nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2012‒02‒01
fourteen papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. When does Impression Management Work: The Influence of Temporal Distance On Interviewer Evaluations By Proost, Karin; Germeys, Filip; Schreurs, Bert
  2. Introduction to the special issue Special issue on Behavioral Public Economics By Charles R. Plott; Jean-Louis Rullière; Marie-Claire Villeval
  3. Respect and relational contracts By Tor Eriksson; Marie-Claire Villeval
  4. Strong, bold, and kind: Self-control and cooperation in social dilemmas By Martin G. Kocher; Peter Martinsson; Kristian Ove R. Myrseth; Conny Wollbrant
  5. Are Self-regarding Subjects More Rational? By B. Arruñada; M. Casari; F. Pancotto
  6. Why Bother Asking? The Limited Value of Self-Reported Vote Intention By Rogers, Todd; Aida, Masa
  7. In search of a preferred preference elicitation method: A test of the internal consistency of choice and matching tasks By Attema, Arthur; Brouwer, Werner
  8. Bounded Rationality in Principal‐Agent Relationships By Mathias Erlei; Heike Schenk-Mathes
  9. Who helps whom? Risk taking and solidarity in a virtual world experiment By Lübbe, Ingmar; Bolle, Friedel
  10. Solidarity, responsibility and group identity By Costard, Jano; Bolle, Friedel
  11. An Uninterpreted Spatial Version of the Trust Game: Evidence of Reciprocity without Suggestive Words, Evidence of Iterated Dominance Self-Taught By Talbot Page; Louis Putterman
  12. The Role of Affect in the Relationship between Distributive Justice Expectations and Applicants’ Recommendation and Litigation Intentions By Geenen, Brigitte; Proost, Karin; Van Dijke, Marius; De Witte, Karel; Von Grumbkow, Jasper
  13. Hyperbolic Punishment Function By Sanjit Dhami; Ali al-Nowaihi
  14. Computability and Algorithmic Complexity in Economics By K. Vela Velupillai; Stefano Zambelli

  1. By: Proost, Karin (Hogeschool-Universiteit Brussel (HUB), Belgium); Germeys, Filip (Hogeschool-Universiteit Brussel (HUB), Belgium); Schreurs, Bert (Maastricht University School of Business and Economics Department of Organization and Strategy, Maastricht, The Netherlands)
    Abstract: In two experiments, it was shown that the effectiveness of different tactics of self-promotion in personnel selection is affected by temporal distance. In Experiment 1, the use of a direct form of self-promotion was more successful when applying for immediate entry whereas an indirect form of self-promotion was more successful when applying for a job in the long term. In Experiment 2, promoting oneself in concrete terms (situation-specific behaviors) was more successful when applying for immediate entry while promoting oneself in abstract terms (traits) was more successful when applying for a job in the distant future.
    Date: 2011–09
  2. By: Charles R. Plott (CALTECH - Division of the Humanities and Social Sciences, California Institute of Technology - California Institute of Technology); Jean-Louis Rullière (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon); Marie-Claire Villeval (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon)
    Abstract: The workshop of the Association for Public Economic Theory on behavioral and experimental public economics was held at Ecole Normale Superieure de Lyon, Universite de Lyon, from June 24 to June 26, 2008. Thirty papers were presented in addition to keynotes by Charlie Plott and John List. The focus of the workshop was to test theoretical models using experimental methods to increase our understanding of the efficiency of mechanisms supporting the provision of public goods, social cooperation, and voting systems. This special issue aims at showing how lively and diversified the ongoing experimental research in public economics has come to be. We highlight three topics in particular: the power of voting and legal enforcement systems, the efficiency of various institutions to support cooperation in social dilemma games, and auctions.
    Keywords: Behavioral Public Economics
    Date: 2011
  3. By: Tor Eriksson (Department of economics - University of Aarhus); Marie-Claire Villeval (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon)
    Abstract: Assuming that people care not only about what others do but also on what others think, we study respect in a labor market context where the length of the employment relationship is endogenous. In our three-stage gift-exchange experiment, the employer can express respect by giving the employee costly symbolic rewards after observing his level of effort. We study whether symbolic rewards are used by the employers mainly to praise employees or as a coordination device to build relational contracts by manipulating the balance between labor demand and supply in the market. We find that a high proportion of long-term relationships have been initiated by the assignment of symbolic rewards. However, the assignment of symbolic rewards decreases when it becomes clear that the relationship is durable, suggesting that employers mainly use symbolic rewards as a coordination device to initiate relational contracts. Compared to the balanced market condition, assigning symbolic rewards in initial relationships is less likely when there is excess demand in the market and more likely when there is excess supply, i.e. when the relationship is more valuable. Receiving symbolic rewards increases the employees' likelihood of accepting to continue the relationship with the same employer. It also motivates them to increase their effort further but only when the market is balanced. Overall, the ability to assign symbolic rewards does not give rise to higher profits because it is associated with lower rents offered to the employees on average, leading to lower effort levels.
    Keywords: Respect; Symbolic rewards; Coordination; Signaling; Labor market; Experiment
    Date: 2012
  4. By: Martin G. Kocher (Department of Economics, University of Munich); Peter Martinsson (Department of Economics, University of Gothenburg); Kristian Ove R. Myrseth (ESMT European School of Management and Technology); Conny Wollbrant (Department of Economics, University of Gothenburg)
    Abstract: We develop a model relating self-control, risk preferences and conflict identification to cooperation patterns in social dilemmas. We subject our model to data from an experimental public goods game and a risk experiment, and we measure conflict identification and self-control. As predicted, we find a robust association between self-control and higher levels of cooperation, and the association is weaker for more risk-averse individuals. Free riders differ from other contributor types only in their tendency not to have identified a self-control conflict in the first place. Our model accounts for the data at least as well as do other models.
    Keywords: self-control, cooperation, public good, risk, experiment
    JEL: C91 D03 H40
    Date: 2012–01–19
  5. By: B. Arruñada; M. Casari; F. Pancotto
    Abstract: Through an experiment, we investigate how the level of rationality relates to concerns for equality and efficiency. Subjects perform dictator games and a guessing game. More rational subjects are not more frequently of the selfregarding type. When performing a comparison within the same degree of rationality, self-regarding subjects show more strategic sophistication than other subjects.
    JEL: C91 C92 D63
    Date: 2012–01
  6. By: Rogers, Todd (Harvard University and Analyst Institute, Washington, DC); Aida, Masa (Greenberg Quinlan Rosner Research, Washington, DC)
    Abstract: How accurate are people when predicting whether they will vote? These self-predictions are used by political scientists to proxy for political motivation, and by public opinion researcher to predict election outcomes. Phone surveys from three elections, including one survey experiment, are analyzed to compare respondents' pre-election vote intention with their actual voting behavior using administrative records (N=29,403). Unsurprisingly, many who predict that they will vote actually do not vote. More surprisingly, many who predict that they will not vote actually do vote (29% to 56%). Records of past voting behavior predicts turnout substantially better than self-prediction. Self-prediction inaccuracy is not caused by lack of cognitive salience of past voting, or by inability to recall past voting. Moreover, self-reported recall of turnout in one past election predicts future turnout just as well as self-prediction. We discuss implications for political science research, behavioral prediction, election administration policy, and public opinion.
    Date: 2012–01
  7. By: Attema, Arthur; Brouwer, Werner
    Abstract: The numerous reports on preference reversals in preference elicitations pose a great challenge to empirical economics. Many studies have found that different procedures may generate substantially different preferences. However, little is known about whether one procedure is more susceptible to preference reversals than another. Therefore, taking the preference reversals as a robust behavioral pattern, guidelines are called for to provide directions regarding a preferred preference elicitation task. This paper puts forward a new test of the internal consistency of choice and matching tasks, based on “internal preference reversals”. We replicate the preference reversal phenomenon and find a significant higher consistency within choice tasks than within matching tasks.
    Keywords: preference reversal; internal consistency; scale compatibility; loss aversion; choice; matching
    JEL: C91 B41 I10
    Date: 2012–01–20
  8. By: Mathias Erlei; Heike Schenk-Mathes (Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal))
    Abstract: We conducted six treatments of a standard moral hazard experiment with hidden action. All treatments had identical Nash equilibria. However, the behavior in all treatments and periods was inconsistent with established agency theory (Nash equilibrium). In the early periods of the experiment, behavior differed significantly between treatments. This difference largely vanished in the final periods. We used logit equilibrium (LE) as a device to grasp boundedly rational behavior and found the following: (1) LE predictions are much closer to subjects’ behavior in the laboratory; (2) LE probabilities of choosing between strategies and experimental behavior show remarkably similar patterns; and (3) profit‐maximizing contract offers according to the LE are close to those derived from regressions.
    Keywords: experiment, logit equilibrium, moral hazard, hidden action
    JEL: C72 C92 J31 L14
    Date: 2012
  9. By: Lübbe, Ingmar; Bolle, Friedel
    Abstract: Most incomes underlie some risk, i.e. ex ante they can be regarded as a lottery ticket. In every society, the lucky winners of this lottery compensate unlucky losers (unemployed workers or bankrupt entrepreneurs) privately and/or by public insurances. Do voluntary solidarity payments depend on the amount and origin of risk of winners and losers? We differentiate between people with riskless incomes (civil servants), with low risk incomes (workers), and with high risk incomes (entrepreneurs). Some of our subjects had no choice of their risk class (civil servants and some workers), some of them had the choice to be a worker or an entrepreneur. The main stylized results are: (i) Civil servants and lucky workers with and without a choice transfer similar shares of their income to unlucky workers, but (ii) discriminate against unlucky entrepreneurs. (iii) Lucky entrepreneurs give about the same share of their income to unlucky workers as lucky workers do and (iv) do not significantly discriminate. (v) The potential solidarity payments are not an incentive for taking higher risks. --
    Keywords: solidarity,responsibility,risk taking
    JEL: D63 D64
    Date: 2011
  10. By: Costard, Jano; Bolle, Friedel
    Abstract: In the Solidarity Game (Selten and Ockenfels, 1998) lucky winners of a lottery can transfer part of their income to unlucky losers. Will losers get smaller transfers if they can be assumed to be (partly) responsible for their zero income because they have chosen riskier lotteries (Trhal and Radermacher, 2009)? Or will risk-lovers and risk-averters develop group identity feelings, leading to larger transfers within, rather than between, the groups (Chen and Li, 2009, for charitable transfers between and within otherwise defined groups)? In an experiment we find behavior to be guided by in-group favoritism. Responsibility for self-inflicted neediness does not seem to play an important role. In-group/out-group behavior is successfully described by a variant of a social utility function suggested by Cappelen et al. (2010). --
    Keywords: risky behavior,group identity,solidarity
    JEL: D3 D8
    Date: 2011
  11. By: Talbot Page; Louis Putterman
    Abstract: In this working paper we report on two trust games: a BDM-like game which is interpreted through its use of the possibly suggestive words “show up fee,” “sends,” “tripled,” “send back”; and an uninterpreted spatial game that does not use these words suggestive or not. In the spatial game we found a considerable amount of reciprocity, which implies the words are not necessary for reciprocity. For further comparison we designed the two games to have a correspondence relation (the relation extends to the original BDM trust game). We focused on two “variables” – interpreted or uninterpreted and spatial or word-based. We also designed “constants” which were identical or near identical in the two games. We did this to reduce confounding in statistical comparisons. We found the frequency of reciprocity in the spatial game, without the suggestive words, was about the same as the frequency of reciprocity in the BDM-like game, with the suggestive words. We found iterated dominance in the spatial game was 5.5 times higher than in the BDM-like game. And we found sending the full endowment was significantly more frequent in the BDM-like game than in the spatial game.
    Keywords: #
    Date: 2012
  12. By: Geenen, Brigitte (Open University of the Netherlands); Proost, Karin (Hogeschool-Universiteit Brussel (HUB), Belgium); Van Dijke, Marius (Rotterdam School of Management, Erasmus University); De Witte, Karel (University of Leuven); Von Grumbkow, Jasper (Open University of the Netherlands)
    Abstract: This paper examined the role of positive and negative affect in the relationship between distributive justice expectations and applicants? intentions to recommend the organization or to litigate. In addition to direct positive/negative relationships between distributive justice expectations and applicants? intentions to recommend/litigate, a moderating role of positive and negative affect was hypothesized. Specifically, it was suggested and supported in two samples of respectively 1409 and 486 applicants, that the positive relationship between distributive justice expectations and recommendation intentions became stronger for applicants high on positive affect. In the second sample, it was further found that the negative relationship between distributive justice expectations and litigation intentions became stronger for applicants high in negative affect. The study supports the suggestion that whether (un)fairness will result in positive or negative intentions, depends on the affect of the applicant. Theoretical and practical implications are discussed.
    Keywords: distributive justice expectations; positive affect; negative affect; recommendation intentions; litigation intentions
    Date: 2011–12
  13. By: Sanjit Dhami; Ali al-Nowaihi
    Abstract: All models in Law and Economics use punishment functions (PF) that incorporates a trade-off between probability of detection, p, and punishment, F. Suppose society wishes to minimize the total costs of enforcement and damages from crime, T (p; F). For a given p, an optimal punishment function (OPF) determines an F that minimizes T(p; F). A popular and tractable PF is the hyperbolic punishment function (HPF). We show that the HPF is an OPF for a large class of total cost functions. Furthermore, the HPF is an upper (lower) bound for an even larger class of punishment functions. If the HPF cannot (can) deter crime then none (all) of the PF's for which the HPF is an upper (lower) bound can deter crime. Thus, if one can demonstrate that a particular policy is ineffective (effective) under the HPF, there is no need to even compute the OPF. Our results should underpin an even greater use of the HPF. We give illustrations from mainstream and behavioral economics. 
    Keywords: Punishment functions; Optimal punishment functions; Becker proposition; Law and economics; Behavioral models of crime and punishment.
    JEL: D01 D81 K42
    Date: 2011–08
  14. By: K. Vela Velupillai; Stefano Zambelli
    Abstract: This is an outline of the origins and development of the way computability theory and algorithmic complexity theory were incorporated into economic and finance theories. We try to place, in the context of the development of computable economics, some of the classics of the subject as well as those that have, from time to time, been credited with having contributed to the advancement of the field. Speculative thoughts on where the frontiers of computable economics are, and how to move towards them, conclude the paper. In a precise sense - both historically and analytically - it would not be an exaggeration to claim that both the origins of computable economics and its frontiers are defined by two classics, both by Banach and Mazur: that one page masterpiece by Banach and Mazur ([5]), built on the foundations of Turing’s own classic, and the unpublished Mazur conjecture of 1928, and its unpublished proof by Banach ([38], ch. 6 & [68], ch. 1, #6). For the undisputed original classic of computable economics is Rabinís effectivization of the Gale-Stewart game ([42];[16]); the frontiers, as I see them, are defined by recursive analysis and constructive mathematics, underpinning computability over the computable and constructive reals and providing computable foundations for the economist’s Marshallian penchant for curve-sketching ([9]; [19]; and, in general, the contents of Theoretical Computer Science, Vol. 219, Issue 1-2). The former work has its roots in the Banach-Mazur game (cf. [38], especially p.30), at least in one reading of it; the latter in ([5]), as well as other, earlier, contributions, not least by Brouwer.
    Date: 2012

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