biological and evolutionary origins of personality traits are explored. Personality measurement systems and relationships among the measures used by psychologists are examined. The predictive power of personality measures is compared with the predictive power of measures of cognition captured by IQ and achievement tests. For many outcomes, personality measures are just as predictive as cognitive measures, even after controlling for family background and cognition. Moreover, standard measures of cognition are heavily influenced by personality traits and incentives. Measured personality traits are positively correlated over the life cycle. However, they are not fixed and can be altered by experience and investment. Intervention studies, along with studies in biology and neuroscience, establish a causal basis for the observed effect of personality traits on economic and social outcomes. Personality traits are more malleable over the life cycle compared to cognition, which becomes highly rank stable around age 10. Interventions that change personality are promising avenues for addressing poverty and disadvantage. |
| Keywords: | personality, behavioral economics, cognitive traits, wages, economic success, human development, person-situation debate |
| JEL: | I2 J24 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5500&r=cbe |
| By: | Gerald Eisenkopf; Urs Fischbacher |
| Abstract: | Machiavelli advises against delegating the distribution of favors. We test this claim in an experiment, in which an investor can directly transfer money to a trustee or delegate this decision to another investor. Varying the value of the transfers of the investor and the delegate, we find that the trustee´s rewards follow a rather simple pattern. In all situations, both investors are rewarded, but the person who actually decides gets a higher reward. Delegation only pays off for the initial decision maker if the value of the delegate´s transfer is much higher than the value of the investor´s transfer. |
| Keywords: | Delegation, trust, reciprocity, intentions, exeriment |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:twi:respas:0063&r=cbe |
| By: | Jana Vyrastekova (Radboud University Nijmegen); Sander Onderstal (University of Amsterdam); Pierre Koning (CPB Netherlands Bureau for Economic Policy Analysis) |
| Abstract: | We examine how self-selection of workers into firms depends on the power of the firms' incentive schemes and how it affects the performance of firms that increase the power of the incentive schemes. In a laboratory experiment, we let subjects choose between (low-powered) team incentives and (high-powered) individual incentives. We observe that subjects exhibiting high trust or reciprocity in the trust game are more likely to choose team incentives. When exposed to individual incentives, workers who chose team incentives perform worse if both the unobservable interdependency between workers and their incentive to cooperate under team incentives are high. |
| Keywords: | Incentive scheme; Self-selection; Laboratory experiment |
| JEL: | C91 J33 M52 |
| Date: | 2010–07–29 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20100074&r=cbe |
| By: | Stoop, Jan; Noussair, Charles; van Soest, Daan |
| Abstract: | We conduct a field experiment to measure cooperation among groups of recreational fishermen at a privately owned fishing facility. The parameters are chosen so that group earnings are greater when group members catch fewer fish, as in the Voluntary Contributions Mechanism (VCM). In a manner consistent with classical economic theory, though in contrast to prior results from laboratory experiments, we find no evidence of cooperation. We construct a series of additional treatments to identify causes of the di®erence. We rule out the subject pool and the laboratory setting as potential causes, and identify the type of activity involved as the source of the lack of cooperation in our field experiment. When cooperation requires a reduction in fishing effort, individuals are not cooperative, whether the reduction in fishing translates into more money or into more fishing opportunities for the group. |
| Keywords: | Public Goods Game; Field Experiment; Social Preferences |
| JEL: | C92 C93 C72 |
| Date: | 2010–09–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:28924&r=cbe |
| By: | Klor, Esteban F. (Hebrew University, Jerusalem); Kube, Sebastian (University of Bonn); Winter, Eyal (Hebrew University, Jerusalem); Zultan, Ro'i (Max Planck Institute for Economics) |
| Abstract: | Conventional wisdom suggests that an increase in monetary incentives should induce agents to exert higher effort. In this paper, however, we demonstrate that this may not hold in team settings. In the context of sequential team production with positive externalities between agents, incentive reversal might occur: an increase in monetary incentives (either because rewards increase or effort costs decrease) may lead agents to exert lower effort in the completion of a joint task – even if agents are fully rational, self-centered money maximizers. Herein we discuss this seemingly paradoxical phenomenon and report on two experiments that provide supportive evidence. |
| Keywords: | incentives, incentive reversal, team production, externalities, laboratory experiments, personnel economics |
| JEL: | C92 D23 J31 J33 J41 M12 M52 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5501&r=cbe |
| By: | Sugato Chakravarty (Purdue University); Yongjin Ma (Purdue University); Sandra Maximiano (Purdue University) |
| Abstract: | The goal of this paper is to investigate the interaction between social ties and deceptive behavior within an experimental setting. To do so, we implement a modified sender-receiver game in which a sender obtains a private signal regarding the value of a state variable and sends a message related to the value of this state variable to the receiver. The sender is allowed to be truthful or to lie about what he has seen. The innovation in our experimental design lies in the fact that, in contrast to the extant sender-receiver games, the receiver can take no action – which eliminates strategic deception. A further innovation lies in the fact that subjects (i.e., senders) are not restricted to choose between truth telling and a unique type of lie but, instead, are allowed to choose from a distinct set of allocations that embodies a multi-dimensional set of potential lies. Our experimental design is, therefore, able to overcome an existing identification problem by allowing us to disentangle lying aversion from social preferences. We implement two treatments: one in which players are anonymous to each other (strangers); and one in which players know each other from outside the experimental laboratory (friends). We find that individuals are less likely to lie to friends than to strangers; that they have different degrees of lying aversion and that they lie according to their social preferences. Pro-social individuals appear to be more lying averse. If they lie, however, they are equally likely to do so with friends and strangers. The deceptive behavior of selfish individuals mimics those of pro social types only when subjects play with friends. Overall, in addition to social preferences, friendship appears to be an important factor in improving our understanding of deceptive behavior. |
| Keywords: | Lying, Friendship, social ties, deceptive behavior, signal, experiment |
| JEL: | G21 D82 O16 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:csr:wpaper:1007&r=cbe |
| By: | Xiaohao Ding (Peking University); Joop Hartog (University of Amsterdam); Yuze Sun (Peking University) |
| Abstract: | We combine a survey and an experiment with real pay-out among Peking University students to measure and validate individual risk attitudes. The experiment involves choosing between a cash payment and playing a lottery. The survey questions ask for the reservation price of a hypothetical lottery and self-assessment of risk attitude on a 0-10 scale. We confirm familiar findings: risk aversion dominates, women are more risk averse than men, risk aversion decreases with increasing parental income, risk attitudes are domain-specific. Correlations between survey measures and experimental measures, are in the right direction, but not very high. The survey measures are valid indicators of experimentally measured risk attitude, but with substantial noise remaining. Heterogeneity in levels and structure of risk attitude is large. |
| Keywords: | risk attitude; survey question; experimental validation |
| JEL: | D12 |
| Date: | 2010–03–03 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20100027&r=cbe |
| By: | Linan Diao (Max Planck Institute of Economics, Jena, Germany) |
| Abstract: | Empirical evidences show that investors tend to be biased toward investing in domestic (home bias) and local (local bias) stocks. Familiarity is considered to be one of the reasons. A similar concept was proposed by Goldstein and Gigerenzer (1999, 2002), known as the recognition heuristic: "when choosing between two objects, of which only one is recognized, choose the recognized. Investors recognize or are familiar with local stocks, expect them to provide higher returns and, therefore, invest more in such stocks". We conducted an experiment in Jena, Germany to test whether subjects show local bias and use recognition-based and familiarity-based portfolio strategies. We categorized them into an experienced and an inexperienced group; in addition, we used two data periods, i.e., bull market and bear market, to see if they behave differently in the two markets. Results show that all participants invested more of their endowments in the stock market in bull rather than bear market. All participants showed greater familiarity with local stocks. However, the experienced participants only invested more in local rather than recognized and familiar stocks; on the contrary, the inexperienced participants invested more in recognized and familiar but not local stocks. Our experiment shows no evidence that familiarity is a reason for local bias. |
| Keywords: | Recognition Heuristic, recognition-based portfolio strategy, familiarity-based portfolio strategy, local bias |
| JEL: | C91 G11 D14 |
| Date: | 2011–02–16 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2011-010&r=cbe |
| By: | Chatterjee, Sidharta |
| Abstract: | This paper deals with cognitive theories behind agent-based modeling of learning and information processing methodologies. Herein, I undertake a descriptive analysis of how human agents learn to select action and maximize their value function under reinforcement learning model. In doing so, I have considered the spatio-temporal environment under bounded rationality using Markov Decision process modeling to generalize patterns of agent behavior by analyzing the determinants of value functions, and of factors that modify policy- action-induced cognitive abilities. Since detecting patterns are central to the human cognitive skills, this paper aspires at uncovering the entanglements of complex contextual pattern identification by linking contexts with optimal decisions that agents undertake under hypercompetitive market pressure through learning which have however, implicative applications in a wide array of social and macroeconomic domains. |
| Keywords: | Cognitive theory, Reinforcement Learning, Markov Decision Process, Glia, Action potential, policy pattern, Neuroeconomics |
| JEL: | D81 C61 D87 |
| Date: | 2011–02–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:28883&r=cbe |
| By: | Kölle, Felix (University of Cologne); Sliwka, Dirk (University of Cologne); Zhou, Nannan (University of Cologne) |
| Abstract: | We investigate the effects of inequality in wealth on the incentives to contribute to a public good when agents are inequity averse and may differ in ability. We show that equality may lead to a reduction of public good provision below levels generated by purely selfish agents. But introducing inequality motivates more productive agents to exert higher efforts and help the group to coordinate on equilibria with less free-riding. As a result, less able agents may benefit from initially disadvantageous inequality. Moreover, the more inequity averse the agents, the more inequality should be imposed even by an egalitarian social planner. |
| Keywords: | public goods, inequality, inequity aversion, social welfare, voluntary provision, income distribution, heterogeneity |
| JEL: | H41 D31 D63 J31 M52 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5514&r=cbe |
| By: | Junichiro Ishida |
| Abstract: | This paper provides a simple autonomy-based model of human motivation in which a decision maker with divided selves must perform some task. The key presumption of the model is that the brain is not a unitary system which is equipped to achieve a single goal in a systematic manner; rather, it is more like an organization which is hampered by several constraints such as preference incongruence and incomplete exchange (or imperfect recall) of information. Due to these constraints, the model yields behavioral patterns that are consistent with various stylized facts of human motivation, mostly found in social psychology. The main findings of the paper are: (i) more autonomy induces more motivation; (ii) complex tasks are susceptible to motivation crowding out; (iii) small rewards are detrimental to motivation; (iv) intrinsically interesting tasks are susceptible to motivation crowding out. |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:0803&r=cbe |
| By: | Jana Vyrastekova (Radboud University Nijmegen); Sander Onderstal (University of Amsterdam) |
| Abstract: | We analyze gender differences in the trust game in a "behind the veil of ignorance" design. This method yields strategies that are consistent with actions observed in the classical trust game experiments. We observe that, on average, men and women do not differ in "trust", and that women are slightly more "trustworthy". However, men's strategies are bimodal, peaking at the subgame perfect Nash equilibrium and the Pareto efficient frontier, while women's strategies are single peaked at moderate transfers. For a given high level of pro-social preferences, men send more than women. This may be linked to men willing to bear more risk than women. |
| Keywords: | trust game; experiment; strategy method behind the veil of ignorance; gender differences |
| JEL: | C72 C91 |
| Date: | 2010–07–05 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20100063&r=cbe |
| By: | Hessel Oosterbeek (University of Amsterdam); Reyn van Ewijk (VU University Amsterdam) |
| Abstract: | Recent studies for primary and secondary education find positive effects of the share of girls in the classroom on achievement of boys and girls. This study examines whether these results can be extrapolated to post-secondary education. We conduct an experiment in which the shares of girls in workgroups for first year students in economics and business are manipulated and students are randomly assigned to these groups. Boys tend to postpone their dropout decision when surrounded by more girls, and there is also a modest reduction in early absenteeism. On the other hand, boys perform worse on courses with high math content when assigned to a group with many girls. Overall, however, we fail to find substantial gender peer effects on achievement. This in spite of the fact that students' perceptions of the behavior of themselves and their peers are influenced by the share of girls. |
| Keywords: | Field experiment; Peer effects; University students |
| JEL: | I22 I28 D83 |
| Date: | 2010–11–11 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20100113&r=cbe |