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on Cognitive and Behavioural Economics |
| By: | Wang, Mei (WHU - Otto Beisheim School of Management); Rieger, Marc Oliver (Dept. IV, Business Administration, University of Trier); Hens, Thorsten (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration) |
| Abstract: | We present results from the first large-scale international survey on time discounting, conducted in 45 countries. Cross-country variation cannot simply be explained by economic variables such as interest rates or in ation. In particular, we find strong evidence for cultural differences, as measured by the Hofstede cultural dimensions. For example, high levels of Uncertainty Avoidance or Individualism are both associated with strong hyperbolic discounting. Moreover, as application of our data, we find evidence for an impact of time preferences on the capability of technological innovations in a country and on environmental protection. |
| Keywords: | Time preferences; Intertemporal decision; Endogenous preference; Cross-cultural comparison |
| JEL: | D90 F40 |
| Date: | 2011–10–31 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2011_018&r=cbe |
| By: | Ernst Fehr; Oliver Hart; Christian Zehnder |
| Abstract: | Previous experimental work provides encouraging support for some of the central assumptions underlying Hart and Moore (2008)’s theory of contractual reference points. However, existing studies ignore realistic aspects of trading relationships such as informal agreements and ex post renegotiation. We investigate the relevance of these features experimentally. Our evidence indicates that the central behavioral mechanism underlying the concept of contractual reference points is robust to the presence of informal agreements and ex post renegotiation. However, our data also reveal new behavioral features that suggest refinements of the theory. In particular, we find that the availability of informal agreements and ex post renegotiation changes how trading parties evaluate ex post outcomes. Interestingly, the availability of these additional options affects ex post evaluations even in situations in which the parties do not use them. |
| JEL: | C91 D86 J41 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:043&r=cbe |
| By: | Charlotte Cabane (Centre d'Economie de la Sorbonne); Andrew Clark (Paris School of Economics) |
| Abstract: | It is well known that non-cognitive skills are an important determinant of success in life. However, their returns are not simple to measure and, as a result, relatively few studies have dealt with this empirical question. We consider sports participation while at school as one way of improving or signalling the individual's non-cognitive skills endowment. We use four waves of Add Health data to study how sports participation by schoolchildren translates into labour-market success. We specifically test the hypotheses that participation in different types of sports at school leads to, ceteris paribus, very different types of jobs and labour-market insertion in general when adult. We take seriously the issue of endogeneity of sporting activities in order to tease out a causal relationship between childhood sporting activity and adult labour market success. As such, we contribute to the literature on the returns to non-cognitive skills. |
| Keywords: | Job quality, sport, non-cognitive skills. |
| JEL: | J24 J28 L83 I2 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:11052&r=cbe |
| By: | Ioannou, Christos A.; Qi, Shi; ,; Rustichini, Aldo |
| Abstract: | Group membership affects an agent's individual behavior. We determine how, by testing two competing hypotheses. One is that group membership operates through social identity, and the other is that group membership implements a correlation among the actions of in-group members in response to an implicit signal. We introduce two novel features in the experimental design. The first feature is the display of group outcomes. This allows us to assess directly the importance of relative group performance on subjects' decisions. The second is a careful manipulation of the Dictator game and the Trust game. More specifically, we choose parameters strategically so as to ensure no change in the pecuniary incentives across the two games. For a precise quantitative test of the two hypotheses we develop a structural model to describe an agent's behavior across treatments. Our findings suggest that the role of social identity on motivating agents' decisions has been exaggerated. The display of group outcomes induces a group effect, but a careful analysis of this effect reveals that participants use group outcomes as a signal to coordinate in-group members on favorable outcomes. Furthermore, we find evidence in support of recent experimental studies which demonstrate that an agent's allocation choice is sensitive to the behavior of the agent that generated the choice set. |
| Date: | 2011–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:stn:sotoec:1106&r=cbe |
| By: | Bruno S. Frey; Margit Osterloh |
| Abstract: | Research rankings based on publications and citations today dominate governance of academia. Yet they have unintended side effects on individual scholars and academic institutions and can be counterproductive. They induce a substitution of the “taste for science” by a “taste for publication”. We suggest as alternatives careful selection and socialization of scholars, supplemented by periodic self-evaluations and awards. Neither should rankings be a basis for the distributions of funds within universities. Rather, qualified individual scholars should be supported by basic funds to be able to engage in new and unconventional research topics and methods. |
| Keywords: | Academic governance, rankings, motivation, selection, socialization |
| JEL: | A10 D02 H83 L23 M50 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:039&r=cbe |
| By: | Urs Fischbacher; Verena Utikal |
| Abstract: | We present experimental evidence on the existence of disadvantageous lies. Literature so far assumes that people do not lie to their monetary disadvantage. However, some people have preferences for appearing honest. If the utility gained from appearing honest outweighs the monetary payoff gained from an advantageous lie or the truth, people will tell a disadvantageous lie. |
| Keywords: | Lying, experiment |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:twi:respas:0071&r=cbe |
| By: | Peter H. Kriss; Andreas Blume; Roberto A. Weber |
| Abstract: | We examine communication in a two-player coordination game with Pareto-ranked equilibria. Prior research demonstrates that efficient coordination is difficult without communication but obtains regularly with (mandatory) costless pre-play messages. In a laboratory experiment, we introduce two realistic features of communication by making the sending of messages optional and costly. Even small costs dramatically reduce message use, but efficient coordination of actions occurs with similar frequency to that observed under costless communication. By varying communication costs we corroborate several predictions from a theoretical analysis based on forward induction. Our results indicate that, for some levels of communication costs, explicit communication may be unnecessary for efficient coordination; instead, players simply need to know that the option to send messages was available. Thus, the relationship between communication and coordination is more complex than suggested by prior research. |
| Keywords: | Coordination, communication, experiment |
| JEL: | C72 C92 D83 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:034&r=cbe |
| By: | Sandro Casal (School of Social Sciences, University of Trento); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Mofei Jia (School of Social Sciences, University of Trento); Matteo Ploner (DECO-CEEL, University of Trento) |
| Abstract: | Envy is often the cause of mutually harmful outcomes. We experimentally study the impact of envy in a bargaining setting in which there is no conflict in material interests: a proposer, holding the role of residual claimant, chooses the size of the pie to be shared with a responder, whose share is exogenously fixed. Responders can accept or reject the proposal, with game types differing in the consequences of rejection: all four combinations of (not) self-harming and (not) other-harming are considered. We find that envy leads responders to reject high proposer claims, especially when rejection harms the proposer. Notwithstanding, maximal claims by proposers are predominant for all game types. This generates conflict and results in a considerable loss of efficiency. |
| Keywords: | Social Preferences, Conflict, Experimental Economic,, Bargaining |
| JEL: | D63 D74 C91 C72 |
| Date: | 2011–11–04 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2011-051&r=cbe |
| By: | Agnes Bäker (University of Tübingen, Department of Business and Economics); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Kerstin Pull (University of Tübingen, Department of Business and Economics); Manfred Stadler (University of Tübingen, Department of Business and Economics) |
| Abstract: | nnovative behavior is mostly studied theoretically, e.g., in models of patent races, and empirically, e.g., by using R&D or patent data. This research, however, is only poorly informed about the psychological tradition of creativity research. Our study is an attempt to experimentally collect behavioral data revealing in how far creativity, analytical skills, personality traits and innovation game behavior in the lab are interrelated. With the help of a within-subject design we find that participants' performance in the innovation games is in fact related to their creativity, risk tolerance and self-control. Other personality traits such participants' anxiety, independence, tough-mindedness and extraversion, if any, only play a minor role, and the same is true for participants' analytical skills. |
| Keywords: | Creativity, personality traits, innovation games, experiments |
| JEL: | C91 L13 O31 |
| Date: | 2011–11–09 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2011-056&r=cbe |
| By: | Robert S. Gazzale (Williams College); Jared C Carbone (University of Calgary) |
| Abstract: | A frequently cited argument against the use of market-based instruments to provide public goods is that they diminish our sense of responsibility to be good citizens. In this paper, we report on the results of a laboratory experiment designed to explore the idea that this distrust stems from the ability of some members of society to contribute to the public good with money instead of time or effort. We look at how the personal effort exerted by subjects changes when their peers take advantage of an offer to buy out of their obligation to perform lab tasks that contribute toward carbon emission reductions. We find that on average subjects reduce their effort when their peers buy out. However, the aggregate result masks significant heterogeneity across individual responses. Those who choose not to buy out despite its expected profitability have no response to the treatment while those for whom it would simply not be profitable to buy out register large reductions in effort. The magnitude of these responses is increasing in the share of the group that accepts the buyout offer, suggesting that it is the act of peers buying out rather than the simple introduction of monetary incentives that is the source of the effect. |
| Keywords: | experimental economics, public goods, effort contribution, environment, climate change |
| JEL: | C90 C91 H41 Q54 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:wil:wileco:2011-14&r=cbe |
| By: | Natalia Montinari (Max Planck Institute of Economics) |
| Abstract: | Whether friendship or competitive relationships deserve to be encouraged in the workplace is not obvious a priori. In this paper we derive the conditions under which a profit-aximizing employer finds it convenient to induce a rat race among workers exhibiting horizontal reciprocity in order to obtain underpaid or unpaid extra eort. We characterize the optimal compensation scheme under both symmetric and asymmetric information about workers'actions, and we also derive conditions for our result to hold in the presence of vertical reciprocity. |
| Keywords: | Extra Effort, Horizontal Reciprocity, Negative Reciprocity |
| JEL: | D83 J33 |
| Date: | 2011–11–04 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2011-052&r=cbe |
| By: | Cathleen Johnson; Claude Montmarquette |
| Abstract: | Evidence is presented on whether the willingness to borrow for education varies significantly among some at-risk students: low SES levels, First Nations, and first generation students. 1248 students participated in a survey, a numeracy assessment and took part in experimental decisions. During these sessions, students were presented with a series of paid binary decisions: bursaries vs. cash, loans for postsecondary education studies vs. cash, intertemporal decisions and risky decisions. The paid binary decisions involved trade-offs between cash and various types of student financial aid, allowing us to generate a cost per dollar of educational financing (grants, loans, mixtures of loans and grants). Prices for the various types of educational financing overlapped substantially in order to more clearly distinguish the impact of loan aversion on the decision to take up financial assistance to pursue PSE. Results show that several factors influence the subjects’ decisions about education financing but the most prominent influence was the price of educational subsidies. Participants were marginally sensitive to the form of financing (grant or loan), with no evidence of systematic loan aversion being detected. <P>Cette étude montre que la volonté d'emprunter pour s’instruire varie considérablement chez certains étudiants issus de milieu socio-économique faible, des Premières nations, et les étudiants de première génération. 1248 étudiants ont participé à une enquête, une évaluation de leur niveau de connaissances numériques et ont pris part à des décisions expérimentales. Pendant ces séances, les étudiants ont été confrontés à une série de décisions binaires rémunérées : bourses vs dollars, prêts d’études pour le postsecondaire vs dollars, des décisions intertemporelles et des décisions risquées. Les décisions binaires rémunérées impliquant un arbitrage entre des dollars et divers types d'aide financière, nous ont permis de générer un coût par dollar du financement de l'éducation (bourses, prêts, mélanges de prêts et de bourses). Les prix pour les différents types de financement de l'éducation se chevauchent de manière substantielle pour permettre de distinguer clairement l'impact de l'aversion pour les prêts sur la décision de prendre ou non l’option d’une aide financière pour poursuivre des études postsecondaires. Les résultats montrent que plusieurs facteurs influencent les décisions des sujets sur le financement de leur éducation, mais l'influence la plus importante est le prix en dollars des subventions à l'éducation. Les participants ont été légèrement influencés par la forme de financement (subvention ou prêt), mais aucune preuve d'aversion pour les prêts n’a été décelée. |
| Keywords: | Intertemporal choice, field experiments, risk attitudes, loans aversion, choix intertemporels, expériences sur le terrain, attitudes vis-à-vis des risques, l'aversion aux prêts d’études. |
| Date: | 2011–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2011s-67&r=cbe |
| By: | Rieger, Marc Oliver (Dept. IV, Business Administration, University of Trier); Wang, Mei (WHU - Otto Beisheim School of Management); Hens, Thorsten (Department of Banking and Finance, University of Zurich) |
| Abstract: | We present results from the first large-scale international survey on risk preferences, conducted in 45 countries. We show substantial cross-country differences in risk aversion, loss aversion and probability weighting. Moreover, risk attitudes in our sample depend not only on economic conditions, but also on cultural factors, as measured by the Hofstede dimensions Individuality and Uncertainty Avoidance. The presented data might also serve as an interesting starting point for further research in cultural economics. |
| Keywords: | Risk preferences; prospect theory; cross-cultural comparison |
| JEL: | D90 F40 |
| Date: | 2011–10–31 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2011_019&r=cbe |
| By: | Herweg, Fabian; Müller, Daniel |
| Abstract: | We extend Akerlof ’s (1970) “Market for Lemons” by assuming that some buyers are overconfident. Buyers in our model receive a noisy signal about the quality of the good that is at display for sale. Overconfident buyers do not update according to Bayes’ rule but take the noisy signal at face value. The main finding is that the presence of overconfident buyers can stabilize the market outcome by preventing total adverse selection. This stabilization, however, comes at a cost: rational buyers are crowded out of the market. |
| Keywords: | Adverse Selection; Market for Lemons; Overconfidence |
| JEL: | D82 L15 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:12411&r=cbe |
| By: | Néstor Gándelman; Rubén Hernández-Murillo |
| Abstract: | In this paper we provide estimates of the coefficient of relative risk aversion using information on self-reports of subjective personal well-being from the 2006 Gallup World Poll. We expand the existing literature on the use of happiness data to analyze economic issues by considering the implications of allowing for health state dependence in the utility function. Our estimates of relative risk aversion using pooled data from various country groupings are smaller than one, suggesting less concavity than log utility. We also find that controlling for health dependence generally reduces these estimates. Our results also suggest that the marginal utility of income increases when health deteriorates. |
| Keywords: | Happiness ; Health ; Risk-taking (Psychology) |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2011-039&r=cbe |
| By: | Anneke Kosse (De Nederlandsche Bank, Cash and Payment Systems Division, P.O. Box 98, 1000 AB Amsterdam, Netherlands.) |
| Abstract: | This paper investigates the impact of newspaper publications about debit card skimming fraud on debit card usage in the Netherlands using daily information from January 1st 2005 to December 31st 2008. Time-series analyses are employed to assess the daily fluctuations in aggregate debit card usage. The results show that newspaper articles that somehow make mention of the phenomenon of skimming fraud significantly affect the number of debit card payments. The direction of the effect depends on the type of skimming fraud addressed. Newspaper articles on fraud at points-of-sale (POS) and ticket machines depress the number of debit card payments. News on ATM fraud, by contrast, has a positive effect on debit card payments. This indicates that the temporarily created fear for using the debit card at the ATM is not automatically translated into fear for using the debit card at the POS. Instead, ATMs and POS terminals are perceived as substitutes. Although significant, all media effects found are relatively small in comparison with other factors such as calendar and holiday effects and daily rainfall. Moreover, the effects only last for one day, with consumers immediately reverting back to their regular payment behaviour. This corresponds to earlier results found in other research fields and suggests that consumers’ confidence in the debit card is relatively sturdy and not easily affected. Moreover, it might be an indication of consumers having a short memory when it comes to newspaper articles. JEL Classification: C22, C23, D12, E21. |
| Keywords: | Debit card, fraud, payment behaviour, media communication. |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20111389&r=cbe |
| By: | Deuchert, Eva; Kauer, Lukas; Meisen Zannol, Flurina |
| Abstract: | The low employment among people with disabilities in general, and mental disorders in particular, generates high costs to the society. This raises the need to develop effective vocational rehabilitation methods. Supported Education/Employment is effective in increasing sustainable employment for people with mental disorders. This vocational rehabilitation method places patients directly in realistic work settings instead of training them in a protected work environment. Supported Education and Employment has not yet been widely implemented. Using a discrete choice experiment, we demonstrate that one of the key problems is to find employers willing to provide training. Non-cognitive dysfunctions are the main deterrents. |
| Keywords: | upported Vocational Education & Training; vocational rehabilitation; mental disorders; discrete choice experiment |
| JEL: | J24 M53 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:usg:econwp:2011:41&r=cbe |
| By: | Fani Bakratsa |
| Abstract: | The dominant metabolic system within urban environments often involves deep socio-economic inequalities, exploitative productive practices and a persistent sense of alienation among the vast majority of the population. The city itself spawns the conditions both for the development of actual criminality and, more perniciously, for the emergence of an acute perception of fear within the polis. Over the years, this perception has affected a whole array of societal elements including, quite significantly, the spatial structure of neighborhoods, urban forms and housing design. The big boom of gated communities signifies the development of social segregation and the tendency to ensure ontological security behind impenetrable walls. The development of off-center exclusive communities, parallel to the inner city impoverished neighborhoods establishes the “new ghettos trendâ€. The new gated suburbs seem to have increased safety measures such as surveillance cameras, security personnel, high fences, moat-like structures, dead-end roads etc., involving a complex defensive architecture, in order to eliminate random and unaccounted movements, to enhance a sense of security and minimize the perception of fear. This paper examines the complex inter-determinations between perceived fear of urban otherness and spatial appropriation, urban forms and housing design, aspects whose functional attributes address almost exclusively the fear factor. It also presents the results of a comparative field study of the exclusive neighborhoods of Hampstead and Psychiko, in greater London and Athens respectively, where the material manifestations of the fear – urban character inter-relationship are examined, including road plans, pedestrian areas, home security systems, housing design elements and, perhaps most revealingly, real estate values. Key words: exclusive suburbs, gated communities, perception of fear, defensive architecture, security. References: Amin A. (1994): “Post- Fordism: A Readerâ€, Blackwell Publishers Davis M. (2008): “Beyond Blade Runner: Urban control- The ecology of fearâ€, Futura Press Ellin N. (1996): “Postmodern Urbanismâ€, Princeton Architectural Press Low S. (2003): “Behind the gates: Life, security and the pursuit of happiness in fortress Americaâ€, Routledge Savage M., Warde A. (1993): “Urban Sociology, Capitalism and Modernityâ€, Palgrave Macmillan Sennett R. (1990): “The conscience of the eye: The design and social life of citiesâ€, Norton & Company |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa11p975&r=cbe |
| By: | Dave Colander |
| Abstract: | When heterodox economists talk of pluralism they generally are talking about pluralism within the economics professionÑthey are asking: how can we have a more pluralistic economics profession? This paper argues that another, perhaps more useful, way to think of pluralism and economics is from the perspective of all the social sciences. When looked in reference to the social science profession rather than in reference to the economics profession, the amount of pluralism increases significantly, since different social sciences follow quite different methodologies. But looking at pluralism from the social science perspective reveals a different type of pluralism problem in social science. While there may be plenty of pluralism within social science as a whole, there is a serious question about whether it is appropriately distributed. This paper argues that heterodox economistÕs agenda should be a greater blending of all the social science departments. It summarizes proposals to do so on both the undergraduate level and graduate level, and explains why supporting variations of these proposals would be a strategy that would further the objectives of most heterodox economists more so than would their current strategy of pushing for more pluralism in economics. |
| Keywords: | Pluralism; heterodox; social science; epistemic game theory |
| JEL: | A2 B4 B5 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:mdl:mdlpap:1102&r=cbe |