nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2011‒04‒02
fifteen papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. World Heritage: Where Are We? An Empirical Analysis By Bruno S. Frey; Paolo Pamini
  2. Attitudes to Risk and Roulette By Adi Schnytzer; Sara Westreich
  3. Predicting Lotto Numbers By Claus Bjørn Jørgensen; Sigrid Suetens; Jean-Robert Tyran
  4. Emotions, Sanctions and Cooperation By Joffily, Mateus; Masclet, David; Noussair, Charles N.; Villeval, Marie Claire
  5. Envy and agricultural innovation: An Experimental Case Study from Ethiopia By Bereket Kebede; Daniel John Zizzo
  6. Emotions and Chat in a Financial Markets Experiment By Shaun P. Hargreaves Heap; Daniel John Zizzo
  7. Experiments with the Traveler's Dilemma: Welfare, Strategic Choice and Implicit Collusion By Kaushik Basu; Leonardo Becchetti; Luca Stanca
  8. The long shadow of income on trustworthiness By Ermisch J; Gambetta D
  9. Repeated moral hazard and contracts with memory: A laboratory experiment By Nieken, Petra; Schmitz, Patrick W
  10. Public Spending and Volunteering: "The Big Society", Crowding Out, and Volunteering Capital. By Bartels, Koen; Cozzi, Guido; Mantovan, Noemi
  11. Temporal stability and psychological foundations of cooperation preferences By Volk, Stefan; Thoeni, Christian; Ruigrok, Winfried
  12. Cooperation limitations under a one-time threat of expulsion and punishment By Aaron Lowen; Pamela Schmitt
  13. Sanctions that Signal: an Experiment. By Roberto Galbiati; Karl Schlag; Joel van der Weele
  14. An impure public good model with lotteries in large grou By Antonio Cabrales; Haydée Lugo
  15. An Experimental Dynamic Public Goods Game with Carryover By Kurtis Swope; Pamela Schmitt; John Cadigan; Patrick Wayland

  1. By: Bruno S. Frey; Paolo Pamini
    Abstract: A statistical analysis of the UNESCO World Heritage List is presented. The World Heritage Convention intends to protect global heritage of outstanding value to mankind, but there has been great concern about the missing representativity of the member countries. There is a strongly biased distribution of Sites according to a country’s population, area or per capita income. The paper reveals the facts but refrains from judging whether the existing distribution is appropriate or not. This task must be left to the discussion in the World Heritage Convention.
    Keywords: global public goods; world heritage; international organizations; international political economy; culture; UNESCO
    JEL: Z11 F5 H87
    Date: 2011–03
  2. By: Adi Schnytzer (Department of Economics, Bar Ilan University); Sara Westreich (Bar-Ilan University)
    Date: 2010–08
  3. By: Claus Bjørn Jørgensen (Department of Economics, University of Copenhagen); Sigrid Suetens (Tilburg University); Jean-Robert Tyran (Department of Economics, University of Vienna)
    Abstract: We investigate the “law of small numbers” using a unique panel data set on lotto gambling. Because we can track individual players over time, we can measure how they react to outcomes of recent lotto drawings. We can therefore test whether they behave as if they believe they can predict lotto numbers based on recent drawings. While most players pick the same set of numbers week after week without regards of numbers drawn or anything else, we find that those who do change, act on average in the way predicted by the law of small numbers as formalized in recent behavioral theory. In particular, on average they move away from numbers that have recently been drawn, as suggested by the “gambler’s fallacy”, and move toward numbers that are on streak, i.e. have been drawn several weeks in a row, consistent with the “hot hand fallacy”.
    Keywords: gambler’s fallacy; hot hand fallacy; representativeness; law of small numbers
    JEL: D81 D84
    Date: 2011–03
  4. By: Joffily, Mateus (CNRS); Masclet, David (University of Rennes); Noussair, Charles N. (Tilburg University); Villeval, Marie Claire (CNRS, GATE)
    Abstract: We use skin conductance responses and self-reports of hedonic valence to study the emotional basis of cooperation and punishment in a social dilemma. Emotional reaction to free-riding incites individuals to apply sanctions when they are available. The application of sanctions activates a "virtuous emotional circle" that accompanies cooperation. Emotionally aroused cooperators relieve negative emotions when they punish free riders. In response, the free-riders experience negative emotions when punished, and increase their subsequent level of cooperation. The outcome is an increased level of contribution that becomes the new standard or norm. For a given contribution level, individuals attain higher levels of satisfaction when sanctioning institutions are in place.
    Keywords: emotions, sanctions, cooperation, experiment, skin conductance responses
    JEL: C92 D62 D63 D64 D74
    Date: 2011–03
  5. By: Bereket Kebede; Daniel John Zizzo
    Abstract: The underlying motivations for envy or related social preferences and their impact on agricultural innovations are examined by combining data from money burning experimental game and household survey from Ethiopia. In the first stage of the money burning experimental game, income inequality is induced by providing different endowments and playing a lottery. In the second, people are allowed to decrease (‘burn’) other players’ money at their own expense. Conditional on individual behaviour, experimentally measured envious preferences from others have a negative effect on real life agricultural innovation.
    Keywords: envy; social preferences; money burning games; agricultural innovations; Ethiopia
    JEL: C93 O12 O55
    Date: 2011
  6. By: Shaun P. Hargreaves Heap (University of East Anglia); Daniel John Zizzo (University of East Anglia)
    Abstract: This paper examines experimentally two common conjectures in the popular literature on financial markets: that they are swayed by emotion and that they behave like a 'crowd'. We find consistent evidence that deviations of prices from fundamental value depend on the emotion of excitement and on the presence of independently identified 'irrational' traders. Other than through 'irrational' traders, there is no evidence, however, that non-price communication ('chat') influences prices. Subjects with an economics background make better traders.
    Keywords: asset bubbles; cheap talk; emotions; noise traders; behavioral finance.
    JEL: C91 G12
    Date: 2011–03–01
  7. By: Kaushik Basu (Department of Economics, Cornell University); Leonardo Becchetti (University of Rome "Tor Vergata"); Luca Stanca (University of Milan - Bicocca)
    Abstract: This paper investigates behavior in the Traveler's Dilemma game and isolates deviations from textbook predictions caused by differences in welfare perceptions and strategic miscalculations. It presents the results of an experimental analysis based on a 2x2 design where the own and the other subject's bonus-penalty parameters are changed independently. We find that the change in own bonus-penalty alone entirely explains the effect on claims of a simultaneous change in one's own and the other's bonus-penalty. An increase in the other subject's bonus-penalty has a significant negative effect on claims when the own bonus-penalty is low, whereas it does not have a significant effect when the own bonus-penalty is high. We also find that expected claims are inconsistent with actual claims in the asymmetric treatments. Focusing on reported strategies, we document substantial heterogeneity and show that changes in choices across treatments are largely explained by risk aversion.
    Date: 2011–03–23
  8. By: Ermisch J (Institute for Social and Economic Research); Gambetta D (Nuffield College, Oxfod)
    Abstract: We employ a behavioural measure of trustworthiness obtained from an experiment carried out with a sample of the general British population whose individuals were extensively interviewed on earlier occasions. Our basic finding is that given past income, higher current income increases trustworthiness and, given current income, higher past income reduces trustworthiness. Past income determines the level of financial aspirations and whether or not these are fulfilled by the level of current income affects trustworthiness. We also suspect that past income may also capture heterogeneity in relevant subjects‘ dispositions, with more opportunistic subjects being less trustworthy and having higher average incomes.
    Date: 2011–03–22
  9. By: Nieken, Petra; Schmitz, Patrick W
    Abstract: This paper reports data from a laboratory experiment on two-period moral hazard problems. The findings corroborate the contract-theoretic insight that even though the periods are technologically unrelated, due to incentive considerations principals may prefer to offer contracts with memory.
    Keywords: Laboratory experiment; Repeated moral hazard; Sequential hidden actions
    JEL: D82 J33
    Date: 2011–02
  10. By: Bartels, Koen; Cozzi, Guido; Mantovan, Noemi
    Abstract: The current British Government's "Big Society" plan is based on the idea that granting more freedom to local communities and volunteers will compensate for a withdrawal of public agencies and spending. This idea is grounded on a widely held belief about the relationship between government and volunteering: a high degree of government intervention will cause a crowding out of voluntary activity. Up to now, however, the crowding out hypothesis has hardly been supported by any empirical evidence or solid theoretical foundations. We develop a simple theoretical model to predict how fiscal policy affects the individual decision to volunteer or not. The predictions of the model are tested through the econometric analysis of two survey data sets, and interpretative analysis of narratives of local volunteers and public officials. Contrary to conventional wisdom, our results suggest that volunteering, by the individuals in the actively working population, declines when government intervention is decreased.
    Keywords: Volunteering; Labor Supply; Public Goods; Altruism.
    JEL: H31 H41 I38 J22 D64
    Date: 2011–03–19
  11. By: Volk, Stefan; Thoeni, Christian; Ruigrok, Winfried
    Abstract: A core element of economic theory is the assumption of stable preferences. We test this assumption in public goods games by repeatedly eliciting cooperation preferences in a fixed subject pool over a period of five months. We find that cooperation preferences are very stable at the aggregate level, but less so at the individual level. Nevertheless, individual preferences are sufficiently stable to predict future behavior fairly accurately. Our results also provide evidence on the psychological foundations of cooperation preferences. The personality dimension 'Agreeableness' is closely related to both the type and the stability of cooperation preferences.
    Keywords: Social preferences, preference stability, conditional cooperation, free riding, personality, Big-Five.
    JEL: C91 C72 H41
    Date: 2011–01
  12. By: Aaron Lowen (Grand Valley State University); Pamela Schmitt (United States Naval Academy)
    Abstract: We examine the role one-time threats of expulsion and punishment have on voluntary contributions in a public goods game. This paper extends the work of Cinyabuguma, Page, and Putterman (2005), who find that the threat of expulsion in every period raises contributions to near Pareto Optimal levels. In our experiments, participants played in 15-round sessions where they were allowed to vote to remove other subjects only after round 5 and in one design also voted whether to punish the remaining subjects after round 10. We find that the additional threat of punishment not only increased the contributions of participants before the punishment vote, but also resulted in the expulsion of participants who had contributed more than in the no punishment treatment. Efficiency with expulsion is 58.07% without punishment, and 57.13% with punishment, including the cost for voting and punishment. Our findings indicate that the threat of expulsion as a sanctioning mechanism may not be helpful for public good provision unless expulsion can occur in every period, the threat of costly punishment increases contributions with little impact on efficiency, and that standards for inclusion rise when later punishment is available.
    Date: 2011–03
  13. By: Roberto Galbiati; Karl Schlag; Joel van der Weele
    Abstract: Sanctions are a means to provide incentives towards more pro-social behavior. Yet their implementation can be a signal that past behavior was undesirable. We investigate experimentally the importance of the informational content of the choice to sanction. We place this in a context of a coordination game to focus attention on beliefs and information and less on intrinsic or pro-social motivations. We compare the eect of sanctions that are introduced exogenously by the experimenter to that of sanctions which have been actively chosen by a subject who takes the role of a fictitious policy maker with superior information about the previous eort of the other players. We nd that cooperative subjects perceive actively chosen sanctions as a negative signal which eliminates for them the incentive eect of sanctions.
    JEL: C92 D83 K42
    Date: 2011–03
  14. By: Antonio Cabrales (Departamento de Economía (Department of Economics), Universidad Carlos III de Madrid and CEPR); Haydée Lugo (Departamento de Fundamentos del Análisis Económico II (Department of Foundations of Economic Analysis II), Facultad de Ciencias Económicas y Empresariales (Faculty of Economics and Business), Universidad Complutense de Madrid)
    Abstract: We analyze the efect of a large group on an impure public goods model with lotteries. We show that as populations get large, and with selfish preferences, the level of contributions converges to the one given by voluntary contributions. With altruistic preferences (of the warm glow type), the contributions converge to a level strictly higher than those given by voluntary contributions, even though in general they do not yield First-best levels.
    Keywords: Lotteries, Public good, Warm glow, Eficiency.
    JEL: D64 H21 H41
    Date: 2011
  15. By: Kurtis Swope (United States Naval Academy); Pamela Schmitt (United States Naval Academy); John Cadigan (Gettysburg College); Patrick Wayland (United States Navy)
    Abstract: We examine voluntary contributions in a two-stage public good experiment with ‘carryover.’ In two treatments, each subject’s second stage endowment is determined by the return from the public good in the first stage. We manipulate payoffs across these treatments so that, relative to our no-carryover baseline, earnings from either Nash play or Pareto Optimal play are held constant. The remaining two treatments maintain a constant endowment in each stage, but vary the marginal per capita return (MPCR) to contributions in the second stage. Our results indicate that carryover increases first stage contributions. Our implementation of carryover enables us to examine the effects of changing endowments and MPCR’s with a wider variety of parameter values than in the existing literature. Consistent with these studies, we find that MPCR and endowment effects are important determinants of subject contributions to the group account. While stage 1 contributions tend to increase in the presence of carryover, efficiency levels across both stages fall relative to the baseline due to the high potential payoffs from complete contribution in the second stage (due to higher endowments or MPCR levels).
    Date: 2011–02

This nep-cbe issue is ©2011 by Marco Novarese. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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