nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2011‒07‒21
ten papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. On the Evolution of Preferences By Astrid Gamba
  2. The Present and Future of Game Theory By Martin Shubik
  3. Computable and Dynamical Systems Foundations of Bounded Rationality and Satisficing By K. Vela Velupillai
  4. Behavioral Responses to Natural Disasters By Marco Castillo; Michael Carter
  5. Agent-Based Modeling of the El Farol Bar Problem By Shu-Heng Chen; Umberto Gostoli
  6. Focal Points, Gender Norms and Reciprocation in Public Good Games By David Zetland; Marina Della Giusta
  7. Rewarding my Self. Self Esteem, Self Determination and Motivations By Bruno, Bruna
  9. Ambiguity aversion as a reason to choose tournaments By Christian Kellner; Gerhard Riener
  10. Toward an Autonomous-Agents Inspired Economic Analysis By Shu-Heng Chen; Tina Yu

  1. By: Astrid Gamba (Max Planck Institute of Economics, Jena, Germany)
    Abstract: A common feature of the literature on the evolution of preferences is that evolution favors nonmaterialistic preferences only if preference types are observable at least to some degree. We argue that this result is due to the assumption that in each state of the evolutionary dynamics some Bayesian Nash equilibrium is played. We show that under unobservability of preference types, conditional on selecting some self-confirming equilibrium as a rule for mapping preference into behavior, non-selfish preferences may be evolutionarily successful.
    Keywords: evolution of preferences, altruism, learning, self-confirming equilibrium
    JEL: A13 C72 D64 D83
    Date: 2011–07–04
  2. By: Martin Shubik (Cowles Foundation, Yale University)
    Abstract: A broad nontechnical coverage of many of the developments in game theory since the 1950s is given together with some comments on important open problems and where some of the developments may take place. The nearly 90 references given serve only as a minimal guide to the many thousands of books and articles that have been written. The purpose here is to present a broad brush picture of the many areas of study and application that have come into being. The use of deep techniques flourishes best when it stays in touch with application. There is a vital symbiotic relationship between good theory and practice. The breakneck speed of development of game theory calls for an appreciation of both the many realities of conflict, coordination and cooperation and the abstract investigation of all of them.
    Keywords: Game theory, Application and theory, Social sciences, Law, Experimental gaming, conflict, Coordination and cooperation
    JEL: C7 C9
    Date: 2011–07
  3. By: K. Vela Velupillai
    Abstract: Formally, the orthodox rational agentís 'Olympian' choices ([14], p.19) are made in a static framework. However, a formalization of consistent choice, underpinned by computability, suggests satisficing in a boundedly rational framework is not only more general than the model of 'Olympian' rationality; it is also consistently dynamic. This kind of naturally process-oriented approach to the formalization of consistent choice can be interpreted and encapsulated within the framework of decision problems - in the formal sense of metamathematics and mathematical logic - which, in turn, is the natural way of formalizing the notion of Human Problem Solving in the Newell-Simon sense. Casting Simon's insights and suggestions on boundedly rational, satisficing and adaptive choice in the formalisms of time computational complexity theory and algorithmic dynamics makes it possible to take some small first steps in the direction of a formal demonstration of this proposition. A more complete attempt would require the additional consideration of space computational complexity, which will be the next step in this research program. The latter consideration would allow one to go beyond the P?=NP conundrum and thereby justify the relative, implicit unimportance, Simon gave this issue
    Keywords: Bounded Rationality, Decision Problems, Satisficing, Computability
    JEL: C63 C65 C69
    Date: 2011
  4. By: Marco Castillo (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); Michael Carter (Agricultural and Resource Economics, University of California - Davis)
    Abstract: Catastrophic events can dramatically alter existing social and economic relationships. The consequences can be long-lasting and give rise to heterogeneity of behavior across populations. We investigate the impact of a large negative shock on altruism, trust and reciprocity in 30 small Honduran communities diversely affected by Hurricane Mitch in 1998. We conduct a survey of communities and behavioral experiments three and four years after the event. We find that the mean and variance of behavior are nonlinearly related to the severity of the weather shock affecting the community. Also, there is a substitution away from formal local organizations to informal arrangements.
    Keywords: noncooperative games, experimental economics, norms
    JEL: C72 C92 C93
    Date: 2011–06
  5. By: Shu-Heng Chen; Umberto Gostoli
    Abstract: In this paper, we study the self-coordination problem as demonstrated by the well-known El Farol problem (Arthur, 1994), which has later become what is known as the minority game in the econophysics community. While the El Farol problem or the minority game has been studied for almost two decades, existing studies are mostly only concerned with efficiency. The equality issue, however, has been largely neglected. In this paper, we build an agent-based model to study both efficiency and equality and ask whether a decentralized society can ever possibly self-coordinate a result with the highest efficiency while also maintaining the highest degree of equality. Our agent-based model shows the possibility of achieving this social optimum. The two key determinants to make this happen are social preferences and social networks. Hence, not only doe institutions (networks) matter, but individual characteristics (preferences) also matter. The latter are open to human-subject experiments for further examination.
    Keywords: El Farol Bar problem, Social Preferences, Social Networks, Self-Organization, Emergence of Coordination.
    Date: 2011
  6. By: David Zetland (Department of Economics, Wageningen University); Marina Della Giusta (Department of Economics, University of Reading)
    Abstract: We examine the impact of information regarding other people’s choices on individual choice in a public good experiment with two separate treatments. In the implicit treatment, subjects do not see the average contribution of others in their group, but they can calculate it from the information available. In the explicit treatment, subjects see the average contribution of others in their group. If subjects are rational calculating agents as suggested in mainstream economic theory there should be no difference in observed behavior across treatments: agents should use all available information to make decisions. What we see instead is quite different and consistent with the presence of social norms: first, players change their behavior in response to the change in displayed information; second, changes in individual behavior produce identical group outcomes, in terms of total payoffs or efficiency across the two treatments. How does this happen? The display of the average contribution of others results in behavior consistent with a focal point (Schelling, 1960), i.e., more subjects behave as reciprocators (conditioning their contributions on the contributions of others), and fewer behave as cooperators or free-riders (unconditionally contributing a lot or a little, respectively). This change in behavior differs by gender: women behave similarly to men when they see the average contribution by others; when they cannot, they behave differently, favoring unconditional strategies of free-riding or cooperation. Men’s behavior, in contrast to women’s adaption, does not adjust to social cues, as suggested by Croson and Gneezy (2009).
    Keywords: public goods, focal points, social norms, gender, experiments
    JEL: D0
    Date: 2011–06–01
  7. By: Bruno, Bruna
    Abstract: The paper presents a model where the self esteem and the self determination mechanisms are explicitly modelled in order to explain how they affect the intrinsic motivation and its impact on individual choices. The aim is to reconcile different explanations (and consequences) of the motivation crowding theory in a unique theoretical framework where the locus of control is introduced in a one period maximisation problem and the intrinsic motivation is assumed as an exogenous psychological attitude. The analysis is based on the different effect of the self esteem mechanism on intrinsic motivation input oriented or output oriented. Results show that crowding out of intrinsic motivation depends on the self determination sensitivity and the individual belief about one’s own self.
    Keywords: intrinsic motivation; crowding out; self-esteem; self-determination.
    JEL: D11 D64 J22
    Date: 2011–07–13
  8. By: Maria De Paola; Francesca Gioia (Dipartimento di Economia e Statistica, Università della Calabria)
    Abstract: Does the choice of the field of study depend on individual risk aversion? The direction of the relationship between individual risk attitudes and type of college major chosen is potentially ambiguous. On the one hand, risk adverse individuals may prefer majors allowing high returns on the labour market; on the other hand, if these majors expose students to a higher probability of dropping out, those who are more risk adverse may be induced to choose less challenging fields. Using data from a sample of students enrolled in 2009 at a middle-sized Italian public University, we find that, controlling for a large number of individual characteristics, including cognitive abilities, personality traits and family background, more risk adverse students are more likely to choose any other field (Humanities, Engineering and Sciences) compared to Social Sciences. We interpret this result considering that some of these fields, such as Humanities, allow to reduce the risk of dropping out, while others (such as Engineering and Sciences)involve a lower risk on the labour market. It also emerges that the effect of risk aversion on major choice is related to student ability. Risk adverse students characterized by high abilities tend to prefer Engineering, while the propensity of risk adverse students to enrol in Humanities decreases when ability increases, suggesting that the attention paid to labour market risks and drop out risks varies according to student skills.
    Keywords: Risk aversion, College choice, Education
    JEL: I21 Z13 J24
    Date: 2011–07
  9. By: Christian Kellner (University of Bonn); Gerhard Riener (University of Jena and Max-Planck Institute of Economics, Jena)
    Abstract: We test the implications of ambiguity aversion in a principal-agent problem with multiple agents. When output distributions are uncertain, models of ambiguity aversion suggest that tournaments may become more attractive than independent wage contracts, in contrast to the case where output distributions are known. We do so by presenting agents with a choice between tournaments and independent contracts, which are designed in a way that under uncertainty about output distribution (that is, under ambiguity), ambiguity averse agents should typically prefer tournaments, while ambiguity neutral agents prefer independent contracts, independent of their degree of risk aversion. This is the case, because the tournament removes all ambiguity about the equilibrium wages. We compare the share of participants who choose the tournament under ambiguity with the share of participants choosing the tournament in a control treatment, where output distributions are know. As the theory predicts, we find indeed that under ambiguity the share of agents who choose the tournaments is higher than in the case of known output distributions.
    Keywords: Ambiguity aversion, tournaments, Ellsberg urn, contract design
    JEL: D01 D81 M55
    Date: 2011–07–11
  10. By: Shu-Heng Chen; Tina Yu
    Abstract: This paper demonstrates the potential role of autonomous agents in economic theory. We first dispatch autonomous agents, built by genetic programming, to double auction markets. We then study the bargaining strategies discovered by them, and from there an autonomous-agent-inspired economic theory with regard to the optimal procrastination is derived.
    Keywords: Agent-Based Double Auction Markets, Autonomous Agents, Genetic Programming, Bargaining Strategies, Monopsony, Procrastination Strategy
    Date: 2011

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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.