nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2011‒04‒09
fourteen papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. The Effect of Education on Time Preferences By Francisco Perez-Arce
  2. Bosses and Kings: Asymmetric Power in Paired Common Pool and Public Good Games By James C. Cox; Elinor Ostrom; James M. Walker
  3. How Payment Systems Affect Physicians' Provision Behaviour – An Experimental Investigation By Heike Hennig-Schmidt; Reinhard Selten; Daniel Wiesen
  4. Emotions, Sanctions and Cooperation By Matteus Joffily; David Masclet; Charles Noussair; Marie-Claire Villeval
  5. Paradoxes and Mechanisms for Choice under Risk By James C. Cox; Vjollca Sadiraj; Ulrich Schmidt
  6. Rarer Actions: Giving and Taking in Third-Party Punishment Games By Simon Halliday
  7. Challenging the Intrapersonal Empathy Gap An Experiment with Self-Commitment Power By Matthias Uhl
  8. Determining risk preferences for pain By Eike B. Kroll; Judith N. Trarbach; Bodo Vogt
  9. Is It How You Look or Speak That Matters? - An Experimental Study Exploring the Mechanisms of Ethnic Discrimination By Rödin, Magnus; Özcan, Gülay
  10. Identification Problems in Personality Psychology By Borghans, Lex; Golsteyn, Bart H. H.; Heckman, James; Humphries, John Eric
  11. A Theory of Regret and Information By Emmanuelle GABILLON (GREThA, CNRS, UMR 5113)
  12. Modelling cognitive skills, ability and school quality to explain labour market earnings differentials By Cobus Burger; Servaas van der Berg
  13. Intrinsic and Extrinsic Motivations of Inventors By OWAN Hideo; NAGAOKA Sadao
  14. Fairness, justice, subjectivity, objectivity and goal congruence in management control systems By Cuguero, Natalia; Rosanas, Josep M.

  1. By: Francisco Perez-Arce
    Abstract: The author examines whether education increases patience. Admission decisions in a public college in Mexico are determined through a lottery. He finds that applicants who were successful in the draw were more likely to study in the following years. He surveyed the applicants to this college almost two years after the admission decision was made and measured their time preferences with a series of hypothetical inter-temporal choice questions. He finds that individuals who were successful in the admission lottery were, on average, more patient. He argues that this evidence points towards a causal effect of education on time preferences.
    Date: 2011–03
  2. By: James C. Cox; Elinor Ostrom; James M. Walker
    Abstract: Social dilemmas characterize decision environments in which individuals' exclusive pursuit of their own material self-interest can produce inefficient allocations. Two such environments are those characterized by public goods and common-pool resources in which the social dilemmas can be manifested in free riding and tragedy of the commons outcomes. Much field and laboratory research has focused on the effectiveness of alternative political-economic institutions in counteracting individuals' tendencies to underprovide public goods and over-extract commonpool resources. Previous laboratory research has not focused on the implications of power asymmetries in paired public good and common pool game settings. In our baseline treatments, we experiment with simultaneous move one-period games in which paired comparisons can be made across settings with public good and common pool games. In our central treatments, we experiment with pairs of sequential move one-period games in which second movers with asymmetric power -- "bosses and kings" -- can have large effects on efficiency and equity. The central questions are whether the bosses and kings do have significant effects on outcomes and whether those effects differ across the paired public good and common pool games in ways that can be rationalized by some theories but not others.
    Date: 2011–03
  3. By: Heike Hennig-Schmidt; Reinhard Selten; Daniel Wiesen
    Abstract: Understanding how physicians respond to incentives from payment schemes is a central concern in health economics research. We introduce a controlled laboratory experiment to analyse the influence of incentives from fee-for-service and capitation payments on physicians’ supply of medical services. In our experiment, physicians choose quantities of medical services for patients with different states of health. We find that physicians provide significantly more services under fee-for-service than under capitation. Patients are overserved under fee-forservice and underserved under capitation. However, payment incentives are not the only motivation for physicians’ quantity choices, as patients’ health benefits are of considerable importance as well. We find that patients in need of a high (low) level of medical services receive a larger health benefit under fee-for-service (capitation).
    Keywords: Physician payment system; laboratory experiment; incentives; fee-for-service; capitation
    JEL: C91 I11
    Date: 2011–03
  4. By: Matteus Joffily (ISC - Institut des Sciences Cognitives - CNRS : UMR5015 - Université Claude Bernard - Lyon I); David Masclet (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes I - Université de Caen); Charles Noussair (Department of economics, Tilburg University - Tilburg University); Marie-Claire Villeval (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon)
    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
    Date: 2011
  5. By: James C. Cox; Vjollca Sadiraj; Ulrich Schmidt
    Abstract: Experiments on choice under risk typically involve multiple decisions by individual subjects. The choice of mechanism for selecting decision(s) for payoff is an essential design feature that is often driven by appeal to the isolation hypothesis or the independence axiom. We report two experiments with 710 subjects. Experiment 1 provides the first simple test of the isolation hypothesis. Experiment 2 is a crossed design with six payoff mechanisms and five lottery pairs that can elicit four paradoxes for the independence axiom and dual independence axiom. The crossed design discriminates between: (a) behavioral deviations from postulated properties of payoff mechanisms; and (b) behavioral deviations from theoretical implications of alternative decision theories. Experiment 2 provides tests of the isolation hypothesis and four paradoxes. It also provides data for tests for portfolio effect, wealth effect, reduction, adding up, and cross-task contamination. Data from Experiment 2 suggest that a new mechanism introduced herein may be less biased than random selection of one decision for payoff.
    JEL: C91 D81
    Date: 2011–04
  6. By: Simon Halliday
    Abstract: In attempting to understand cooperation, economists have used the methods of experimental economics to focus on spheres of human behavior in which humans display altruism, reciprocity, or other social preferences through giving and through punishment. Recent work has begun to examine whether allowing allocations in the negative domain, that is, allowing subjects to take (or steal) other subjects' endowments, might affect participants' behavior. If participants' behavior is affected, then our understanding of experimental results generally, and social preferences speci cally, should be affected too (List 2007, Bardsley 2008). In this paper we propose an experimental variation on the Dictator Game with third-party punishment (Fehr and Fischbacher 2004b). We examine, first, a basic Dictator Game with third-party punishment, after which we introduce a treatment allowing the dictator to take from the receiver, in the knowledge that the third party could punish them. The results conflict. Many dictators choose the most self-interested option, while, when taking is introduced as an option for the dictator, third parties punish the most self-interested option more than in the baseline.
    JEL: C91 D63
    Date: 2011
  7. By: Matthias Uhl (Max Planck Institute of Economics, IMPRS "Uncertainty", Jena, Germany)
    Abstract: Loewenstein (1996, 2005) identifies an intrapersonal empathy gap. In the respective experiments, subjects make choices with delayed consequences. When entering the state where these consequences would unfold, they get the possibility to revise their initial choice. Revisions are more substantial when these two choices are made in different emotional states. The concept of the empathy gap suggests that the initial choice represents a misprediction of future preferences. However, it might alternatively be based on a well understood disagreement with future preferences. In this sense, people would like to add: "But don't ask me again!" To disentangle both explanations, we induce two different emotional states in each subject and offer a self-commitment device in the first state. In one condition, subjects move from a "cold" state of reflection to a "hot" state of impulsiveness. In the other condition, this order is reversed. We find evidence for the hot-to-cold empathy gap, but not for the cold-to-hot empathy gap when subjects can self-commit to their initial choice.
    Keywords: Intrapersonal empathy gap, self-commitment, intrapersonal conflict, naiveté, sophistication
    JEL: C90
    Date: 2011–04–04
  8. By: Eike B. Kroll (Institute of Economic Theory and Statistics (ETS), Karlsruhe Institute of Technology); Judith N. Trarbach (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Bodo Vogt (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: The QALY concept is the commonly used approach in research to evaluate the efficiency of therapies in cost utility analysis. We investigate the risk neutrality assumption for time of the QALY concept: can time be included as a linear factor? Various studies show that this assumption does not hold empirically. However, the results are based on hypothetical questionnaires rather than decisions with real consequences. Experimental economists argue that experiments are necessary to avoid hypothetical bias. Our study provides the first experimental analysis of health related decision making. Using the cold pressor test we can analyze decisions when subjects face real consequences. Analog to the hypothetical studies, our experimental results of real decisions provide no linear time preferences. In conclusion, the QALY concept needs to be modified by a weighting factor for time.
    Date: 2011–03
  9. By: Rödin, Magnus (Dept. of Economics, Stockholm University); Özcan, Gülay (Dept. of Economics, Stockholm University)
    Abstract: Using a unique laboratory experiment where subjects are asked to guess the test performance of candidates presented by facial portraits and voice messages, this paper explores the following questions: Are beliefs about performance affected by if a candidate is perceived to have looks that are non-stereotypical for the dominant population and do these beliefs change if the candidate has native-like versus accented speech? The experiment is conducted in Sweden and the results show that candidates not perceived as stereotypically Swedish are considered to be worse performers. These beliefs are found in within-gender but not in cross-gender evaluations and are not eliminated when additional performance-related information about the candidates is provided. When candidates are presented by both looks and speech, differential evaluations based on looks disappear. Instead, we find strong negative beliefs about performance for candidates that speak Swedish with a foreign accent implying that ethnic stereotypes associated with speech override stereotypes associated with appearance. The negative beliefs associated with foreign-accented speech are not supported by corresponding mean differences in the candidates’ actual test performance.
    Keywords: Experiment; Appearance; Speech; Beliefs; Performance; Stereotypes
    JEL: J15 J71
    Date: 2011–04–01
  10. By: Borghans, Lex (Maastricht University); Golsteyn, Bart H. H. (Maastricht University); Heckman, James (University of Chicago); Humphries, John Eric (University of Chicago)
    Abstract: This paper discusses and illustrates identification problems in personality psychology. The measures used by psychologists to infer traits are based on behaviors, broadly defined. These behaviors are produced from multiple traits interacting with incentives in situations. In general, measures are determined by these multiple traits and do not identify any particular trait unless incentives and other traits are controlled for. Using two data sets, we show, as an example, that substantial portions of the variance in achievement test scores and grades, which are often used as measures of cognition, are explained by personality variables.
    Keywords: identification problem; personality; psychology; achievement test; grades
    Date: 2011–03–25
  11. By: Emmanuelle GABILLON (GREThA, CNRS, UMR 5113)
    Abstract: Following Quiguin (1994), we propose a general model of preferences that accounts for individuals\' regret concerns. By confronting the commonly-accepted additive and multiplicative regret utility functions to this model, we establish certain characteristics that these utility functions require to be in conformity with our preferences model. Equally, as regret is intrinsically related to the concept of information about the foregone alternatives, we generalize our framework so that it can accomodate any information structure. We show that the less informative that structure is, the higher the utility of a regretful individual. This result means that an individual prefers not to be exposed to ex post information about the foregone alternatives. We also focus on information value, and consider two cases. That of flexibility, where information arrives before the choice and can be used to determine the optimal strategy; that of non-flexibility, where information arrives after the choice. We show that information value is negative when there is no flexibility, and that it can also be negative when there is flexibility.
    Keywords: , information, choice under uncertainty, bivariate risk aversion
    JEL: D81 D82
    Date: 2011
  12. By: Cobus Burger (Department of Economics, University of Stellenbosch); Servaas van der Berg (Department of Economics, University of Stellenbosch)
    Abstract: Attempts to explain wage differences between race groups in South Africa are constrained by the fact that quality of education is known to differ greatly between groups, thus the unexplained portion of the wage gap may be much affected by such differences in education quality. Using a simulation model that utilises school-leaving (matric) examination results and educational attainment levels to generate estimates of education quality, we find that much of the wage gap can indeed be explained by differences in education quality. Thus the unexplained residual, often identified with labour market discrimination, usually greatly over-estimates such discrimination. This emphasises even more strongly the need for greater equity in educational outcomes, particularly in the often unobserved quality of education.
    Keywords: South Africa, education quality, wages, labour market, Oaxaca-Blinder decomposition, discrimination, economics of education
    JEL: J7 J24 J31
    Date: 2011
  13. By: OWAN Hideo; NAGAOKA Sadao
    Abstract: This paper theoretically and empirically evaluates the relationship between the strength of inventors’ motives and their productivity, and the interaction between intrinsic and extrinsic motivation. For our empirical analyses, we use novel data from a survey of Japanese inventors on 5,278 patents conducted by the Research Institute of Economy, Trade and Industry (RIETI) in 2007 matched with a firm-level survey of remuneration policies for employee inventions conducted by the Institute of Intellectual Property (IIP) in 2005. The RIETI survey contains rich information about inventors, patents, and project characteristics, as well as two new measures of inventor productivity. Our study first reveals that satisfaction from contributing to science and technology and interest in solving challenging technical problems are highly associated with inventor productivity. Most notably, the science motivation measure has the largest and the most significant correlation with our measures of inventor productivity. Science orientation may be strongly associated with high R&D productivity because early access to scientific discoveries gives inventors an advantage or because interest in science correlates with inventive ability. However, careful analysis using additional measures of knowledge spillovers from academia and a proxy of inventor ability find little support for either explanation. This result makes the third explanation (science orientation) plausible, that is, the above two task motives simply encourage researchers to dedicate themselves to challenging projects. In order to explore further and based on our interpretation of motivation mentioned above, we present a principal-agent model where the agent selects the type of research projects and exerts effort in the presence of monetary incentives. The model offers the following two empirical implications: (a) firms with many intrinsically motivated employees are less likely to introduce revenue-based pay; and (b) the average value of patents is more positively correlated with the strength of intrinsic motivation in the absence of revenue-based pay than in its presence. Finally, we test the above empirical implications using the matched dataset from the RIETI and IIP surveys and we find little significant support for either prediction. We offer possible explanations for the result.
    Date: 2011–03
  14. By: Cuguero, Natalia (IESE Business School); Rosanas, Josep M. (IESE Business School)
    Abstract: Management control systems are intended to motivate managers to ensure that organizational goals are accomplished. They do this by rewarding and promoting people according to certain criteria. Usually, they are designed to achieve the greatest possible goal congruence, where people pursue personal goals that conduce to the organizational goal. The literature on management control has focused mainly on formal controls, as they are easier to study empirically. Generally speaking, though, formal and informal controls coexist. In this paper, we attempt to show that organizational justice may act as a link between formal and informal control elements. We find that there are two stable states, which we have labeled ideal goal congruence (where the system is lawful and the user is fair) and total goal incongruence (where the system is unlawful and the user is unfair); and two unstable states, in which goal congruence is occasional (unlawful system used fairly) or perverse (lawful system used unfairly). We conclude with some propositions, which can be used to generate hypotheses that we believe will stimulate, at the core of the management control systems literature, a new stream of research in which justice is seen as a central element of control system design and use.
    Keywords: organizational justice; fairness; goal congruence; management control systems;
    Date: 2011–01–03

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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