nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2011‒10‒15
thirteen papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Rules of Thumb in Life-Cycle Saving Decisions By Winter, Joachim K.; Schlafmann, Kathrin; Rodepeter, Ralf
  2. The emergence of emotions and pro-social and religious sentiments during the September 11 disaster By David A Savage; Benno Torgler
  3. Usefulness of Adaptive and Rational Expectations in Economics By Gregory C. Chow
  4. Impatience, Anticipatory Feelings and Uncertainty: A Dynamic Experiment on Time Preferences By M. Casari; D. Dragone
  5. The public loss game: An experimental study of public bads By Schosser, Stephan; Vogt, Bodo
  6. A Simple Questionnaire Can Change Everything - Are Strategy Choices in Coordination Games Stable? By Lora R. Todorova; Siegfried K. Berninghaus; Bodo Vogt
  7. Within-subject Intra- and Inter-method consistency of two experimental risk attitude elicitation By Uwe Dulleck; Jacob Fell; Jonas Fooken
  8. Nudges and Impatience: Evidence from a Large Scale Experiment By Wieland Mueller; Eline van der Heijden; Tobias J. Klein; Jan Potters
  9. Fund managers - why the best might be the worst: On the evolutionary vigor of risk-seeking behavior By Witte, Björn-Christopher
  10. The Implications of Risk and Uncertainty Aversion in Public Goods Games By Veronika Nemes; Lata Gangadharan
  11. Warm glow in charitable auctions: Are the WEIRDos driving the results? By Remoundou, Kyriaki; Drichoutis, Andreas C.; Koundouri, Phoebe
  12. The Effect of Altruism on Consumer Behavior in Japan: an Analysis on Rice Consumption using Scanner Data By Ujiie, Kiyokazu
  13. The importance of time in referee home bias due to social pressure. Evidence from Spanish football By Andrés J. Picazo-Tadeo; Francisco González-Gómez; Jorge Guardiola

  1. By: Winter, Joachim K.; Schlafmann, Kathrin; Rodepeter, Ralf
    Abstract: We analyse life-cycle saving decisions when households use simple heuristics, or rules of thumb, rather than solve the underlying intertemporal optimization problem. We simulate life-cycle saving decisions using three simple rules and compute utility losses relative to the solution of the optimization problem. Our simulations suggest that utility losses induced by following simple decision rules are relatively low. Moreover, the two main saving motives re ected by the canonical life-cycle model { long-run consumption smoothing and short-run insurance against income shocks { can be addressed quite well by saving rules that do not require computationally demanding tasks such as backward induction.
    Keywords: saving; life-cycle models; bounded rationality; rules of thumb
    JEL: D91 E21
    Date: 2011–10
  2. By: David A Savage (QUT); Benno Torgler (QUT)
    Abstract: Analysing emotional states under duress or during heightened, life-and-death situations is extremely difficult, especially given the inability of laboratory experiments to adequately replicate the environment and the inherent biases of post event surveys. It is in this area that natural experiments come to the fore by combining the randomization that comes from natural data with an experimentally realistic event. The pager communications from September 11th, made publicly available by Wiki Leaks (Wiki Leaks, 2009), provide exactly the kind of natural experiment emotion researchers have been seeking. We have analysed the pager messages by applying an absolute count methodology and by presenting both positive and negative emotive categories as well as the development of pro-social and religious sentiment. Providing behavioural evidence on how people communicate under extreme circumstances and offers valuable insights into human nature. We demonstrate that positive and pro-social communications are the first to emerge followed by the slower and lower negative communications. Religious sentiment is the last to emerge, as individual attempt to make sense of event.
    Keywords: Content Analysis, Positive Emotion, Negative Emotion, Religiosity, Disaster Communications, 9/11
    JEL: D70 D64 Z12 N30 Z10
    Date: 2011–10–06
  3. By: Gregory C. Chow (Princeton University)
    Abstract: This paper provides a statistical reason and strong econometric evidence for supporting the adaptive expectations hypothesis in economics. It points out why the rational expectations hypothesis was embraced by the economics profession without sufficient evidence. Finally it will summarize the conditions under which these two competing hypotheses can be used effectively.
    Keywords: macroeconomics, adaptive expectations, rational expectations
    JEL: E00
    Date: 2011–09
  4. By: M. Casari; D. Dragone
    Abstract: We study intertemporal choices through an experiment that elicits a subject's plan and then tracks its implementation over time. There are two main results. When facing a costly task to be completed under a deadline, two thirds of subjects prefer anticipating it rather than postponing it. Choice reversals are common although present-biased preferences alone cannot explain them. This evidence is compatible with models based on anticipatory feelings and stochastic utility.
    JEL: C91 D01 D80 D90
    Date: 2011–07
  5. By: Schosser, Stephan; Vogt, Bodo
    Abstract: We analyze cooperative behavior of participants who faced a loss. In particular, we extend the Public Good Game by a fixed loss in the beginning of every period. We show that humans change their behavior compared to corresponding studies with gains only. First, in contrast to literature on gains, we observe significant order effects. When participants first play a treatment with punishment, they cooperate less and face higher punishment costs than when first playing a treatment without punishment. The changes are that drastic that punishment does not pay in the first case, while it does in the later. Second, for participants first playing without punishment the contributions in the very first period of play determine the contributions throughout both treatments of the game, yielding higher contributions in the punishment treatment than when playing with gains. Participants punishing first, show no comparable behavior. --
    Keywords: public good,punishment,losses,experiment
    Date: 2011
  6. By: Lora R. Todorova (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Siegfried K. Berninghaus (Karlsruhe Institute of Technology (KIT), Institute for Economic Theory and Statistics); Bodo Vogt (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: This paper presents results from an experiment designed to study the effect of self reporting risk preferences on strategy choices made in a subsequently played 2× 2 coordination game.The main finding is that the act of answering a questionnaire about one's own risk preferences significantly alters strategic behavior. Within a best response correspondence framework, this result can be explained by a change in either risk preferences or beliefs. We find that self reporting risk preferences induces an increase in subjects' risk aversion while keeping their beliefs unchanged. Our findings raise some questions about the stability of strategy choices in coordination games.
    Keywords: coordination game, questionnaire, risk preferences, beliefs, best response correspondence
    JEL: D81 C91 C72
    Date: 2011–09
  7. By: Uwe Dulleck (QUT); Jacob Fell (The commonwealth Grants Commission); Jonas Fooken (QUT)
    Abstract: We compare the consistency of choices in two methods to used elicit risk preferences on an aggregate as well as on an individual level. We asked subjects to choose twice from a list of nine decision between two lotteries, as introduced by Holt and Laury (2002, 2005) alternating with nine decisions using the budget approach introduced by Andreoni and Harbaugh (2009). We nd that while on an aggregate (subject pool) level the results are (roughly) consistent, on an individual (within-subject) level, behavior is far from consistent. Within each method as well as across methods we observe low correlations. This again questions the reliability of experimental risk elicitation measures and the ability to use results from such methods to control for the risk aversion of subjects when explaining effects in other experimental games.
    Keywords: risk preferences, laboratory experiment, elicitation methods, subject heterogeneity
    JEL: C91 D81
    Date: 2011–10–05
  8. By: Wieland Mueller; Eline van der Heijden; Tobias J. Klein; Jan Potters
    Abstract: We elicit time preferences of a representative sample of 1,102 Dutch individuals and also confront them with a series of incentivized investment decisions. There are two treatments which di¤er by the frequency at which individuals decide about the invested amount. The low frequency treatment provides a nudge by stimulating decision makers to frame a sequence of risky decisions broadly rather than narrowly. We ?nd that impatient individuals are more ?nudgeable? than patient ones as the e¤ect of the treatment on investment levels is signi?cantly larger within the group of high discounters than within the group of low discounters. This result is robust to controlling for various economic and demographic variables and cognitive ability. This ?nding is interesting from a policy perspective because impatient individuals are often the target group of nudges as impatience is associated with problematic behaviors such as low savings, little equity holdings, low investments in human capital, and an unhealthy lifestyle.
    JEL: C93 D81
    Date: 2011–09
  9. By: Witte, Björn-Christopher
    Abstract: This article explores the influence of competitive conditions on the evolutionary fitness of different risk preferences. As a practical example, the professional competition between fund managers is considered. To explore how different settings of competition parameters, the exclusion rate and the exclusion interval, affect individual investment behavior, an evolutionary model based on a genetic algorithm is developed. The simulation experiments indicate that the influence of competitve conditions on investment behavior and attitudes towards risk is significant. What is alarming is that intense competitive pressure generates riskseeking behavior and undermines the predominance of the most skilled. --
    Keywords: risk preferences,competition,genetic programming,fund managers,portfolio theory
    JEL: C73 D81 G11 G24
    Date: 2011
  10. By: Veronika Nemes (Centre for Energy and Environmental Markets, The University of New South Wales and Victorian Government Department of Sustainability and Environment.); Lata Gangadharan (Department of Economics, Monash University)
    Abstract: In this paper we examine how individuals behave in situations of risk and uncertainty in public and private goods context. We find that subjects are willing to pay a much higher amount to find out information relating to the probabilities of providing the private good than information relating to the public good even if this information has greater consequences for the individual in he public goods context. We find strong support for the free-rider hypothesis and extend it to cases when risk and uncertainty are present. We find that subjects treat risks and uncertainties associated with the provision of private good and public good differently.
    Date: 2011–06
  11. By: Remoundou, Kyriaki; Drichoutis, Andreas C.; Koundouri, Phoebe
    Keywords: Research Methods/ Statistical Methods, Resource /Energy Economics and Policy,
    Date: 2011
  12. By: Ujiie, Kiyokazu
    Keywords: Consumer/Household Economics, Food Consumption/Nutrition/Food Safety,
    Date: 2011
  13. By: Andrés J. Picazo-Tadeo (Universidad de Valencia); Francisco González-Gómez (Universidad de Granada. Department of Applied Economics); Jorge Guardiola (Universidad de Granada. Department of Applied Economics)
    Abstract: This paper analyses referee home bias due to social pressure with data from the matches played in the First Division of the Spanish football league between the 2002/03 and 2009/10 seasons. Finally, our main conclusion is that the time the referee has to make a decision does affect the final outcome; while there is no referee home bias when a free kick is awarded, in the case of booking players, when the referee has more time to make a decision, social pressure can influence the final outcome in favour of the home team.
    Keywords: Social pressure; crowd effect; referee home bias; sports economics.
    JEL: L83
    Date: 2011–09–08

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