nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2011‒11‒01
sixteen papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Spite and Cognitive Skills in Preschoolers By Elisabeth Bügelmayer; C. Katharina Spieß
  2. Public Goods and Voting on Formal Sanction Schemes: An Experiment By Louis Puttermann; Jean-Robert Tyran; Kenju Kamei
  3. Social Approval, Competition, and Cooperation By Xiaofei Pan; Daniel Houser
  4. Behavioural Economics: Classical and Modern By Selda (Ying Fang) Kao; K. Vela Velupillai
  5. One Step at a Time: Does Gradualism Build Coordination? By Sam Asher; Lorenzo Casaburi; Plamen Nikolov
  6. Is cooperation instinctive? Evidence from the response times in a Public Goods Game By Lotito, Gianna; Migheli, Matteo; Ortona, Guido
  7. Self-Confidence and Teamwork : An Experimental Test By Isabelle Vialle; Luis Santos-Pinto; Jean-Louis Rullière
  8. Effects of Parental Background on Other-Regarding Preferences in Children By Bauer, Michal; Chytilová, Julie; Pertold-Gebicka, Barbara
  9. Trust, reciprocity and altruism: An impossible addition By Di Bartolomeo Giovanni; Stefano Papa
  10. Economics and psychology.Perfect rationality versus bounded rationality By Schilirò , Daniele
  11. Learning in Networks - An Experimental Study using Stationary Concepts By Siegried K. Berninghaus; Thomas Neumann; Bodo Vogt
  12. A Critique and Reframing of Personality in Labour Market Theory: Locus of Control and Labour Market Outcomes By Eileen Trzcinski; Elke Holst
  13. Allocation criteria under task performance: the gendered preference for protection By Leonardo Becchetti; Giacomo Degli Antoni; Stefania Ottone; Nazaria Solferino
  14. When Kahneman meets Manski: making sense of individual expectations on equity returns By Fabian Gouret; Guillaume Hollard
  15. Matthew effects and R&D subsidies: knowledge cumulability in high-tech and low-tech industries By Francesco Crespi; Cristiano Antonelli
  16. Freedom, Anarchy and Conformism in Academic Research By K. Vela Velupillai

  1. By: Elisabeth Bügelmayer; C. Katharina Spieß
    Abstract: Although spiteful preferences play a crucial role in the development of human large-scale cooperation, there is little evidence on spiteful behavior and its determinants in children. We investigate the relationship between children’s cognitive skills and spiteful behavior in a sample of 214 preschoolers aged 5-6 and their mothers. Other-regarding behavior of both mothers and children is elicited through four simple allocation decisions. A key advantage of our study is that it is carried out in a household context. Therefore, we have information about both the child’s and mother’s cognitive and noncognitive skills as well as health and household characteristics. We find that higher cognitive skills are associated with more spiteful behavior in children. This relationship is even more pronounced among boys and possibly reflects differences in competitiveness. Moreover, we find further gender differences depending on the measure of cognitive skills and the degree of spite. These results shed light on the determinants of the development of other-regarding preferences in humans.
    Keywords: Spite, other-regarding preferences, cognitive skills, child experiments, household survey studies
    JEL: C90 C99 J24
    Date: 2011
  2. By: Louis Puttermann; Jean-Robert Tyran; Kenju Kamei
    Abstract: The burgeoning literature on the use of sanctions to support public goods provision has largely neglected the use of formal or centralized sanctions. We let subjects playing a linear public goods game vote on the parameters of a formal sanction scheme capable both of resolving and of exacerbating the free-rider problem, depending on parameter settings. Most groups quickly learned to choose parameters inducing efficient outcomes. But despite uniform money payoffs implying common interest in those parameters, voting patterns suggest significant influence of cooperative orientation, political attitudes, and of gender and intelligence.
    Keywords: Public good; voluntary contribution; formal sanction; experiment; penalty; voting
    JEL: C91 C92 D71 D72 H41
    Date: 2010–12
  3. By: Xiaofei Pan; Daniel Houser
    Date: 2011–10–20
  4. By: Selda (Ying Fang) Kao; K. Vela Velupillai
    Abstract: In this paper, the origins and development of behavioural economics, beginning with the pioneering works of Herbert Simon (1953) and Ward Edwards (1954), is traced, described and (critically) discussed, in some detail. Two kinds of behavioural economics – classical and modern – are attributed, respectively, to the two pioneers. The mathematical foundations of classical behavioural economics is identified, largely, to be in the theory of computation and computational complexity; the corresponding mathematical basis for modern behavioural economics is, on the other hand, claimed to be a notion of subjective probability (at least at its origins in the works of Ward Edwards). The economic theories of behavior, challenging various aspects of 'orthodox' theory, were decisively influenced by these two mathematical underpinnings of the two theories
    Keywords: Classical Behavioural Economics, Modern Behavioural Economics, Subjective Probability, Model of Computation, Computational Complexity. Subjective Expected Utility
    JEL: C61 C63 D81 D83
    Date: 2011
  5. By: Sam Asher; Lorenzo Casaburi; Plamen Nikolov (Harvard University)
    Abstract: We study how gradualism -- increasing required levels (“thresholds”) of contributions slowly over time rather than requiring a high level of contribution immediately -- affects individuals’ decisions to contribute to a public project. Using a laboratory binary choice minimum-effort coordination game, we randomly assign participants to three treatments: starting and continuing at a high threshold, starting at a low threshold but jumping to a high threshold after a few periods, and starting at a low threshold and gradually increasing the threshold over time (the “gradualism” treatment). We find that individuals coordinate most successfully at the high threshold in the gradualism treatment relative to the other two groups. We propose a theory based on belief updating to explain why gradualism works. We also discuss alternative explanations such as reinforcement learning, conditional cooperation, inertia, preference for consistency, and limited attention. Our findings point to a simple, voluntary mechanism to promote successful coordination when the capacity to impose sanctions is limited.
    Keywords: Gradualism; Coordination; Cooperation; Public Goods; Belief-based Learning; Laboratory Experiment
    Date: 2011–10
  6. By: Lotito, Gianna; Migheli, Matteo; Ortona, Guido
    Abstract: In this work we use data on response times from a public good experiment to test the hypothesis that cooperation is instinctive, under the assumption that the longer the time of the decision, the less instinctive the choice. Results seem to support the hypothesis that cooperation is instinctive, while defection is 'rational'. Moreover, as the experiment is designed also to assess the effects of the consumption of relational goods on cooperation, we are also able to state that some types of relational goods, like team working, produce additional cooperation, but make it less spontaneous. We also detect that males seem to behave more instinctively than females.
    Keywords: response times; cooperation; public goods experiments; gender effect
    JEL: C91 H41
    Date: 2011–10
  7. By: Isabelle Vialle (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France); Luis Santos-Pinto (Faculty of Business and Economics, University of Lausanne, Internef 535, CH-1015, Lausanne, Switzerland); Jean-Louis Rullière (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France)
    Abstract: We use a laboratory experiment to study how perceptions of skill influence teamwork. Our design is based on Gervais and Goldstein (2007) theory of teams. Team output is increasing in skill and in effort, skill and effort are complements, and workers’ effort choices are complements. An overconfident agent thinks that his skill is higher than it actually is. We find that the presence of overconfi-dent workers in teams is beneficial for firms since it raises effort provision and team output. We also find that overconfidence leads to a Pareto improvement in workers’ payoffs. In contrast, underconfidence is detrimental to firms as well as workers.
    Keywords: Teamwork; Self-Confidence, Laboratory Experiment
    JEL: D81 C91
    Date: 2011
  8. By: Bauer, Michal (Charles University, Prague); Chytilová, Julie (Charles University, Prague); Pertold-Gebicka, Barbara (Charles University, Prague)
    Abstract: Other-regarding preferences are central for the ability to solve collective action problems and thus for society's welfare. We study how the formation of other-regarding preferences during childhood is related to parental background. Using binary-choice dictator games to classify subjects into other-regarding types, we find that children of less educated parents are less altruistic and more spiteful. This link is robust to controlling for a range of child, family, and peer characteristics, and is attenuated for smarter children. The results suggest that less educated parents are either less efficient to instill social norms or their children less able to acquire them.
    Keywords: other-regarding preferences, altruism, spite, experiments with children, family background, education
    JEL: C91 D64
    Date: 2011–10
  9. By: Di Bartolomeo Giovanni; Stefano Papa
    Abstract: This paper attempts to measure conditional and unconditional other-regarding preferences in two versions of an investment game: a canonical one and a cheap-talk variant where some pre-play is also allowed (i.e., non-binding unilateral messages). We find that counter-factual measures, as the well-known triadic design (Cox, 2004 [G&EB]) may systematically fail in distinguishing between conditional and unconditional other-regarding preferences due to the existence of frame effects. Specifically, by using indirect methods, we document conditional other-regarding preferences that are systematically neglected by the triadic approach. By inspecting result from the cheap-talk variant of the game, we also find that messages have no effect on average, but they affect the participants’ behavior leading to a polarization of their choices.
    Keywords: Conditional and unconditional other-regarding preferences, trust, reciprocity, investment game, frame effect, polarization effect, cheap talk
    JEL: C91 D83
    Date: 2011–10
  10. By: Schilirò , Daniele
    Abstract: Classical mathematical algorithms often fail to identify in time when the international financial crises occur although, as the classical theory of choice would suggest, the economic agents are rational and the markets are or should be efficient and behave also rationally. This contribution does not pretend to give a complete answer to these questions, but it will highlight some well-known limits of the classical theory of rational choice and compare this theory of choice with the approach that seeks to combine economics and psychology and that has established itself as cognitive or behavioral economics. In particular, the present paper will focus on the juxtaposition of the concepts of perfect rationality and bounded rationality. It concludes with some references to the literature of behavioral finance which has given important contributions in explaining the behavior and the anomalies of financial markets.
    Keywords: Bounded rationality; procedural rationality; rational choice; cognitive economics
    JEL: D81 B52 C00 D83
    Date: 2011–10
  11. By: Siegried K. Berninghaus (Karlsruhe Institute of Technology (KIT), Institute for Economic Theory and Statistics); Thomas Neumann (Otto-von-Guericke-University Magdeburg, Faculty of Economics and Management, Empirical Economics); Bodo Vogt (Otto-von-Guericke-University Magdeburg, Faculty of Economics and Management, Empirical Economics)
    Abstract: Our study analyzes theories of learning for strategic interactions in networks. Participants played two of the 2 x 2 games used by Selten and Chmura (2008) and in the comment by Brunner, Camerer and Goeree (2009). Every participant played against four neighbors and could choose a different strategy against each of them. The games were played in two network structures: a attice and a circle. We compare our results with the predictions of different theories (Nash equilibrium, quantal response equilibrium, action-sampling equilibrium, payoff-sampling equilibrium, and impulse balance equilibrium) and the experimental results of Selten and Chmura (2008). One result is that the majority of players choose the same strategy against each neighbor. As another result we observe an order of predictive success for the stationary concepts that is different from the order shown by Selten and Chmura. This result supports our view that learning in networks is different from learning in random matching.
    Keywords: experimental economics, networks, learning
    JEL: C70 C73 C91 D83 D85
    Date: 2011–10–19
  12. By: Eileen Trzcinski; Elke Holst
    Abstract: This article critically examines the theoretical arguments that underlie the literature linking personality traits to economic outcomes and provides empirical evidence indicating that labour market outcomes influence personality outcomes. Based on data from the German Socio-Economic Panel, we investigated the extent to which gender differences occur in the processes by which highly positive and negative labour market outcomes are determined and in the processes underlying the development of one particular aspect of personality, locus of control. Gender differences were more pronounced in the results for years in managerial/ leadership positions than for locus of control. Negative labour market states were also marked by gender differences. We conclude by arguing that an explicitly value-laden analysis of the rewards associated with personality within the labour market could expose areas where the gendered nature of rewards by personality serves to perpetuate power relationships within the labour market.
    Date: 2011
  13. By: Leonardo Becchetti (Faculty of Economics, University of Rome "Tor Vergata"); Giacomo Degli Antoni (University of Milano - Bicocca); Stefania Ottone (University of Milano - Bicocca); Nazaria Solferino (University of Calabria-Unical)
    Abstract: We device a randomized experiment with task performance in which players directly decide allocation criteria (with/without) veil of ignorance on payoff distribution under different criteria in a stakeholder/spectator position. Our main result is a strong and significant gender effect: women choose significantly more protection (that is, they choose criteria in which a part or all the total sum of money that must be allocated among participants is equally distributed) before (but not after) the removal of the veil of ignorance. They also reveal less overconfidence and significantly higher civicness and inequality aversion in ex post questionnaire responses, even though such differences are not enough to fully capture our main result. The puzzle when interpreting it is that the gendered preference for protection exists not only for stakeholders but also for spectators while it disappears for both once we remove the veil of ignorance. This makes it impossible to explain it exclusively with risk or competition aversion.
    Keywords: Distributive Justice; Gender Effects; Risk Aversion; Competition Aversion; Veil of Ignorance.
    JEL: C91 D63 J16
    Date: 2011–10–24
  14. By: Fabian Gouret (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Guillaume Hollard (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: To understand how decisions to invest in stocks are taken, economists need to elicit expectations relative to expected risk-return trade-off. One of the few surveys which have included such questions is the Survey of Economic Expectations in 1999-2001. Using this survey, Dominitz and Manski find an important heterogeneity across respondents that can hardly be accounted for by simple models of expectations formation. This paper claims that much of the heterogeneity derives from pathologies affecting respondents. Adapting a principle of dual-reasoning borrowed from Kahneman, we classify respondents according to their sensitivity to these pathologies, and find a strong homogeneity across the less sensitive respondents. We then sketch a model of expectation formation
    Date: 2011
  15. By: Francesco Crespi; Cristiano Antonelli
    Abstract: The paper explores the causes and effects of persistence in the discretionary allocation of public subsidies to R&D activities performed by private firms in high-tech and low-tech industries. It applies the distinction between virtuous Matthew-effects and vicious Matthew-effects. The former qualifies the persistence in the discretionary allocation of public subsidies in terms of sheer reputation based upon previous awards. The latter is identified by the role of the accumulation of competence stemming from past grants in current R&D activities. Virtuous Matthew effects are found in high-tech industries where knowledge cumulability is higher. In traditional industries, vicious Matthew effects prevail for the lower levels of knowledge cumulability. Here reputation-Matthew-effects can lead to substitution of private funds with public ones. The empirical analysis is based on Transition Probability Matrices, probit regressions and Propensity Score Matching on around 700 Italian firms in the years 1998-2003.
    Keywords: Innovation; R&D subsidies; Matthew effects; past dependence; path dependence
    JEL: H25 H32 L52
    Date: 2011–10
  16. By: K. Vela Velupillai
    Abstract: In this paper I attempt to make a case for promoting the courage of rebels within the citadels of orthodoxy in academic research environments. Wicksell in Macroeconomics, Brouwer in the Foundations of Mathematics, Turing in Computability Theory, Sraffa in the Theories of Value and Distribution are, in my own fields of research, paradigmatic examples of rebels, adventurers and non-conformists of the highest caliber in scientific research within University environments. In what sense, and how, can such rebels, adventurers and non-conformists be fostered in the current University research environment dominated by the cult of 'picking winners'? This is the motivational question lying behind the historical outlines of the work of Brouwer, Hilbert, Bishop, Veronese, Gödel, Turing and Sraffa that I describe in this paper. The debate between freedom in research and teaching, and the naked imposition of 'correct' thinking, on potential dissenters of the mind, is of serious concern in this age of austerity of material facilities. It is a debate that has occupied some of the finest minds working at the deepest levels of foundational issues in mathematics, metamathematics and economic theory. By making some of the issues explicit, I hope it is possible to encourage dissenters to remain courageous in the face of current dogmas
    Keywords: Non-conformist research, economic theory, mathematical economics, 'Hilbert's Dogma', Hilbert's Program, computability theory
    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.