nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2012‒01‒03
fourteen papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. The Role of Behavioural Economics in Energy and Climate Policy By Pollitt, M. G.; Shaorshadze, I.
  2. The behavioural economist and the social planner: to whom should behavioural welfare economics be addressed? By Robert Sugden
  3. Group Decision Making Under Risk: An experiment with student couples By He, Haoran; Martinsson, Peter; Sutter, Matthias
  4. Crossing the Point of No Return: A Public Goods Experiment By Urs Fischbacher; Werner Güth; M. Vittoria Levati
  5. Social Influence in Trustors’ Neighborhoods By Luigi Luini; Annmaria Nese; Patrizia Sbriglia
  6. Profit or Patients' Health Benefit? Exploring the Heterogeneity in Physician Altruism By Godager, Geir; Wiesen, Daniel
  7. Scarring Effects of Unemployment By Nilsen, Øivind Anti; Reiso, Katrine Holm
  8. Updating, Self-Confidence and Discrimination By Albrecht, Konstanze; Von Essen, Emma; Parys, Juliane; Szech, Nora
  9. Time Horizon and Cooperation in Continuous Time By Bigoni, Maria; Casari, Marco; Skrzypacz, Andrzej; Spagnolo, Giancarlo
  10. Overconfidence and Managers´ Responsibility Hoarding By Petra Nieken; Abdolkarim Sadrieh; Nannan Zhou
  11. A social perception of smoking cessation medication: A willingness-to-pay survey By Jose Luis Pinto Prades; José M. Abellán-Perpiñán; Ildefonso Méndez-Martínez; Silvia Díaz-Cerezo; Verónica Sanz de Burgoa
  12. Consumer responses to various nutrition "front of pack" logos : a framed field experiment By Muller, L.; Ruffieux, B.
  13. Experimental economics shows how food price policies may improve diet while increasing socioeconomic inequalities in nutrition. By Darmon, N.; Lacroix, A.; Muller, L.; Ruffieux, B.

  1. By: Pollitt, M. G.; Shaorshadze, I.
    Abstract: This article explores how behavioural economics can be applied to energy and climate policy. We present an overview of main concepts of behavioural economics and discuss how they differ from the assumptions of neoclassical economics. Next, we discuss how behavioural economics applies to three areas of energy policy: (1) consumption and habits, (2) investment in energy efficiency, and (3) provision of public goods and support for pro-environmental behaviour. We conclude that behavioural economics seems unlikely to provide the magic bullet to reduce energy consumption by the magnitude required by the International Energy Agency's “450” climate policy scenario. However it offers new suggestions as to where to start looking for potentially sustainable changes in energy consumption. We believe that the most useful role within climate policy is in addressing issues of public perception of the affordability of climate policy and in facilitating the creation of a more responsive energy demand, better capable of responding to weather-induced changes in renewable electricity supply.
    JEL: D03 D10 Q40 Q58
    Date: 2011–12–21
  2. By: Robert Sugden
    Date: 2011–12–22
  3. By: He, Haoran (School of Economics and Business Administration, Beijing Normal University); Martinsson, Peter (Department of Economics, School of Business, Economics and Law, Göteborg University); Sutter, Matthias (Dept of Public Finance, University of Innsbruck)
    Abstract: In an experiment, we study risk-taking of cohabitating student couples, finding that couples’ decisions are closer to risk-neutrality than single partners’ decisions. This finding is similar to earlier experiments with randomly assigned groups, corroborating external validity of earlier results.
    Keywords: risk experiment; student couples; group decision making
    JEL: C91 C92
    Date: 2011–12–15
  4. By: Urs Fischbacher (Department of Economics, University of Konstanz, Konstanz, Germany; Thurgau Institute of Economics, Kreuzlingen, Switzerland); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); M. Vittoria Levati (Max Planck Institute of Economics, Strategic Interaction Group; Department of Economics, University of Verona)
    Abstract: Participants in a public goods experiment receive private or common signals regarding the so-called "point of no return", meaning that if the group's total contribution falls below this point, all payoffs are reduced. An individual faces the usual conflict between private and collective interests above the point of no return, while he incurs the risk of damaging everyone by not surpassing the point. Our data reveal that contributions are higher if the cost of not reaching the threshold is high. In particular if the signal is private, many subjects are not willing to provide the necessary contribution.
    Keywords: Public goods, provision point mechanism, experiments, reduction factor, signal
    JEL: H41 C92 C72
    Date: 2011–12–16
  5. By: Luigi Luini; Annmaria Nese; Patrizia Sbriglia
    Abstract: Economists have often analysed the impact that the spread of beliefs and behaviors have on the equilibrium and performance of markets. Recent experimental studies on peer pressure in groups of agents interacting in investment and gift exchange games (Mittone and Ploner, 2011, Gachter et al. 2010) have proved that the imitation of partners’ behaviors can have substantial effects on reciprocity, thus confirming that the effects of information also need to be studied in games where social preferences play a fundamental role. The aim of this paper is to ascertain whether trust is affected by contagion and herding in small groups of trustors who can observe each other’s choices over time. We account for three important factors of trustors’ preferences,namely: risk attitude, generosity and expected trustworthiness. Using our data we test the basic hypothesis that an individual's propensity to trust recipients in the Trust Game can be affected by the observed behavior of other trustors. Our results confirm that trust is affected by contagion effects. Furthermore, we find that specific types of agents (generous or untrusting) more often imitate the same type, when positioned in the same group. Finally, we find that untrusting individuals are less affected by their peers compared to generous individuals, and they imitate less even when positioned in groups of agents who have the same characteristics.
    Keywords: trust game, experiments, social influence, imitation
    JEL: C72 C91
    Date: 2011–11
  6. By: Godager, Geir (Department of Health Management and Health Economics); Wiesen, Daniel (BonnEconLab, Laboratory for Experimental Economics, University of Bonn and Chair of Quantitative)
    Abstract: This paper investigates physician altruism toward patients’ health benefit using behavioral data from the fully incentivized laboratory experiment of Hennig-Schmidt et al. (2011). This setup identifies both physicians’ profits and patients’ health benefit resulting from medical treatment decisions. <p> <p> We estimate a random utility model applying multinomial logit regression, finding that physicians attach a positive weight on patients’ health benefit. Furthermore, physicians vary substantially in their degree of altruism. Finally, we provide some implications for the design of physician payment schemes. <p> <p>
    Keywords: Payment incentives; Physician altruism; Health Care Quantity
    JEL: C91 I11
    Date: 2011–12–28
  7. By: Nilsen, Øivind Anti (Norwegian School of Economics (NHH)); Reiso, Katrine Holm (Norwegian School of Economics (NHH))
    Abstract: Using Norwegian individual register data of young workers, from the period 1986-2008, we analyse whether there are large and persistent negative relationships between unemployment and the risk of repeated unemployment and being out of labour force. A nearest-neighbour propensity score matching method is applied to make the treatment group (the unemployed) and the control group (the employed) as similar as possible. By tracking workers over a 10-year follow-up period, we find that unemployment has a negative effect on later labour market attachment. This is consistent with existing findings in the literature. The negative effects decrease over time. Using the bounding approach proposed by Rosenbaum (2002) to analyse the importance of unobserved variables, our results indicate that a relatively high level of unobserved selection bias could be present in the data before changing the inference. Thus, unemployment leaves young workers with long-term scars.
    Keywords: unemployment persistency, scarring, matching technique
    JEL: J64 J65 C23
    Date: 2011–12
  8. By: Albrecht, Konstanze (University of Bonn); Von Essen, Emma (Stockholm University); Parys, Juliane (University of Bonn); Szech, Nora (University of Bonn)
    Abstract: In a laboratory experiment, we show that subjects incorporate irrelevant group information into their evaluations of individuals. Individuals from on average worse performing groups receive lower evaluations, even if they are known to perform equally well as individuals from better performing groups. Our experiment leaves room neither for statistical nor taste-based discrimination. The discrimination we find is rather due to conservatism in updating beliefs. This conservatism is more pronounced in females. Furthermore, self-confident male evaluators overvalue male performers. Additionally, we use our data to simulate a job promotion ladder: Few rounds of moderate discrimination virtually eliminate females in higher positions.
    Keywords: updating, conservatism, gender, discrimination, self-confidence
    JEL: J16 C91 D81
    Date: 2011–12
  9. By: Bigoni, Maria (University of Bologna); Casari, Marco (University of Bologna); Skrzypacz, Andrzej (Stanford University); Spagnolo, Giancarlo (University of Rome "Tor Vergata" and Stockholm School of Economics)
    Abstract: When subjects interact in continuous time, their ability to cooperate may dramatically increase. In an experiment, we study the impact of different time horizons on cooperation in (quasi) continuous time prisoner's dilemmas. We find that cooperation levels are similar or higher when the horizon is deterministic rather than stochastic. Moreover, a deterministic duration generates different aggregate patterns and individual strategies than a stochastic one. For instance, under a deterministic horizon subjects show high initial cooperation and a strong end-of-period reversal to defection. Moreover, they do not learn to apply backward induction but to postpone defection closer to the end.
    JEL: C72 C73 C91 C92 D74
    Date: 2011–11
  10. By: Petra Nieken (University of Bonn); Abdolkarim Sadrieh (University of Magdeburg); Nannan Zhou (University of Cologne)
    Abstract: Overconfidence is a well-established behavioral phenomenon that involves an overestimation of own capabilities. We introduce a model, in which managers and agents exert effort in a joint production, after the manager decides on the allocation of the task. A rational manager tends to delegate the critical task to the agent more often than given by the efficient task allocation. In contrast, an overconfident manager is more likely to hoard responsibility, i.e. to delegate the critical task less often than a rational manager. In fact, a manager with a sufficiently high ability and a moderate degree of overconfidence increases the total welfare by hoarding responsibility and exerting more effort than a rational manager. Finally, we derive the conditions under which responsibility hoarding can persist in an organization, showing that the bias survives as long as the overconfidence manager can rationalize the observed output by underestimating the ability of the agent.
    Keywords: organizational behavior, management performance, bounded rationality, behavioral bias
    JEL: C72 D03 D82 M12 M54
    Date: 2011–12
  11. By: Jose Luis Pinto Prades (Department of Economics, Universidad Pablo de Olavide); José M. Abellán-Perpiñán (Department of Applied Economics, Universidad de Murcia); Ildefonso Méndez-Martínez (Department of Applied Economics, Universidad de Murcia); Silvia Díaz-Cerezo (Pfizer, S.L.U.); Verónica Sanz de Burgoa (Pfizer, S.L.U.)
    Abstract: Smoking is one of the main preventable causes of death in the world. There are several first-line pharmacological treatments available for smoking cessation. However, they are not very popular amongst smokers. There is evidence that smokers may not value these therapies in accordance with the scientific evidence. This paper provides evidence about the impact of subjective perceptions on the decision to use pharmacological treatments for smoking cessation and on the value that people place on these treatments. We conducted telephone interviews with 2011 members of the Spanish population (785 smokers, 590 ex-smokers and 636 never-smokers). We found that a large proportion of subjects (70% smokers, 67% ex-smokers and 59% never-smokers) did not show a positive willingness to pay for these therapies. The basic reason for refusing to pay anything at all was that they did not believe the therapies were effective. Mean willingness to pay (for those with a positive willingness to pay) was very similar for the three groups (€223/month for smokers, €225/month for ex-smokers and €213/month for never-smokers). We discuss whether social policy can be based on distorted preferences. We argue that Libertarian Paternalism can be used to guide social policy in the area of tobacco addiction.
    Keywords: willingness to pay, smoking cessation therapies, biases, libertarian paternalism
    JEL: D12 D78 I18
    Date: 2011–12
  12. By: Muller, L.; Ruffieux, B.
    Abstract: In a laboratory experiment, we study consumer responses to 7 Nutrition ‘Front of Pack’ Logos. In addition to the Guideline Daily Amounts (GDA) logo, the six other logos vary according to three criteria: (i) Granularity (What object do we rate? Product vs. Nutrient), (ii) Reference Set (How do we distinguish between products? All Products vs. Product Family), and (iii) Policy Range (Do we include bad ratings? Green vs. Green and Red). 364 subjects, all parents accustomed to shopping, were asked to fill their shopping cart for their family for the next couple of days in an e-shopping environment. To do so, they could choose among 273 products grouped into 35 product families. They were then given the opportunity to revise their shopping cart after one of the seven logos had been exhaustively applied to all 273 products. The nutritional quality of a cart was assessed according to its salt, free sugar and saturated fatty acids content. We found that all of the seven logos significantly improved the nutritional quality of the shopping carts. On average, rating the product rather than the nutrient was more efficient. Informing on both healthy and unhealthy products was also more efficient on average but had significant toxic effects. The GDA logo lies at the median of our logo chart list. Unlike free sugar and saturated fatty acids, salt appears to be a particular case, as our logos proved to be insufficient for reducing its consumption.
    JEL: C93 D12 I18
    Date: 2011
  13. By: Darmon, N.; Lacroix, A.; Muller, L.; Ruffieux, B.
    Abstract: The aime of this paper is to compare the impact of food price policies on the nutritional quality of food baskets chosen by low-income and medium-income women. Experimental economics was used to simulate a fruit and vegetable price subsidy (FV policy) and a mixed policy subsidizing healthy products and taxing unhealthy ones(NP policy)Low-income (n=95) and medium–income (n=33) women selected a daily food basket at current prices and then at policy prices. Energy density (ED) and the mean adequacy ratio (MAR) were used as nutritional quality indicators. At baseline, low-income women selected less healthy baskets than medium–income ones (less fruit and vegetables, more unhealthy products,higher ED, lower MAR). Both policies improved nutritional quality (fruit and vegetable quantities increased, ED decreased,the MAR increased), but the magnitude of the improvement was often lower among low income women. For instance, their ED decreased by 5.3% with the FV policy and by 7.3% with the NP policy, whereas decreases of 13.2% and 12.6% respectively were recorded for the medium–income group.
    JEL: C93 D12 I18
    Date: 2011
  14. By: Franziska Krüger (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: Literature indicates that culture influences consumers' expectations on a product or service, how they perceive performance, handle disconfirmation resulting from the comparison of expectations and perceived product or service performance, as well as their satisfaction. The study compares the confirmation/disconfirmation-paradigm between Chinese and U.S. American consumers. The influence of Hofstede's (2001) cultural dimension on disconfirmation and satisfaction is examined. The results show that the process of customer satisfaction differs across national borders. For U.S. American consumers the perceived performance has a stronger effect on satisfaction than for Chinese consumers. A direct influence of expectations on satisfaction can be observed only for Chinese consumers. Uncertainty avoidance and power distance influence customers' disconfirmation and satisfaction. The findings of the study contribute to current marketing literature and management practice in order to explain differences in cross-cultural consumer behaviour. The implications relate to the management of expectations, product development, and quality management.
    Date: 2011–12

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